Comprehensive Marketing Report: Costa Coffee and the UK Coffee Market

This report presents a comprehensive analysis of the UK coffee market, with a specific focus on Costa Coffee. It begins with an executive summary and introduction, followed by an examination of statistical indicators, marketing models, and viable opportunities within the industry. The report utilizes tools such as SWOT, PESTLE, competitor matrix, BCG matrix, and Ansoff matrix to evaluate the market landscape. It delves into market segmentation, including socio-demographic, psychographic, and behavioral factors, to identify growth drivers. Furthermore, the report analyzes Costa Coffee's marketing strategies, including the 7 Ps of the marketing mix, and concludes with recommendations for future strategies. The report also highlights the impact of factors like Brexit and digital marketing on the coffee market and consumer preferences.

INDUSTRY MARKETING
REPORT

EXECUTIVE SUMMARY
This report conducts an extensive research of the Coffee industry in the UK economy through
analysing the various marketing activities and strategies of the industry. The Costa Coffee
company, second largest coffee brand outlet in the world has been taken for implementation of
the marketing strategies and conclusions thus formed. SWOT, PESTLE, Competitor Matrix,
BCG Matrix, Ansoff Matrix are a few tools used for analysing the coffee industry and all the
relevant data and figures related to different market segments like Socio-demographic, Psycho
graphic and behavioural have been discussed. This report also highlight the 7 P analysis of
Costa Coffee.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
TASK 1............................................................................................................................................4
Valid and relevant statistical indicators of UK coffee market....................................................4
Concise argument utilising current literature..............................................................................5
Summary of marketing Models...................................................................................................6
Viable Marketing Opportunities.................................................................................................7
TASK 2............................................................................................................................................8
Examine market segments through statistical data.....................................................................8
Segments driving growth in UK Coffee Market.........................................................................9
TASK 3............................................................................................................................................9
Approaches to marketing strategies and 7 P's of Marketing Mix..............................................9
CONCLUSION AND RECOMMENDATIONS..........................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Industry refers to a particular sector in which a number of companies having the same
basic product compete with each other trying to become superior over the other one. This report
highlights the importance ad trends of coffee company in UK market so that appropriate
marketing strategies can be formed for Costa Coffee company. Costa Coffee is a UK based
international coffee bran outlet operating in 31 countries having 3401 stores. The revenue of the
company was £1.167 billion in 2016. This report links the company towards its various
marketing strategies that it should adopt after careful analysis of the coffee industry in UK's
economy.
MAIN BODY
TASK 1
Valid and relevant statistical indicators of UK coffee market.
At present, the coffee market in UK is steadily growing and turning profitable for companies like
Costa Coffee who are established brands in UK. The data relevant to this industry for year 2019
is :-
 The current valuation of coffee shop market is £10.1 billion through 25483 stores
throughout UK and there has been a steady increase of 7.9% in sales yearly since two
decades but the turbulence that Brexit has created is yet to show its impact.
 In the past 18 months, UK coffee market has faced consolidation like Costa Coffee was
acquired by Coca Cola for £3.9 billion (UK Coffee Market Analysis, 2018). Similarly,
Pret A Manger was acquired by JAB Holding for £1.5 billion. Also, around 22 stores
were acquired by Department of Coffee and Social Affairs in 2018.
 Starbucks, Costa Coffee and Caffe Nero are three major coffee oriented brand chains and
have 992, 2655 and 683 stores in UK respectively. It is forecasted that by year 2023, UK
branded coffee market will grow by opening 10000 more outlets (Kotler and et.al.,
2015).
 It was ascertained that the consumers are giving preference to those coffee brands whose
digital marketing game is very strong and 45% industry leaders agreed that digital
marketing is given most attention. However, the quality of coffee served is still a primary
factor in attracting customers.
4

 It has been ascertained that Brexit has impacted all the sectors negatively creating a
shortage of labour etc. and has damaged the confidence of consumer.
Concise argument utilising current literature.
It can be argued that the consumers are motivated to visit branded coffee stores due to location
preference, peer group or good experience. Social Media factor is also a strong influencer in
attracting customers. However, despite the glamour of international and branded coffee stores,
the local coffee shops hold a personal relationship with their customers which gives them an
added advantage. Consumers are familiar with the taste and know what to expect while visiting
these local stores. The UK coffee market has been affected by the Brexit but it still holds solid
place in the market continuing to grow.
As per JAIN (2017), the branded stores can create loyal customers by focusing on creation of
personal bonds and identifying regular ad occasional customers. This is critical in ensuring old
and new customers get associated with the brand. The marketing advantage that a brand name
has can be utilized in increasing the declining customer confidence of UK's customers positively
and increasing the brand value by creating a positive impact. Overall, the coffee market in UK
5
Illustration 1: Statistics related to UK coffee industry.
Source: 6 Things we now know about UK coffee shop market, 2019

is well-paced and Costa Coffee has a strong hold over the market and by giving a little
importance towards formation of binds, they can help in utilising competitive advantage.
Summary of marketing Models.
SWOT Analysis :- Costa Coffee is the leading coffee brand in UK having a majority market and
a widespread operation base. Their key attraction figure is the excellent taste and quality and the
image that it portrays of targetting premium sector consumers. However, due to the lack of
proper marketing and advertising methods, Costa Coffee despite having more number of outlets
than Starbucks ranks second in the world. Also its digital presence is very limited and people are
not aware about the brand in other countries. Due to the higher prices, the customer base gets
limited and is majorly concentrated in UK only. Therefore,by expanding into other countries and
creating strategic alliances the company can establish itself more prominently.
PESTLE Analysis :- Pestle Analysis helps in analysing the factors related to macro environment
and this can help in formulating better understanding of the coffee market in UK. Ever since the
Brexit, political conditions have not been very stable in UK and are negatively affecting the
market (Marketing Model, 2016). Economy of the country is also reeling from the major change
although the coffee industry of UK is quite stable. There are various positive and negative
aspects related to consumption of coffee and hence affect the decision of society. However there
have been many advances in the brewing industry and this ha increased competition in UK but
since their major raw material i.e. coffee beans is a natural product they have to depend heavily
on factors lie rains, drought etc.
Competitor Matrix :-
6Illustration 2: Competitor Matrix
Source: Competitive Matrix Examples, 2018

At present in the UK coffee market, the contenders in the market is JD Wetherspoon who is
giving tough competition and Ankle biters can be credited to Coffee Beanery who has
marginally low capitalization. Emergents are McCafe and Caffe Nero who are proving to be
excellent coffee chains and the rivals in context to Costa Coffee are Starbucks and Lavazza who
are world class competitors.
BCG Matrix :- BCG matrix is used for classifying the products of a company on the basis of
their productivity. Star are the best products of the company which have already established
themselves like Ristretto and Mocha. Dog are the worst performers and they are Cappuccino as
it is brewed too much resulting a bitter taste. Cash Cows are the maximum fund generating
products and they are Espresso and Macchiato while question marks are those products which
require more investment and do not have an impressive market share like Americano as it seems
too forced to target American market.
Ansoff Matrix :- Ansoff matrix helps in analysis of positioning and diversification of company
and its products in the present market. Market penetration is done when the market is already
existing and the product has already been developed and launched. This can be done by Costa
Coffee by developing more products which can serve global purpose rather than keeping the cafe
vibe as typical British one (Rowley, 2016). Market development is creation of a new product
through existing products and Costa Coffee can do this by launching their products more widely
in international markets like India, China where very few people are familiar with the brand.
Product development is introducing new products in existing markets like iced tea etc. which
will increase their menu range and involve different sector consumers and diversification
involves new product and new market and Costa coffee along with its cafe can plan to venture
into book-store sector giving off a nice relaxed vibe and attracting more customers.
Viable Marketing Opportunities.
Some of the viable marketing techniques that Costa Coffee can adopt include:
 Better digital marketing methods so that the brand awareness can be increased.
 By expanding into international markets, brand value can be increased helping the
company in enlarging itself.
 Managing the customers by tracking down their visiting frequency, order frequency etc.,
will help them in segregating the loyal or regular customers for the occasional ones.
7

 Increase the loyalty of customers by building personal relationships and bonds
(Mohammad, 2015).
 Promote the practice of taking feedbacks and suggestions form the customers and
inculcating those suggested things in the work culture if found feasible or beneficial.
TASK 2
Examine market segments through statistical data.
The data can be collected related to different market segments so that they can be targetted
properly:
Socio Demographic :- Socio demographic are those factors or characteristics which a particular
segment or group of people possess. It includes data like age, religion, status etc. There are 4
major motivational factors that can influence a person in a social setting namely family,
reference, social class and culture. In UK, women and men preferred different coffee brands for
e.g. branded stores were more preferred by men than women. Also, around 54.6% of the
youngsters within the age group of 20 to 24 years preferred branded stores as compared to people
aged 65 years which comprised only 17.7%. The statistics also showed that when the UK's
economy was hit by depression, 30.75 of the customers visiting the stores cut back and were
more attracted to those stores and outlets that were offering discounts (The Motivational reasons
behind consumer Choice in Branded Coffee Shops, 2016.).
Psycho-graphic :- This segment is related to identification and study of the behaviour or
psychological attributes of an individual i.e. it is a study of personality, opinions, interests etc.
When the Brexit occurred, the relationship between UK and EU became frustrated in regard to
coffee segment and market. Due to the negative market, the prices of coffee has increased in year
2017. In UK, there has been a recent rise in the trend of ethical and sustainable adoption of
methods for brewing coffee and hence the customers have become more conscious about the
practices adopted etc. (Folmer, 2016).
Behavioural segment :- Behaviour segment focuses on how an individual behaves in a particular
situation or what is the basis of their selection criteria. These are consistent in nature despite the
changing trends and circumstances. People in UK are commonly characterized as tea drinkers
but gradually preferences of the consumers have changed making them the fifth largest coffee
consuming country. Every year a British person consumes only 3.3 kg of coffee and the instant
coffee is the most preferred coffee type. Due to the shift of preferences of younger generation
8

from a tea drinking country to a coffee has led to increase in the number of coffee shops and
Costa Coffee has proved to be the largest UK brand having an annual increases in sales of 14%.
however, recently there as also bee shift in the taste of consumers from instant coffee to
speciality coffee and the reason is high degree of outdoor coffee consumption and the segment is
expected to grow by 13% until the year 2020 (UK Coffee Market Analysis, 2018).
Apart form these three segments, there are many other segment that affect the marketing
strategy or position like geographical factors etc. which affect the coffee industry in UK in an
entirely different manner.
Segments driving growth in UK Coffee Market.
After conducting the above analysis based on the various statistics and figures related to
all the three segments, it has become sufficiently evident that the segment which has been most
instrumental in the growth and development of the coffee industry in UK is the behavioural
sector. This sector has seen a paradigm shift in the taste and preference of the consumers from
originally a tea drinking country to slowly becoming a country preferring coffee (Maciejewski,
Mokrysz, and Wróblewski, 2019). The most important role was played by the individuals
belonging to the age group of 20 to 25 years youngsters who prefer different versions of coffee
over tea. Also, the various experiments in the flavour, consistency, taste of coffee has led to the
youth being excited to taste ad try new flavours and innovations. This has led to increase in the
consumption of coffee and hence the coffee market has seen a boost and growth. Companies like
Costa Coffee have become such prominent brands because of this change in preferences and
along with it small coffee shop and outlets have also increased. Now, the consumers in UK
regularly need new flavour ad brands which they can try and also the increased social presence
of brands and their outlets has led to popping up of many coffee outlets in the economy of UK
(Venter, Wright and Dibb, 2015).
TASK 3
Approaches to marketing strategies and 7 P's of Marketing Mix.
Product Description:- Costa Coffee, The Italian Coffee Masters; has a range of coffee types
under their portfolio classified on different categories and basis. The major product categories
are Espresso, Espresso Doppio, Ristretto, Macchiato, Americano, Cappuccino, Caffe Latte and
Mocha. All of these differ either on the basis of frothed or steamed milk or single or double shot.
9

Apart from these, Costa Coffee also serves a wide variety of hot chocolate flavours, Iced teas and
coffees, infusions and teas, frescato etc. All of these products have different price range.
Brand Image:- Costa Coffee is the second largest branded coffee outlet having its base in UK
but spread all over the world. Costa has seen the rapid expansion in countries like China and
UAE and despite different issues like premium pricing etc. (Giannoni, Hernández and Pérez-
Rodríguez, 2019). Collectively, the brand has a great recognition and to further enhance the
brand value, the company changed its logo introducing red colour making a customer recognize
the brand no matter wherever they were and they also introduced the word Coffee in their logo
and created a three-bean logo and the visual darts were reintroduced.
Pricing Objective Strategy:- Costa Coffee is a well established branded coffee outlet and hence
they are now shifting towards premium sector targeting high income consumer groups. The
higher prices are charged on the basis of high quality levels that they give and the value of their
brand name (White, Rocha and Nicholson-Metz, 2018).
Retailing and Distribution Objectives :- These are those objectives whose formulation helps the
company in making its product available to the all the areas and outlets that the company is
operating. Costa Coffee is an international brand having its store in many countries at different
places. They have to adopt an extensive supply chain technique connecting all the stores spread
all over the world and there are different zonal mangers operating in every country so that the
stock can be maintained at all time and there is no opportunity cost of loosing a customer
(Hayhurst and Wills, 2018).
Integrated marketing communications' objectives :- There are four major objectives i.e.
attention ad awareness, interest, desire and action. When the marketers of the company
understand well these objective ad communicate them through their marketing strategies that
they adopt, they are able to clarify what their product supports and target. These objectives also
help in formulating appropriate marketing strategies to be carried out by the company.
7 P's of Marketing Mix :- There are 7 elements in the marketing mix adopted by the company :-
Product : There is a large scope of expansion into international markets and Costa needs to
reframe their list of products offered including those which change when taken into
consideration geographical boundaries (7p's of marketing, 2016).
10

Price: Despite the price sensitivity that exists due to premium pricing strategy adopted by the
company, there is a high degree of brand loyalty amongst the consumers and hence they do not
have to face the price wars.
Place: Although there is a wide and strong network of Costa Coffee stores operating in UK, they
need to expand outside UK and make their location more convenient and accessible to the
customers lying between the middle and rich income group.
Promotion: Costa Coffee uses various techniques like providing membership through member
cards, giving discounts to loyal and regular customers, giving festival and seasonal discounts like
Christmas packages at the time of Christmas etc (Bowie and et.al., 2016).
People: People are an important factor and at Costa Coffee, the management knows well to
value their human resource employed as they are the key role players in formulation of those
marketing strategies which would help the company in succeeding.
Processes: Costa Coffee adopts latest technological inventions and the process includes all the
activities beginning right from supply of raw material to the end product supply. They ensure
that the customers are satisfied with what they get and feel that they have utilised full worth of
the money that they paid.
Physical Evidence: The presence of all the machinery etc. i.e. anything that gives a physical
touch is included here and costa coffee utilizes a lot of physical machineries and parts in its
outlets and stores giving red as their broad theme line (Wierenga and Van der Lans, 2017).
CONCLUSION AND RECOMMENDATIONS
After going through the research conducted in this report, it can be concluded that
formulating a marketing plan and strategy is very important before implementing any changes in
the present scenario of the company. This report highlighted the present market of Coffee
industry in UK and its impact on the decisions taken by Costa Coffee. This report using various
models, data, statistics and 7 P's, identified the best possible practices that Costa Coffee should
adopt in order to further expand their market. On this basis, following recommendations can be
made :-
 Although the company has a strong brad value, yet they do not practice any
unconventional or eye catching promotional methods and techniques. Adopting this
would help the company.
11

 Also, although the customer base is strong despite premium pricing; the company can
adopt some products which are priced lower so that their customer base can be increased.
 Their is a rising scope in digital market and the Costa company can up it social media
marketing game making themselves more heard and seen so that their market can be
expanded at international levels as well.
12

REFERENCES
Books and Journals
Bowie, D. and et.al., 2016. Hospitality marketing. Routledge.
Folmer, B. ed., 2016. The craft and science of coffee. Academic Press.
Giannoni, S., Hernández, J.M. and Pérez-Rodríguez, J.V., 2019. Economic growth and market
segment choice in tourism-based economies. Empirical Economics, pp.1-18.
Hayhurst, R. and Wills, G., 2018. Organizational design for marketing futures. Routledge.
JAIN, M.K., 2017. An analysis of marketing mix: 7Ps or more. International Journal of
Advance Higher Education Research & Development. 1(7).
Kotler, P. and et.al., 2015. Marketing. Pearson Higher Education AU.
Maciejewski, G., Mokrysz, S. and Wróblewski, Ł., 2019. Segmentation of Coffee Consumers
Using Sustainable Values: Cluster Analysis on the Polish Coffee
Market. Sustainability. 11(3). p.613.
Mohammad, H.I., 2015. 7PS marketing mix and retail bank customer satisfaction in northeast
Nigeria. British journal of marketing studies. 3(3). pp.71-88.
Rowley, J., 2016. Information marketing. Routledge.
Venter, P., Wright, A. and Dibb, S., 2015. Performing market segmentation: a performative
perspective. Journal of Marketing Management. 31(1-2). pp.62-83.
White, B., Rocha, S. and Nicholson-Metz, D., T-Mobile USA Inc, 2018. Market segment
analysis of product or service offerings. U.S. Patent Application 15/593,254.
Wierenga, B. and Van der Lans, R. eds., 2017. Handbook of marketing decision models (Vol.
254). Springer.
Online
7p's of marketing. 2016 [ONLINE] Available through
<https://www.professionalacademy.com/blogs-and-advice/marketing-theories---the-
marketing-mix---from-4-p-s-to-7-p-s>
Marketing Model. 2016 [ONLINE] Available through <https://www.smartinsights.com/digital-
marketing-strategy/online-business-revenue-models/marketing-models/>
13

6 Things we now know about UK coffee shop market. 2019. [ONLINE] Available
through :<https://www.foodserviceequipmentjournal.com/new-research-6-things-we-
now-know-about-the-uk-coffee-shop-market/>
Competitive matrix examples: 5 ways to compare competitors. 2018. [ONLINE] Available
through :<https://www.crayon.co/blog/competitive-matrix-examples>
The Motivational reasons behind consumer Choice in Branded Coffee Shops. 2016. [ONLINE]
Available
through :
<https://warwick.ac.uk/fac/cross_fac/iatl/reinvention/archive/bcur2013specialissue/
burge/>
UK Coffee Market Analysis. 2018. [ONLINE] Available through :<https://www.cbi.eu/market-
information/coffee/uk/>
14

15

16