Costa Coffee: In-depth Marketing Analysis of the UK Coffee Shop Market

This report provides a comprehensive marketing analysis of Costa Coffee within the UK coffee shop market. It begins with an introduction to marketing and market research, followed by an overview of the UK coffee shop market, highlighting its growth and key players. The report then delves into a SWOT analysis of Costa Coffee, assessing its strengths, weaknesses, opportunities, and threats. A PESTLE analysis is conducted to examine the political, economic, social, technological, legal, and environmental factors impacting Costa Coffee's operations. A competitor matrix is also presented to compare Costa with its main rivals, such as Starbucks and Caffe Nero. Furthermore, the report explores market segmentation, targeting, and positioning (STP) strategies that Costa Coffee can utilize. The report also covers marketing mix (7Ps) and IMC objectives and strategies, with recommendations for future growth and expansion. This report is designed to provide a detailed understanding of the company's marketing environment and strategies.

Introduction To
Marketing

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Brief overview of the UK Coffee Shop Market..........................................................................3
TASK 2............................................................................................................................................8
TASK 3............................................................................................................................................9
CONCLUSION and Recommendations........................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Marketing is a field of study in which management of an organisation builds relationship
with customers and satisfying them through offering products of firm to them. In addition, it is
an action or function of organisation which is performed by them so as to promoting or selling
their products or services in marketplace. Whereas, Market Research is an activity through which
firm collects information about needs and preferences of customers. Chosen firm for this report
is Costa coffee which is a multinational coffee house firm along with headquarters in London.
Company was founded in 1971 by Bruno and Sergio Costa. There are around 16000 coffee shops
in Coffee Market of UK which are rapidly growing with an average rate of 4% in each year. It
defines that Costa can easily expand its market share in Coffee market. Present report will
discuss about the overview of Coffee shop market of UK along with specific models such as
SWOT, PESTLE etc. so as to identifying growth opportunities. In addition, market segmentation
will also done so that needs of customers can be identified in new market along with this, some
marketing strategies such as Marketing mix with IMC objectives strategies will also covered
under this report.
TASK 1
Brief overview of the UK Coffee Shop Market
Coffee market in UK is considered as the dynamic market across the world. Coffee shops
in UK are considered as a quick service restaurant in UK. In previous years, there has been an
increasing trend is identified in number of coffee shops operating in UK. Whole UK coffee
market is dominated by three leading multinational coffee-house chains like Costa Coffee,
Starbucks, Caffe Nero. As per a customer survey report, approx. 79 percent of UK individuals
drinks coffee all seven days of the week. In which, 90 percent drinks coffee at home along with
this, there are around 5.3 million customers visits coffee shops and sandwich bars in a week for
drink coffee (Homburg, 2015). Over the previous five years, 28% of growth has been identified
in this market. In addition, it has been identified that most of the Coffee drinkers are aged
between 16-34 who prefers to drink quality coffee and usually go 2 or 3 days in a week for
drinking coffee in coffee-house or shops (UK Coffee shop Market Overview, 2017). Due to
increasing demand of coffee, Coffee is also serving to the customers in those stores or outlets
like pub, restaurants, hotels etc. which are not a part of coffee market.

Illustration 1: Coffee shops in UK market
Due to this reason, Independent stores like Costa Coffee, Starbucks are facing competition from
these non-specialist Coffee shops. In order to overcome the considerable impact of these shops,
Management of Costa have started their Costa Express. Whereas, McDonald which is a
multinational fast food chain have started Mc Cafe in order to making its strong presence in
coffee market of UK. According to a market survey report, Number of Coffee outlets are grew
by 1215 in last 12 months which defines 5.3% of growth in UK market. In addition, this market
will exceed 31,400 outlets along with a turnover of £13bn by 2022. 52.9% of Coffee market
share is held by Starbucks, Costa Coffee and Caffe Nero. (UK Coffee Shop market continues
with robust growth, 2018)
SWOT of Costa
Strength Weaknesses
 Second Largest coffee chain across the
world.
 Largest Coffee chain in UK.
 Around 3401 stores of firm in 31
 Market presence of firm in a limited
nations
 Marketing strategies of organisation are
not efficient as compare to its rivals.

nations.
 Customers are bounded by the taste of
Coffee provided by the firm.
 More expensive products as compared
to their main competitor Starbucks.
Opportunities Threat
 Company can use strong market
expansion strategy for enhancing their
market share.
 Costa can build its strong competitive
advantage in market over its rivals
through taking support of its new
parent firm Coca Cola.
 Ineffective supply chain system can
become threat for profitability of
organisation.
 Tough competition from non-specialist
coffee-shops can negatively impact on
the sales figures of firm in UK.
PESTLE of Costa coffee
Pestle analysis is a tool which is used for analysing or monitoring the macro-
environmental factors that can affect the performance of organisation in positive or negative
manner. In Costa, their management have to conduct this analysis in their market research so as
to identifying expansion opportunities or threats which are exist in market. Pestle analysis of
Costa Coffee is given as below:
Political – This factor is related with political situations of a nation which includes tax
duties, VAT etc. which can impact the profitability or sales figures of firm in positive or negative
manner. VAT rate is continuously increasing from 2008 as in this year VAT rate is 15% which
goes up to 20% in the year 2011. Due to this, prices of Costa products are increased which
posses negative impact on the customer base and sales figures. Whereas, regional strength of
Costa in UK is high as compared to its rivals which can provide opportunities in their expansion.
Economical – Due to Brexit, Purchasing power of individuals in UK are decreasing
because of which people prefers to spend less money on unessential products which is not a
positive sign for expansion of Costa Coffee. In order to deal with this situation, management of
Costa Coffee have reduce the cost of their products so that customers would be retained and
market share of firm would be maintained in UK. Along with this, for making expansion

management of Costa have to pay their attention on quality of their offerings so that any kind of
difficulties wouldn't be faced by them during expansion.
Social – This factor is comprises of needs, wants, taste, preferences of customers that can
impact positively or negatively on the profitability of organisation. In current scenario, various
IT companies are established in UK due to which demand of coffee are increasing because of
this factor Costa Coffee have developed Costa Express so as to increasing their sales and can use
this factor in positive manner for expansion. Apart from that, non specialised Coffee shops are
increasing in UK market which are lowering the sales figures and profitability of firm (Malhotra,
2015).
Technological – In today's busy world technology is most significant factor in each
organisation however, Costa is a part of coffee market which is not a high tech industry but
through implementing technology Costa can gain competitive edge in productivity and efficiency
in marketplace. Whereas, implementation of these techniques and providing training to staff
members according to this will be prove costly for firm in their expansion.
Legal – It is very important for each organisation to perform its operations in legal
manner so as to prevent penalties or fines. Management of Costa always follow all the rules and
regulations which are formed by UK government and performs its duties with motive of
improving security and well-being of their employees. Apart from that, company have also
signed FSA (food safety agreements) so as to providing healthy products across the world.
Environmental – UK Government is highly strict for protecting the environment of
nation and have also formed several laws for it like Environmental Protection Act 1990.
Therefore, It is important for costa to adhere the guidelines of this act such as they have to use
china cups for offering coffee to customer and recycling the used cups for packaging. With the
help of this they will not only able to expand their market share in UK but also it will be helpful
for them in building good image in front of governmental authorities.
Competitor Matrix of Costa
This is a tool which is used by the organisations in order to identifying strengths and
weaknesses of current and potential competitors. In Costa, it is very essential to conduct
competitor's analysis which makes easy for the management to make suitable and competitive
strategies that brings company ahead than their competitors in competitive market environment.
Here are the list of competitors of Costa along with the analysis of their strategies

Key elements Barista
Coffee
Lavazza Starbucks Cafe Coffee
Day
Caffe Nerro
Objectives Main objective
of firm is to
providing
comfortable
place to
customers so
that they can
enjoy
conversations
with a cup of
coffee.
Objectives
of Lavazza
is to make
innovations
in existing
products so
that
excellent
quality in
products
can be
provided to
customers.
Main objectives
of firm are to
establish firm as
the premium
provider of finest
coffee in world.
Aims of
CCD's are to
providing best
experience to
their
customers.
Company
wants to
expand into
new market
areas for
taking growth
and
minimising
risk.
Strategy They uses
franchisee
models for
expanding
market shares
in
international
markets.
Company
have made
its strong
focus on
quality of
their
offerings.
Management of
firm believes in
providing
excellent quality
in services to
customers.
Management
of firm is
offering
world Class
coffee
experience to
their
customers at
affordable
prices.
Company
mainly focuses
to build their
outlets in
Italian theme
so as to
grabbing large
number of
customers
towards their
outlets.
Assumptions Company
wants to
expand their
market share
Organisatio
n wants to
expand its
profitability
Company is
estimating 8% of
growth in present
customer
Management
have
formulated
effective
Company is
increasing its
product
portfolio so as

in future for
staying ahead
from its
competitors.
up to 10%
in
upcoming 5
years.
presence in their
outlets.
decisions
which will be
helpful for
them in
expanding
their market
share.
to enhancing
their
sustainability
in
marketplace.
Resources and
Capabilities
Distribution
network of
firm is very
strong
Italian
culture at its
outlets
makes its
strong
capabilities
as compare
to its rivals.
Quality of Coffee
beans are very
high which is
used by the firm
in making
products.
Management
structure is
very stronger
than their
competitors.
Partnership
with big
brands is the
main strength
of firm.
Marketing Opportunities for Costa Coffee – from the above analysis of PESTLE and
competitors, it has been identified that there are several opportunities exist in UK market like
expansion of customer base, market share, improving sales figures etc. which can be grab by
firm through making effective strategies like 7ps of marketing mix and STP Model.
TASK 2
STP - This is a three stage model which was given by Philip kotler and used by companies for
segmenting the market, targetting the customers or positioning themselves in marketplace.
Management of Costa can use this model for formulating effective marketing strategies which
will be helpful for them in representing their firm, offerings and brands.
Segmentation- In this step, management of firm have to identify needs of customers then
segment the market. Before making strategies, it is very essential for Costa Coffee to consider
following points of segmentation which are given as below:
Demographics- In this kind of segmentation, management categorise the market on the
basis of income level, education, occupation or age of customers. Therefore, it is very essential

for management of Costa to conduct this kind of segmentation so that they can easily reach to
their targetted customers and expand their market share in UK (Ross, 2016).
Psychographics- This segmentation is based on emotions and personality of customers
that is highly based on their behaviour. For identifying taste and preferences of customers,
Managers of Costa can conduct surveys or market research programmes. By providing the
products to customers as per their demands company can easily expand its market share in UK.
Targeting- This is the second stage of model in which consumers are evaluated and
selected from target segments. Management of Costa can easily expand their market share in UK
as they have targetted those customers who are business class and do not prefer tea.
Positioning- In this, Management of Costa have to create strong position of firm in
mindset of customers. For this, management have to develop new products which are unique in
nature and provide them on affordable prices to their targetted customers. Through this,
management will easily build positive brand image of Costa in mindset of customers.
From the above STP model, it has been analysed that Management of Costa can use
psycho graphic segment because with the help of it they will be able in determining current
trends of marketplace and preferences of targetted customers. As a result of it, when customer's
need will be fulfilled as per their expectation by Costa then it will be easier for them in taking
growth and expanding market share in UK.
TASK 3
Marketing Mix
It indicates to the set of actions and tactics which can be used by a firm to promote its
brand or product at market place. It can be a set if marketing tools that the firm uses to pursue its
marketing objectives in the target market (Di Benedetto, 2016). Marketing mix of Costa Coffee
is as following which covers 7P's of marketing and defines the marketing strategies of this
organisation:
Product- Costa coffee is one of the famous coffee chain which operate its business
internationally. This firm produce a lot of variants and flavours in coffee. Most popular products
of this firm are Latte, Cappuccino, Mocha, Americano, Expresso etc. Some of the ice blended
products that are Mocho cream Frostino, Lemondae, Coffee cream etc. that are produced by
Costa. The product is the most important factor in the marketing mix of Costa because the whole
marketing strategy and growth of the business depend on customers interest and liking their

products. The management of the company use and follow pull business strategy to gather
number of consumers who help in achieving the business objectives of the company.
Price- In Costa coffee, the management of the company use premium pricing cause of the
quality of the products and varieties of them. This firm has a diverse price offering in its
marketing mix by which it is affected by competition and is slightly premium. The management
of the company always give the priority to the quality of products more than price. This firm also
sells its own vending machine and the cost of them is competitive in comparing to its other
competitors like Cafe Coffee Day and Starbucks etc.
Place- Costa Coffee Company operates its business at global level. At present time, this
organisation operates 3300 outlets more over 31 nations. It runs more than 2100 restaurants and
1200 outlets in UK. Costa Coffee can be found in m,alls, airport and various premium places.
The management of the company design the menu according to the nation in which it operates its
business to earn profit and gain customer base. This firm mostly operates its business in top
urban cities which adds to the positioning of Costa Coffee.
Promotion- Costa Coffee is a premium brand which does not trust more on
advertisement like print media and TV etc. The most essential and appropriate marketing
strategy which is followed by the organisation is to acquire word of mouth promotion from its
consumers. Because it do not just offer coffee but also the experience. This company does not
use ATL promotions whereas it uses a number of BTL promotions such as advertising on buses
and out of door media. For example, one of the promotional strategy that are used by the firm is
ShakeUpSummer which help in promoting cold coffee products. The organisation use its logo on
the cups that are served to the consumer (Belletti, 2017).
People- Costa Coffee mainly focuses on its people like customers and employees. There
are mo0re than 20 thousand employees who are working under it. The management of the
company specially focus on them so that they can trained them so that they can follow a highly
professional and polite behaviour with its customers. The management of the company organise
training and development sessions to its employees and workers so that they can make
improvement in its skills and can learn new skills according to their business and work. The
employees and workers of this company treats each and every customer with high regards so that
they can gather good experience and show loyalty towards the firm. This company has a strong
brand image at globally cause of its better quality and quantity products.

Process- Inn Costa Coffee, each and every outlet of this company has very nice sitting
arrangement according to its customers which make feel them comfortable and the menu card is
offered by the employees of this organisation to them. The management make sure that each
consumer is treated politely and with a smile. The worker of the company make sure that the
products asked by the consumer are provided to them in minimum time period after taking the
order. In the last, next process is paying bills, in there are number of mechanism for paying bills
that are used by this company such as online payment, credit & debit cards, cash payment etc.
Physical evidence- It refers to the presence of the firm. Costa coffee operates its business
more than 31 countries of the world with 3300 outlet. In its outlets, the management of the
company use colourful pictures, dim lights, 3 colours interior as brown, chocolate and red. It
help in attracting numerous customers. The management of the company also prints logo of the
firm on cups in it served coffee to its consumers. The organisation also sells some of its
merchandise such as its branded cups to its consumers.
Integrated marketing communications' objectives strategies- It has four primary objectives
like creating brand awareness, generating product interest and increasing the desire for products.
Awareness- It is the one of the main objective. In costa, the management of the company
use promotional tools to create awareness about the products. In it, they use BTL promotional
strategy (Atwal, 2017).
Interest- It is the next objective in which the management of Costa informing consumers
and provide information about various its products. This process is done by the firm to create the
interest of them towards to those products that are offered by the company.
Desire- The next objective of IMC is generating the desire in the consumers for
purchasing the products of costs. Cultivating desire within the customer is basically done by
analysing and identifying their perception against the product.
Action- It is the last objective of IMC, after building relationship with customers, gaining
their trust and identifying their interest towards the products, this objective suggesting the
customer to take action for buying products. So that they can get various benefits of the product.
CONCLUSION and Recommendations
It has been concluded from the above report, Strategic analysis such as PESTLE, SWOT,
Competitor analysis are very important because without these any organisation can expand its
market share in new market areas. In addition, it is also important to conduct market research

before implementing any strategies for expansion because when needs are not determined by
firm then how can it possible to providing products to customers as per their demand. It has been
recommended to the managers of firm that they should use several models or theories like
marketing mix, STP model for making expansion in new market because through using these
models they will be able in developing new and unique products which will leads the firm
towards growth and success in new market.

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