Marketing Report: Costa Coffee's UK Market Expansion Strategy

This report provides a comprehensive marketing analysis of Costa Coffee within the UK coffee market. It begins with an executive summary and introduction, highlighting the growth of the UK coffee market and Costa Coffee's position within it. The report then delves into a SWOT analysis, PESTLE analysis, Ansoff Matrix, BCG matrix, and competitor analysis to assess Costa Coffee's strengths, weaknesses, opportunities, and threats. It also examines market segmentation using socio-demographic and psychographic variables to identify target customers. The report concludes with marketing mix recommendations and a conclusion summarizing key findings and suggesting growth strategies for Costa Coffee in the UK market. The report emphasizes the potential for market penetration and expansion, considering the competitive landscape and consumer behavior.

Industry Marketing Report

Executive Summary
Marketing is a way through which an organisation can easily analyse appropriate
condition of market place in which they can exchanging offerings that have value for customers.
In the context of Costs coffee, it is required to conduct some specific market research activities
as SWOT for internal analysis, PESTEL for external environmental influence, 7P's for existing
market identification and so on. All these practices assist in identifying growth options for a firm
through which an organisation can attaining desired success.

Table of Contents
Executive Summary.........................................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
TASK 2............................................................................................................................................9
TASK 3..........................................................................................................................................11
Recommendation...........................................................................................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Marketing is the concept of advertising the products and services of the company to the
target customers (Marketing, 2019). This features helps the organizations to expand their
customer base and business also. Each and every product when comes into market requires
proper marketing so that customers will get to know about it. Almost all the organizations in the
world try to invest a healthy capital in the marketing segment so as to gain competitive
advantage. The companies show features and specifications of their products and services. This
report is based on advertising the new product of Costa Coffee into the coffee market of UK. The
coffee market in UK has expanded severely (Atwal, 2017). Since 2007, the consumption of
coffee has increased from 70 to 95 million cups per day. Apart from that, the coffee outlets also
gets increased from 10000 to 24000 in UK. This statistics shows that there is a huge market of
coffee products for Costa Coffee. In this report, A brief overview of the UK coffee shop market
is discussed by identifying the specific areas of product growth that might provide Costa Coffee
a viable marketing opportunity. Apart from that, customer segment is being identified by using
socio-demographic, psycho-graphic and behavioural variables. In the end, marketing mix is
being applied to the company's product and services to target the identified segment.
TASK 1
The coffee market of UK has increased a lot in past couple of years. The demand of
coffee is still increasing frequently. The coffee market of UK is highly segmented by age. This
concept is differ from the differ age groups. The age group of 50 or more consumes more coffee
than any other age segment in the country (Baker, 2016). The least consumed coffee customers
are the age group of 20 years of lower. Costa Coffee is the second largest coffee chain in the
world. The first position is hired by Starbucks in terms of selling of coffee and revenue. Costa
has its 2422 stores in UK and is also going to expand its market in many countries.

As per the above statistics of graph Costa Coffee is expanding its shops and outlets at a
very fast speed. They have increased their shops from 2008 to 2017 frequently (Mooij, 2018).
This shows that the company is looking to capture the emerging market of coffee within UK.
In order to analyse the area of expansion of Costa Coffee, SWOT analysis is done.
SWOT analysis is done to identify the strength, weakness, opportunity and threats to the
company. Therefore SWOT analysis of Costa Coffee is done below:
Strength
 The biggest strength to Costa Coffee is
that it has good brand name and has
acquired second position in the coffee
chain in the world and first in UK.
 The company is operating its functions
across the globe having 3401 stores
(Erevelles, 2016).
Weakness
 The biggest weakness of Costa Coffee
is that it has a big gap between the
tanking of Starbucks and itself.
 Another weakness is that Costa Coffee
is selling the products with higher
pricing as compared to Starbucks.
Opportunity
 Since the company is lacking to expand
in most of the countries, therefore it has
Threat
 The biggest threat to Costa Coffee is
Starbucks. They are already operating

a great opportunity of expanding their
business.
 Another opportunity is that Costa
Coffee can look to tie up with most of
the corporates so as to provide coffee
vending machines.
more than 70 countries across the globe
while Costa is running in almost 31
countries.
 Due to lack of marketing and
advertisement the company is lacking
its brand value as compared to brand
value.
Another specific tool which can help the company in identifying its marketing
opportunity is PESTLE which is shown below:
PESTLE
Political:
It is known as the political affect over the operations of a company within UK. Politics
within a country defines the area of operations and functionality of a company. In case of Costa
Coffee, the country has launched a free trade agreement by which they had reduced the tariffs in
launching the new business (Felix, 2017). This has boosted many SME to invest in the coffee
market in UK. Therefore as per the politics, there is huge market of Costa Coffee within UK.
Economical:
As per the data revealed by government of UK, the country bis expected to grow with a
growth rate of 4.5% in the upcoming years. Although this is a calm piece of growth rate but still
have great opportunity for the companies like Costa Coffee to expand their business. Therefore
the economic condition for the country is good for the companies like Costa Coffee to expand
their business.
Social:
UK is having a good growth rate in the last few years which has resulted in increasing the
purchasing power of customers. As a result middle class has shifted to upper middle class in the
country and likes to use certain products such as coffee and its products (Hofacker and et. al.,
2016). This has resulted to the positive way for the companies like Costa Coffee to see a bright
future in the country.
Technology

The tremendous technology of coffee brewing industry has led to increase the
opportunity for the companies like Costa Coffee to expand their business in UK. Although the
technology is not up to the mark but still the development in future can provide better
opportunities for Costa Coffee to increase their customer base.
Environmental
As per the environmental concerns the production of coffee has increased in UK since the
last years. This provides better opportunities to the companies like Costa Coffee to grab the
opportunity of expanding their business (Homburg, 2017). The raw material will also be
available for the company.
Legal:
The company is looking to provide better opportunities for their workers so that any type
of legal issues can be overcome. The labour and taxes in the coffee beans origin places will
provide safe aspect of producing finest quality of coffee beans.
Ansoff Matrix
It is one of the important matrix solution through which different types of risks can be
identified. Costa Coffee is going to expand its business in UK, therefore the risk involved in it
should be identified and resolved with the help of Ansoff Matrix. There are four quadrants in this
Matrix which are shown below:

The highest risk is in the diversification market where the company will launch a new
product in a new market. In case of Market penetration, the risk involved is very low as
compared to other because it is the investment in existing market with existing product. Product
development is a bit higher risk area in which a new product is developed in a existing market. In
the end, the last quadrant will be market development in which the risk is lower than
diversification. In this quadrant the existing product is launched in the new market (Järvinen,
2016).
Costa Coffee is going to expand its business in UK therefore the company has to choose
market penetration in which they are going to invest in existing market with existing product.
Therefore, the company should choose less risk tasks for expanding their business.
BCG matrix
This is a type of matrix which is used by the organizations which are looking to expand
for a long term project. This matrix is helpful in reviewing the portfolio of product which can
decide where to invest, discontinue and make changes in the product. The matrix is divided into
four parts such as Dogs, Question mark, Star and Cash Cows.
As per the above diagram, dogs are the products with low growth and market share. The
other section is question mark in which the growth of products in market is higher but the market
share is low. Star shows that the product is of high growth rate with high market share. In the
end, the cow quadrant shows the low growth markets with high end shares (Katsikeas and et. al.,
2016). As per the matrix, Costa Coffee is coming in the quadrant of star in which the company

has a high market share and high growth rate as well. Therefore it had good opportunities of
expanding its business in UK.
Competitors Matrix
This matrix is used by the professionals to identify the competition within existing
companies in the same market. In case of Costa Coffee there are many companies which are
giving competition to it such as Start Bucks Cafe Nero, Cafe 2U, Muffin break, Soho Coffee etc
(Kotler, 2017). All these companies gives tough competition to Costa Coffee but still they are
not so much close to the giant coffee shop chain.
As per the above stated graph there are many competitors of Costa Coffee which are
giving a mild competition to the company. Therefore, there are various chances of getting
opportunities of expanding business (Ottman, 2017). The company is having a good marketing
opportunities such as they can invest a good funds in their advertisement budget which will give
them boost to their business. They have a good brand name in UK therefore they will be helped
in advertising positively with their name.
TASK 2
There are three types of marketing segment which are used to state the yielding
customers to a company. These marketing segment are stated as below:
Socio-demographic

These are nothing but the characteristics of a population which includes age, gender,
ethnicity, education level income type of client etc. All these factors are necessary for a company
to know about their customers. A product cannot be manufactured for all citizens. It has some of
target customers which are highly benefited with that. In order to identify those yielding
customers, this type of marketing segment is analysed. Following are the most commonly states
which are helpful in identified the targetted customers.
Age:
This is one of the important factor through which social factor of delivering the product
to end user is identified (Peattie, 2016). This feature is helpful in determining the target
customers for Costa Coffee. As discussed earlier the age group above 50 is more likely to use
coffee. They mostly consumes a large section of coffee consumers. Therefore, the company can
segment these customers.
Income type:
This is another factor which should be considered by the Costa Coffee so that they can
develop any feature which can be helpful in fulfilling the needs and wants of customers. The
customers of Costa Coffee will be medium to upper class. This section of society are mostly
higher consumer of Coffee therefore this section of society will be the target customers for Costa
Coffee.
Psycho-graphic
This is known as the the reason why the buyer should buy the product of a company. This
includes habits, hobbies, spending habits and values of buyers. There are two types of social
habits of a customers which includes demographics also. Demographics is the concept of
personal features of the buyer which include who the buyer is (Sajid, 2016)? This section
includes gender, age, income, marital status etc. In order to target the audience, both the features
should be in the knowledge of Costa Coffee so that they can target their customers easily. In case
of Costa Coffee marketing promotion to identify the target customers, company should identify
the personal features of customers. In psycho-graphic feature, they should target the personal
needs and wants of the customers. They should satisfy the needs which are essential for the
selected customers. If a customers have a hobby of taking coffee several times in a day than the
company should try to make a coffee which will not harm the customer. This will help them to
increase their customer base and sales also.

Behavioural
This is the market segmentation which is helpful in dividing the customers on the basis of
their behaviour. This segmentation also helpful in identifying the response of customers by
viewing the product. In case of Costa Coffee, the company should identify the customers which
can be their base to increase their sales. These customers can provide better customer base to the
company. In order to increase the customers base, the company should know the behaviour of
customers by providing them coffee. They should also provide some of the changes which can be
helpful for them to give satisfaction to the customers.
From the above stated market segment there are various segments which can be identified
as the target customers for the new expanded business of Costa Coffee. These customers include
above the age of 50 years and middle to high income group customers. These customers will
yield better results for the product of Costa Coffee. Therefore these customers will help the
company to improve their market share in UK.
TASK 3
In order to provide the marketing approaches within Costa Coffee, product description,
brand image of company, pricing objective strategy, retailing and distribution strategy, integrated
marketing communication and marketing mix should be applied to the particular product. The
company mainly deals in making different types of coffee.
Product description: They manufactures Cappuccino also in which they have to use different
flavours which are helpful for making the taste. This taste is good for attracting a large number
of customers to the premise of company.
Brand Image: The organization is having a good brand image which is helpful in gathering the
customers base in order to increase the sale. The company is having first position in UK in the
form of having highest coffee chain and second largest after Starbucks in the world. This
suggests that company is having a good brand name.
Retailing and distribution objectives and strategies: These are the strategies which are helpful
for the organization to deliver the end gods to the customers. In case of Costa Coffee the
company is delivering its product to the end user with the help of its outlets.
Integrated marketing communication objective strategy: the company is using the STP
model for their marketing among the customers. Segmentation, targetting and positioning is the
main motive of this company to expand their business.

7 P's Marketing Mix
This model is helpful in identifying the marketing analysis of the products of company.
Following are the 7 Ps which are helpful in market analysis of product.
Product: This is known as the first P which is denoted by product. In case of Costa Coffee the
company is selling different varieties of coffee to its customers such as Cappuccino, Latte etc.
All these products are viable in nature and have indigenous taste in nature.
Price: The pricing strategy of Costa Coffee is slightly premium. They do not provide cheaper
coffee stall to the customers. These products are of high quality and premium range that is why
the cost of product is very high.
Place: Costa coffee is now running in almost 31 countries to serve their finest quality of coffee.
They have almost 3300 outlets across the globe and also focus on stretching the upper and
middle class families (Tuten, 2017).
Promotion: The company is having a good brand name in the chain of coffee shops. It has first
position in UK and second position in the world in terms of revenue of coffee shops. The
company mainly deals in the promotional strategy of word of mouth which is helpful for them to
increase their sales.
People: There are a lot of people who are working in Costa Coffee and apart from that the
customers are also included in Costa coffee. The company always looks forward for the
satisfaction of both types of people. The company is operating with almost 20000 employees
across the globe.
Process: The process followed by Costa Coffee is simple and have standard procedure. A good
sitting arrangement will be found in each outlet of the company. Apart from that, the ambience
of the premise of Costa Coffee is also attractive for the customers.
Physical Evidence: Physical evidence includes the physical existence of the outlets of company,.
The company is having 3300 outlets across the globe by serving in almost 31 countries. Apart
from that it has 2100 outlets in UK also.
Recommendation
In this report, the coffee market of UK is been analysed with the help of graphs and
statistics. This has helped in identifying the opportunities for Costa Coffee in expanding their
business across UK. This report also includes SWOT analysis which helpful in identifying the
strength, weakness, opportunities and threats of the company. This feature is helpful in