New Marketing Strategy for Caribou Coffee Situational Analysis

Company Analysis

Strengths

Weaknesses

Opportunities

Threats

Marketing Proposal

Marketing Mix

Product

Pricing

Placement

Promotion

To survive firms need to adapt and change in line with the general marketplace. Many successful firm have been able successful deal with dominant competition and high levels of challenge. One firm which faces these challenges is Caribou Coffee, although the second largest coffee house chain in the U.S. it is an underdog when compared to Starbucks, with just over 400 stores across 18 states in the U.S. and 203 stores in 10 international countries, many of which are franchises (Caribou Coffee, 2016). The company has faced some setbacks due to the high level of completion within the coffee house market, closing some 80 stores in 2013, and a further 88 were converted to Peets Coffee and Tea (Leavitt, 2014; Leonard, 2013). This indicates the firm needs to be able to adapt and change if they are to remain competitive. The aim of this report is to examine the firm and present a new marketing strategy.

2. Situational Analysis

To examine a firm to determine a suitable marketing strategy it is essential to look at the firm within its' environment (Thompson, Scott, & Martin, 2010). This section will look at the firm and then its environment with the use of a SWOT analysis.

2.1 Company Analysis

Founded in 1992, Caribou Coffee is a speciality coffee company, selling a range of coffee and expresso drinks though coffee bars. The firm roasts their own beans, which are sold in 400 coffee shops in the U.S.; 273 owned by the company and 127 franchises, and 203 international franchise stores (Caribou Coffee, 2016). The organisation operates with four core values, these are the commitment to guests, including quality innovation connection, a connection to the community, where the company seeks to act in a fair, accepted and responsible manner, a commitment team members, listening, developing, and recognising them, but they commitment to deliver the company's unique personality with fun, passion, and an authentic experience (Caribou Coffee, 2016).

The core product is the coffee shop experience, with coffee made to order, and a selection of food items to complement coffee. During much of 2014 the company undertook some related diversification, product line to incorporate high quality toasted lunchtime sandwiches (Business Wire, 2014). The company sought to continue the competitive advantage of differentiation through a high level of quality in the design of the sandwiches, which included Turkey and brie gets with a pepper jam, and a turkey ciabatta with an aioli pesto (Business Wire, 2014). This expansion into the sector facilitates an enhanced experience for customers, and also provides a greater level of ability to compete with major competitors such as Starbucks, as well as more local firms. This may be seen as a risky strategy, especially as Starbucks reversed this strategy in 2010, citing over diversification resulting in a loss of focus on the quality of the coffee (Schultz & Gordon, 2011).

In addition to the coffee houses, the company also will make a save for the grocery trade, available for mass merchants, wholesale clubs, as well as grocery stores (Caribou Coffee, 2016). The retail range, which includes a full spectrum from light to dark, as well as whole bean and ground varieties in different sizes, is supported the provision of point of sale material, including a four shelf display rack, as well as ongoing trade promotions (Caribou Coffee, 2016). Therefore, diversification into the retail/grocery channels has already occurred.

2.2 SWOT Analysis

Within a SWOT analysis, the first two elements; strengthen pieces, look at the internal elements of the organisation, while opportunities and threats look to the external environment (Mintzberg, Ahlstrand, & Lampel, 2008).

2.1.1 Strengths

As the second largest coffee shop later in United States, Caribou Coffee have a number of benefits, including the well-known trade name which can support sales (Kotler & Keller, 2011), as well as the ability to gain from economies of scope and scale due to the size of the organisation. With the company retaining control over roasting their own coffee, the organisation is able to ensure quality, which is a source of competitive advantage, it retained, as well as maintain control over the supply chain (Caribou Coffee, 2016). The innovation over introduction of new products may also be seen as a strength. This may also be creating a new form of competitive advantage, with the announcement that all of the a menu item are being reviewed, in order to create a "clean label standard," were all food and drink items will eliminate artificial flavourings (Watrous, 2016)....

The processor started with the vanilla syrup, but will be expanded to all products sold by the company by the end of 2016 (Watrous, 2016).
Diversification of the distribution channel, were coffee is sold through the grocery channels, to restaurants, and to offices and catering services, as well as the coffee shops (Caribou Coffee, 2016) facilitate the diversification of risk, which is also a strength (Mintzberg et al., 2008). As the product the same as those sold in the coffee shops, the costs are marginal, using the existing roasting facilities, with additional distribution costs.

The diversification is also seen with the recent acquisition of Keurig Green Mountain Incorporated, well-known for its single serve take-up, along with coffee machines, has been sold to the current owner of Caribou Coffee; JAB, for $14 million (Hammerand, 2015). While a separate company with in the parent group, this may also facilitate increased opportunities Briscoe and scale and alignment distribution channel.

2.1.2 Weaknesses

The reorganisation in 2013/14 was necessary, but it created some, especially in terms of the closures having a negative impact on the organisation's reputation, and internal culture (Leavitt, 2014). The limited geographical presence of the firm in only 18 U.S. states may be seen as a limitation, not only limiting the sales through coffee shops with exposure to regional shocks, but also limiting potential brand awareness to support alternate distribution sales. It may also be argued that despite the organisation being the second largest specialist coffeehouse in America, when compared to the major competitors; Starbucks, although there is some ability to gain economies of scope and scale, they are much less than the major competitor.

The franchising model is weak, as it is estimated by the company that can take up to 5 years for a new franchise operation to breakeven (Caribou Coffee, 2016). This is a relatively long period, especially compared to many other franchise in the food and beverage industry (Nijmeijer, Fabbricotti, & Huijsman, 2014). This can be a severe constrained on an expansion strategy.

The closure of numerous stores in 2013/14 also indicates there are in the marketing model, leading to many stores failing. This may have been the result of underlying operating decisions and control over costs, but may also have been an issue associated with marketing, and inability to generate effective marketing to attract sufficient customers. This weakness will need to be considered and addressed in the way and opportunities identified in the leveraged.

2.1.3 Opportunities

There are significant opportunities within the gourmet/speciality coffee market in the U.S. It is estimated that approximately 50% of the existing adult population, equal to approximately 150 Americans, either espresso coffee, cappuccino, lactate, or iced coffees, approximately 3.1 cups per day (E-imports, 2016). Furthermore, it is estimated that speciality coffee sales are expected to increase by 20% per annum over the next few years (E-imports, 2016). Therefore, there is an increasing market in the U.S., which the company may be leveraged. When the economic situation in the U.S. is considered, with the current recovery taking place in North America, increased disposable income is also likely to increase the demand for non-essential goods, such as gourmet coffee (Baye, 2007).

When examining the penetration of coffee stores, it is apparent that some areas within United States offer great opportunities and others indicated by saturation levels. For example, Seattle has approximately 15 stores per 100,000 residents, or both Manhattan and San Francisco have just over nine coffee shops per 100,000 residents (E-imports, 2016). Meanwhile, other areas have a much saturation, for example Chicago has just over three per 100,000 residents, Houston has less than three, New Orleans has one, and Oklahoma City had less than one per 100,000 residents (E-imports, 2016). These may offer opportunities for national expansion.

There is also a potential for expansion. The organisation has literally created international expansion, having undertaken into franchise operations only. However, when looking, there is a higher level of either coffee, with a recent report indicates Canadian drink coffee on a daily basis (CAC, 2013). This market must be growing at the same rate as the U.S., with expansion expected market demand expected percent per annum (CAC, 2013), but it does provide a significant advantage for Caribou Coffee. Expanding into Canada would help to diversify the risk, especially risk associated with the condition of the U.S. economy which may impact on sales. This opportunity has already been recognised by other companies, with Tim Horton's indicating that they plan to open more than an additional 500 stores in Canada in the next few years (George-Cosh, 2014).

The company has undertaken some expansion…