Hospitality Industry: Costa Coffee Shop

Table Of Content

COMPANY ANALYSIS4

Background4

Financial situation5

Target Market Selection6

Positioning7

MARKETING MIX7

Product Mix7

COMPETITIVE ADVANTAGE7

COSTA OFFERS THREE KINDS OF PRODUCTS:10

Beverages:10

Food:11

Cakes and Desserts:11

Price Mix11

-Promotion Mix.12

Place Mix13

MARKET ANALYSIS14

OVERVIEW14

The coffee shop concept14

The UK coffee market15

Key trends15

GROWTH STRATEGY17

Asset Enhancement20

Capital And Financial Management20

FACTORS OF COFFEE SHOP MARKET GROWTH.21

PEST ANALYSIS.22

Political factors22

Economic factors22

Social factors23

Technological factors23

COSTA SWOT ANALYSIS.23

STRENGTHS23

WEAKNESSES24

OPPORTUNITIES24

THREATS24

THE FIVE FORCES FRAMEWORK BY PORTER24

COMPETITIVE RIVALRY24

Buying power25

Power of suppliers25

Threat of entrants26

Threat of substitutes26

COSTA STRATEGY27

Diversification27

PORTER'S GENERIC STRATEGIES MATRIX28

Focus strategy (differentiation)28

CONCLUSION AND RECOMMENDATIONS29

REFERENCES32

Hospitality Industry: Costa Coffee Shop

COMPANY ANALYSIS

Executive Summary

Costa Coffee is one of the most famous coffee chains in the UK. It was founded in 1971 in Italy by two Italian brothers: Sergio and Bruno Costa. Costa company which introduced the first Costa coffee shops in the UK in the early 1980`s, had as a main objective to create and serve the finest authentic Italian coffee. Costa became part of Whitbread PLC in 1995 and has followed an expansion program, so to become recognized nationally. Despite that figures, Costa faces some problems, related to their competitors. As Marketing research agency, we are about to conduct a marketing research to identify who are the typical customers of coffee outlets and ascertain their needs, expectations and buying behaviour. The decision problem that Costa Coffee management is facing is why Costa is losing customers from its main competitors.

Background

In 1971, Italian brothers Sergio and Bruno Costa started a wholesale operation supplying roasted coffee to caterers and specialist Italian coffee shops. Within a few years they were so famous for combining their roasting business with premium coffee shops, that Costa Coffee quickly became a dominant name on the UK's high streets.

The Costa brothers opened the first Costa store in London in 1978 and growth expanded at the rate of two stores per year with the help of their family and friends in the business.

In October 1995, food and drinks giant Whitbread PLC acquired Costa and immediately established the brand as the market leader in the premium coffee shop sector. Developments such as the new roaster were crucial to Costa. With huge growth over the 1990's the company had increased to 186 stores by 1999 and in 2000, 3.7 million cups of coffee were sold each week (source: http://www.stannah.co.uk).Costa is now the leading UK branded coffee shop with over 300 stores (source: www.costa.co.uk).

Costa coffee was first poured on our shores in 1971 at 9 Newport Street, London, by Sergio and Bruno Costa. Today, just a few metres away from where they first set up, the Costa Roastery produces the same unique Mocha Italia blend that the Costa brothers worked so hard to create. Costa branched out to retailing coffee in 1978, when their first store opened in Vauxhall Bridge Road, London, England. Later, they sold the business to Whitbread.

Financial situation

Pre-tax profits for Costa Ltd improved from £1.1m in 2001 to £6.9m in 2002. Between 2001 and 2002, the pre-tax profit increased by almost 553% probably due to an increase of the economy of scale. Indeed, Costa opened several outlets during this ...