CAFÉ CROWN-STRATEGIC ANALYSISSALİH BURAK AKATMBA 2015 SPRINGSTRATEGIC MANAGEMENT

ISSUES

• Brand Image- Imitation of Nescafe Products

• Product Differentiation- Premium Products

• Customer Communication - Decreasing association to daily life of young people - Lack of contact points with customers

CUSTOMER

• Mid Income / Upper-Mid Income Class• Male and Female• Between ages 15 to 25 (High School Teenagers, Young University Students, Early Professionals)• Stimulation by Word of Mouth• Actively engaged in social events and

organizations.

VALUE PROPOSITIONWhy Café Crown at all?Brand NameAffordableEasy and Quick to Prepare Different Tastes and ProductsWhy Café Crown over others?Brand Image; Young People Oriented

MARKETPLACE ANALYSIS• EconomyGDP Annual Growth Rate is slowing down; 4,2% 2013-Q3 and 1,7% 2014-Q3High Inflation Rate; 7,55% March-2015 Rising Unemployment; 10,9% and 20% youth unemployment December 2014.Depriciation of TL against USD;

MARKETPLACE ANALYSIS• DemographicsPopulation; 77,7 million (2014)Increasing Urban Population; 8% increase in 15 yearMore than 75% living at urban sitesGrowing Young Population; 16% of population 15-24 5,5 million university students (2014) Participation of 18-22 age group to higher education; %40(2014)Growing Middle Class; 20% of population Changing household structure; increase in single household structure (7,9% in 2012 -8,6% in 2013)

MARKETPLACE ANALYSIS• Cultural ValuesShift in consumption groups; 79% of consumer between 18-45Increasing demand for packaged and frozen foods; full time working family members or individuals Increasing Brand Consciousness; increasing preference of local brands from west to east. Western regions are usually indifferent.

Growing Instant Coffee Consumption; Avearge 7% annual growth with 0,7 kg per capita consumption annually (EU 7 kg)Regular Coffee Consumption; 80% consume coffee regularly High Consumption of Instant Blends (3 in 1); 6th in the worldChanging Preferences in Coffee Consumption (2012 figures)Turkish Coffee; 16%Instant Coffee; 27%Instant Blends (3in1-2in1); 57%

MARKETPLACE ANALYSIS• LegislationTurkish Food CodexSoluble Coffee Dry Material Content; 95% of its weightSoluble Coffee Cafein Amount; 2,5-5% of its dry material contentSoluble Coffee Glucose Amount; 2,46% maximum

DRIVING FORCES• Increasing coffee consumption in Turkey Annual coffee consumption; 22.000 tonnes (Turkey) Market Volume; 500 million USD Expected to be doubled at 2020 according to global trend. • Growing urban young middle income class population• Shift in consumption group; • Demand for quick, easy to prepare, tasty goods• Entry of global coffee chains and formation of local ones.

KEY SUCCESS FACTORS• Strong distribution channel• Brandname and Brand loyalty• Affordable price• Different Tastes and Product Options • Customer communication (packaging, coffee machines, mugs,

social events, advertisement)

PORTER’S 5 FORCESANALYSIS

Threat of New Entrance-HIGH- Growing coffee consumption- Low switching cost for customers- Vertical and Backward Vertical Integration of big players- Economies of Scope

Threat of Subsitute Products-MEDIUM

- Coffee as stimulater and taste- Tea and other instant hot beverages as social drink subsituitue- Turkish coffee culture

Bargaining Power of Suppliers-LOW- Numerous ingridient suppliers- Numerous packaging facilities for outsourcing

Bargaining Power of Buyers-MEDIUM- Brand Loyalty (For Suppliers)- High Sales Volume - Limited Shelve Space (For Buyers)

Rivalry-HIGH-Many firms located at low cost

or premium - Product Standardization

INDUSTRYLIFE CYCLE• Instant coffee blend industry is at growing stage

- Consistent annual growth of instant coffee market.- Majority of instant coffee ; instant coffee blends- Increasing Local/Global coffee chains; affecting consumption pattern.

Competitive Advantage- Product Differentiation- More intense distribution for avaliability- Relatively lower pricing than

competitiors- Enchancing brand awareness via

advertisement and customer communication

COMPETITORANALYSISNescafe 3 in 1• First comer and industry leader• 4 classic product variation More Coffee, More Cream, Cream-Milk, 2-1 • 2 different flavours; Hazelnuts-Chocolate• Pricing at retailers: 0,45 TL – 0,55 TL Different packages• Slogan: Mükemmel Karışım (Excellent Blend)

COMPETITORANALYSIS• StrenghtsGlobal Brand Name-Brand Image; generic name for instant coffee in TurkeyHigh QualityStrong Distribution Channels and R&DStrong Customer Communication

• WeaknessLack of flavoured productsFrequently changing brand faces, sometimes contradictory

STRATEGIC MAP

Quality is considered to be combination of taste, different products and brand name/image

FINANCIAL ANALYSIS

Ülker (in Mil. TL) Nestle S.A. (in Bil. CHF)

2012 2013 2014 2012 2013 2014Total Revenue 2343,2 2748,4 2891,2 89,72 92,16 91,61

% of growth - 17,3% 5,2% 2,72% 0,59%

EBIT 243.54 279.12 263.22 13,451 12,437 10,268

%EBIT - 14,6% -5,6% - 21% 8%

Net Income 166,97 188,65 211,71 10,23 10,02 14,46

%Net Income - 12,9% 23% - -2,08% %44,3

SWOTANALYSIS

Strenghts- Brand Name [KSF]

- Affordable Price [KSF]- Strong Distribution Channlels [KSF]

- Different Tastes [KSF] -Brand Loyalty [KSF]

Oppurtunities- Growing Coffee Consumption [DF, P5F, MA]

- Preference Towards Instant Blends [MA] - Entrance of global coffee chains [DF]- Formation of local coffee chains [DF]

- Rapid Urbanization [DF, MA]- Increasing Young Population [DF, MA]

- Growing Middle Class [MA]

Weaknesses- Decreasing Customer Communication [KSF,

Issue]- Brand Image [Issue]

- Lack of Premium Products [Issue]

Threats- Slowing economic growth [MA]

- Decreasing Purchasing Power [MA]- Reaction of Turkish Coffee Providers [MA,

PF5] - Legislations limiting product differentiation

[MA]- Bargainging Power of Buyers [PF5]

- Tea and other instant hot beverages [PF5]- Growing market; competition [ILC]

GENERIC STRATEGY• Differentiation Strategy- Seek to attract a broad market-Driving Force- Convince customers to pay premium- SWOT Oppurtunity- Enchancing customer communication-Key Success Factor- Enchancing brand loyalty-Key Success Factor

• Brand Image• Product Differentiation• Customer Communication

IMPLEMENTATION• Brand Image; Follower and Imitator of Nescafe (Weakness)o Bundling-Packaging

• Lack of premium products (Weakness)• Mature Industry; product customization(Threat)• Growing bargaining power of buyer (Threat)o Cobranding

• Decreasing customer communication (Weakness)o Increasing customer contact by getting into daily life with

artifacts and social media promotions

IMPLEMENTATIONBRAND IMAGE• Bundling with a Ülker product from biscuits segmentAim; sales and penetration of 3 in 1 product using well established brands- All in one experience

• Changing packaging or mugs for special occasions or events

Levearing distirbution channels and brand name Enhance brand image

IMPLEMENTATIONCOBRANDING• Ingrident co-branding with a global coffee roaster (Tchibo,

illy); using their roasted beans to offer premium products Ülker has enough experience of co-branding

(Kellogs, Hero)

- Leveraging its brand name and distribution channels

- Exploiting growing coffee consumption culture and consumption shift

- Creating premium products

IMPLEMENTATIONCUSTOMER CONTACT• Intense communication with customers- Creating variety of mugs- bundle them with products- Distributing free disposable carton cups local coffee shops and canteeens- Providing coffee vending machines canteens, corner shops and universities- Organizing youth fest and sport activies Sponsoring spring fest- Promoting these activities in social media and prepare lottories for fee tickets

Levearing distirbution channels Enchance brand loyalty

THANK YOU

REFERENCES• http://www.hurriyet.com.tr/ekonomi/21194049.asp• http://www.tumgazeteler.com/?a=266420• Türkiye Tüketici Profili ve Bilinç Seviyesi Araştırması-Mart 2014

www.turkcev.org.tr• Türkiye Gıda Sektörü Raporu-Temmuz 2010

www.invest.gov.tr• http://

financials.morningstar.com/income-statement/is.html?t=NSRGY

• http://tr.investing.com/equities/ulker-biskuvi-income-statement

• http://www.dunya.com/ekonomi/ekonomi-diger/kahve-pazari-1-milyar-liraya-kosuyor-224966h.htm