Strategic Analysis and Recommendations for Café Xaragua
This presentation explores the strategic situation, analysis, alternatives, recommendations, and implementation steps for Café Xaragua to succeed in the competitive coffee industry, focusing on sourcing, strengths/weaknesses, and Porter's Five Forces analysis.
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Brewing a Successful Concept Agate Ose, Brian Kamuk, Boniface Molnar, James Sakib Hameed
Agenda 1. Strategic Situation 2. Analysis 3. Alternatives 4. Recommendation 5. Implementation 6. Conclusion 7. Additional slides
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Strategic Situation Key Issues Competitive landscape Substitutes Upstream complexity in Haiti Capital constraint Goals Create a credible concept Thrive for sustainability Quick return on investment How can Xaragua formulate and execute a business strategy that will allow for longevity and a secure flow of revenues?
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Sourcing Caf Xaragua s Value Resources Business knowledge Deep knowledge of Haiti - Canadian cultural know-how - - Value created through passion, connection and distinction Superiority Distinctive capabilities Deliver special coffee with a distinctive environment Revenue from distinctive with cultural experience Capabilities Supply coffee from a Haiti - Have distinctive environment - Value sourced from distinctive Haitian beans with business knowledge
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Strengths and Weaknesses of Caf Xaragua Strengths Business education Distinctive coffee product Understanding of target group CSR in Haiti Weaknesses Low capital Inexperience Distinctive product can be hindered by lacking business experience
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Porter s Five Forces of Consumer Coffee Industry Threat of Entrants Power of Buyers Branding Investment LOW Branding Economic & cultural influence HIGH Competitive Rivalry HIGH Power of Suppliers Threat of Substitutes Consumer product Many competitors HIGH Substitutable Coffee value MEDIUM Competitive advantage possible by understanding consumers and possessing distinctive product
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Trends Vs KISF Factors for Consumer Coffee Industry in Canada Status * U Trends Key Industry Success Factors - High Canadian coffee consumption - Calgary strong economic area Perceived quality and brand Strong supply chain D U Capital investment - Increasing caf competition - Increasing CSR interest A Consumer insight - 18-35 years *Key: U unattained D developing A - attained - Gentrification High consumption of coffee could be seized with strong branding and correct investment
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Alternatives Status Quo Continue online sales Pros Cons Organic growth Established market niche Limited expansion opportunities Personal aspiration issues Vulnerable to competition
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Alternatives Caf Xaragua Open a coffee shop in Calgary Pros Cons Increased customer awareness Offline brand presence Larger growth possibilities Market knowledge in Canada First mover advantages Capital requirements Demand uncertainty High market competitiveness
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Alternatives Open caf Xaragua and exporting Open a coffee shop in Calgary Become a supplier of Haitian coffee Establish distribution channels Pros Cons Flexibility Higher profitability Higher ROI Increased growth Capital requirements Supply uncertainty Lack of negotiating power Low global market knowledge
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Strategic Situation Key Issues Competitive landscape Substitutes Upstream complexity in Haiti Capital constraint Goals Create a credible concept Thrive for sustainability Quick return on investment
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Evaluation Criteria Ease of execution Impact Growth Competition Weight 0.3 Capital requirements Market knowledge Business acumen of the founders Weight 0.3 ROI Profitability Weight 0.2 Establishing clientele Scalability Weight 0.2 Direct competition Competitive response Diversified Concept - Intact Revenue Channels
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Payoff Matrix Ease of execution Total Impact Growth Competition 1. Status Quo 1.8 2. Caf Xaragua 1.6 3. Open Caf Xaragua and exporting 2 Unfavourable Favourable
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Recommendation Commence with the store concept with the usage of external financing Further diversify the model by extending the online selling to exporting
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Recommendation Store Sluggish sales Less traffic Optimal: 1st year Higher operating costs Conceptually sufficient profitability Optimal location Bearish scenario: o Renew store concept o Adjust branding Product superiority (29.000) USD Relying strictly on product quality to drive revenues is not attainable due to the The caf concept is conceptually strong however certain countermeasures are to be taken to avert reliance on the store to drive profitability geographical rivalry
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Recommendation Store Export E-Store Leverage o market/product understanding Supply high-end players without reach o Use the Kensington location as an SKU o Target Rombouts & Malongo as potential candidates o Exporting is attainable and should be pursued in order to mitigate risks of the store opening
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Implementation Establish caf Xaragua Create strong brand equity Establish distribution network
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Timeline Short Term (0-12 months) Mid-term (12-36 months) Long Term (36-60 months) Q1 Q2 Q3 Q4 12-18 18-24 24-30 30-36 36-42 42-48 48-54 54-60 Physical establishment on caf Xaragua Opening caf Xaragua Increasing branding efforts Negotiate with Haitian suppliers for exclusive distribution rights Negotiate with Rombouts Negotiate with Malongo Evaluation of caf s performance Evaluation of branding strategy
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Caf Layout Roasting Tables and decorations Front window promotion Coffee counter Easy access, interest creation as well as atmosphere creation
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Branding Facebook Instagram Google+ Twitter Own store SEO Content Marketing Community creation Establishing client base Online and offline shop promotion Special offers Contests Educating customers Storytelling about Haiti and coffee Conventional Marketing Guerilla marketing Printed local advertising Creating a strong brand image and loyal customers
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Exporting to Europe Retain distributor exclusivity Control Negotiation Rombouts or Malongo (Belgium) 20% margin offer Ensure Haitian suppliers guarantee to Caf Xaragua Marketing by distributors High quality coffee Protect against uncertainties Unique bean as leverage Evaluation annual basis Result is a sustainable business model which is profitable and credible
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Start-up Budget Equipment Leasehold Improvements Upfront Costs Utilities Deposit Rental Deposit Installation Total 145,000 35,000 10,000 2,000 6,000 10,000 208,000 Equity 20 Year Loan nominal Interest PMT 75,000 250,000 13% - 35,588 No extra credit line is needed
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Rombouts & Malongo Assumptions Rombouts Malongo Approximately 700.000 customers Approximately 500.000 customers 2 % customer reach 2 % customer reach 1 coffee bag per customer in the first year 1 coffee bag per customer in the first year Rombouts is the optimal partner
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Sales forecasts 2013 14,000 185,000 92,400 2014 14,700 194,250 97,020 2015 15,435 203,963 101,871 2016 16,207 214,161 106,965 2017 17,017 224,869 112,313 Rombouts (units) Expected Revenue Operating Profit Malongo (units) Expected Revenue Operating Profit 10,000 132,000 66,000 10,500 138,600 69,300 11,025 145,530 72,765 11,576 152,807 76,403 12,155 160,447 80,223 Both partners will contribute largely to total revenue
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Profit & Loss Budget 2013 2014 2015 2016 2017 Revenue Malongo Shop Total Revenue 132,000 576,000 708,000 138,600 590,400 729,000 145,530 605,160 750,690 152,807 620,289 773,096 160,447 635,796 796,243 Variable Costs Malongo Shop Total Variable Costs Operating Profit 66,000 178,650 244,650 463,350 69,300 184,010 253,310 475,691 72,765 189,530 262,295 488,395 76,403 195,216 271,619 501,477 80,223 201,072 281,296 514,947 Fixed Costs Rent Wages Salaries Marketing Utilities Telephone and Internet Insurance Administrative Expenses Maintenance Total Fixed Costs EBITDA 70,695 194,000 25,000 21,000 24,000 3,600 3,000 7,000 6,000 354,295 109,055 72,109 197,880 25,500 12,000 24,600 3,600 3,000 7,140 6,060 351,889 123,802 73,551 201,838 60,000 13,000 25,215 3,600 3,100 7,283 6,121 393,707 94,688 75,022 205,874 61,200 14,000 25,845 3,600 3,100 7,428 6,182 402,252 99,224 76,523 209,992 62,424 15,000 26,492 3,600 3,100 7,577 6,244 410,951 103,997 EBITDA covers the loan and makes the operations profitable
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Outcome Adjust & Strategize the store concept Diversify the company further Create a long- standing venture +103.000 USD (EBITDA-2017) New Store Concept & Brand strategy Attract EU players Thank you for your attention!
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Risk Matrix Risk Mitigation Contingency Haiti political & weather upheaval Alternative bean supply chain More stable source Negotiation fail with Belgians Offer higher % margin Scandinavian distributor Move to a better location Make a signed security contract Landlord dissatisfaction
Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Opportunities and Threats Facing Caf Xaragua Opportunities Kensington Fixed term loan Coffee culture Centrification Threats Haiti unstable socio-politically causing supply chain issues Haiti subject to extreme weather Competition is very high Chances for higher capital and culture could be hindered by insecure supply chain and competition
