Evidence From Costa Rica and Guatemala? The failure of the company may not necessarily reflect the failure of all employees. Hill, C. W. L., & Jones, G. R. (2012). Our results are displayed in table 4. But the former seems to attract a younger customer, while the latter seems more popular with adults. Costa Coffee also offers coffee machines under the brand Costa Express. Costa Coffee incorporated telemetry into Coffee Nations machines, allowing the company to It produces in high volumes. View all Google Scholar citations Required fields are marked *. Coffee price is, on the one hand, one of the most volatile among primary commodities (Lukanima and Swaray, Reference Lukanima and Swaray2014), and on the other hand, one of the most important determinants of profitability for all actors in the coffee value chain, especially for growers. Most famous offering of Costa coffee are: Cappuccino, Latte, Flat white, Americano, Mocha, Expresso etc. For example, in a study of coffee production in the district of Agua Buena, Costa Rica; Babin (Reference Babin2015: 99) concluded that Fairtrade price premiums were inconsequential in providing support for smallholder resistance to land-use change out of coffee production. (LogOut/ We conclude that the null hypothesis (ftp is not an endogenous variable) cannot be rejected. Coefficient 4 refers to the Western Valley region, which is between 800 and 1,700 masl and yields Strictly Hard Bean, Good Hard Bean and Hard Bean coffees. Stevenson, W. J. Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). You are free to use it for research and reference purposes in order to write your own paper; however, you Check out these detailed articles on. B., & Hesterly W. S. (2010). Costa Coffee produces coffee based on the needs of its customers. MCs typically extract a fee to offset the risk of investing in specialized and real-estate assets in a host country. This study investigates the determinants of coffee prices received by growers in Costa Rica, paying attention to the impact of environmental, regional, quality, and international aspects in a panel data set for the period 20082016. (2020, March 27). Like other commodities in developing countries, it has been shown that domestic coffee berry prices are strongly influenced by international prices (Worako et al., Reference Worako, van Schalkwyk, Alemu and Ayele2008; Mofya-Mukuka and Abdulai, Reference Mofya-Mukuka and Abdulai2013). They have decided to lengthen their product line by using an upward stretch, where high quality and more expensive items are introduced: the company is introducing coffee made using rare, luxurious coffee beans. They are able to produce high quality products. hasContentIssue false, This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (, Copyright The Author(s), 2022. The Costa way. This fee might take the form of higher prices for goods they sell and/or lower prices for the commodities they purchase (Teece, Reference Teece1985: 237). Therefore, organizations need to keep up with the changes to remain in the competition. Wheelen, T. L., & Hunger, J. D. (2012). Currently, ICAFE has a web page where current coffee prices on the New York Stock Exchange are reported (see, e.g., ICAFE, 2015) but no price forecasts are offered. Unequally spaced panel data regressions with AR(1) disturbances, Fair trade/organic coffee, rural livelihoods, and the Agrarian Question: Southern Mexican coffee families in transition, Instrumental variables and GMM: estimation and testing, What to do (and not to do) with time-series cross-section data, The world's first carbon neutral coffee: lessons on certification and innovation from a pioneer case in Costa Rica, The potential of Carbon Neutral Labeling to engage coffee consumers in climate change mitigation, Does eco-certification have environmental benefits? Not only is competitive advantage vital for survival in the U.Ks saturated coffee market; but how a company goes about differing its products also provides plenty of scope for failure, as well as success. Despite this, the product will never be profitable there are not sufficient supplies of coffee beans to allow the drink to reach the maturity stage of the product life-cycle. To address these problems, we use the Panel Corrected Standard Errors and the Prais-Winsten estimator, which allows us to correct the problems of heteroscedasticity and autocorrelation following a first-order autoregressive process, even when the panel data is not balanced (Baltagi and Wu, Reference Baltagi and Wu1999; Freybote, Reference Freybote2016), as is the case in this study. Source: Authors' elaboration based on ICO statistics. WebThe four strategies are summarised in the figure below: The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry In order to guarantee the positioning of quality coffee from Costa Rica in general, and from the regions with the highest altitude in particular, the regulatory entity (ICAFE) may promote the Protected Designation of Origin that will allow the main brands of Costa Rican coffee to maintain and widen their position in international markets. Costa Coffee Costa Coffee was founded by Italian brother Bruno and Sergio Costa in Lambeth London in 1971. For Costa Coffee, the supplier value chain means the process of selecting origin of the coffee beans to create a cup of coffee, which they buy directly from the farmers. Secondly, we cannot reject our first hypothesis (H1) regarding the coffee berry prices reported by multinationals. Strategic management and business policy: Toward global sustainability. Alternative activities such as ecotourism and rural tourism could also be encouraged and incentivized, not only as a complement to coffee production, but also as a means to promote the care of nature and local culture (Heyne and Vargas-Camacho, Reference Heyne, Vargas-Camacho, Azara, Michopoulou, Niccolini, Taff and Clarke2018; Howitt and Mason, Reference Howitt and Mason2018). Costa Coffee sells coffee, beverages & snacks as its main product offering in its marketing mix. In Costa Rica, coffee production is an important economic activity for many rural cantons (Pelupessy and Daz, Reference Pelupessy and Daz2008), where primary production is mostly carried out by small farms. Being the experienced brand with strong foothold, the company uses differentiation as a tool to reduce the pressure by other brands. In other words, the products are semi- standardized. WebAbstract. They are measures that ensure products are produced to the highest level of perfection to ensure high quality. Costa Rica. The authors would like to thank Elena Huergo, Tania Osejo and Guillermo Arenas, as well as the editors and two anonymous referees, for valuable feedback. Table 3. More specifically, we consider two particularly relevant certifications, which are Fairtrade mills and organic coffee. Consistent with this insight, Haight (Reference Haight2007) and Sick (Reference Sick2008) claimed that most FT coffee mills in Costa Rica sell much of their coffee to roasters or brokers in conventional markets. An important implication is that the periods during which prices for green coffee are low in international markets tend to generate economic crises in coffee growing regions (see Avelino et al., Reference Avelino, Cristancho, Georgiou, Imbach, Aguilar, Bornemann, Lderach, Anzueto, Hruska and Morales2015; Prasad, Reference Prasad2019). However, the fact that FT mills do not report higher average prices should not lead one to the conclusion that there is no scope for this certification. Coffee bars have 5% penetration in India which itself portrays the opportunity lying ahead. Costa Coffee is a business that operates in a highly competitive environment. In addition, Costa Coffee has employees who are skilled and able to produce at the highest level possible. Starbucks aims to deliver the best possible coffee to customers, regardless of time. Figure 1. This strategy has been successfully carried out by producers of wine, meat, fruits, cheese, and other products in Europe (Hajdukiewicz, Reference Hajdukiewicz2014; Marcoz et al., Reference Marcoz, Melewar and Dennis2014; Sadlek, Reference Sadlek2019). The yield is related to the weight of the coffee seed and depends mainly on the conditions outside the farm, such as the climatic conditions and the altitude where the coffee is harvested. Costa Coffee Marketing Strategy comprises of not only its Marketing Mix, but also segmentation, targeting, positoning, competition and analysis like SWOT. Does Fair Trade Coffee Help the Poor? This includes their presence and amount of activity on different platforms, such as Twitter and Facebook. Employees of Costa coffee also interact with customers in regional language along with English as their main language to make its customer feel more comfortable and friendly. We built an unbalanced panel data set from 2008 to 2016 with information about annual average coffee prices paid by mills in Costa Rica and a set of variables that are expected to have an impact on such prices. The various products are designed based on the occasions and the time of the year, as well as customer needs. Costa Coffee's target demographic Second are some intrinsic characteristics that are related to coffee quality, but difficult or impossible to modify by coffee growers, such as altitude or the yield of coffee berries. J.A. Business organizations should be dynamic. Change), You are commenting using your Facebook account. These efforts are expected to be rewarded by higher prices in the market. MBA Skool is a Knowledge Resource for Management Students, Aspirants & Professionals. Following its 3.9bn ($4.8bn) acquisition by Cola-Cola in late 2018, the company has operated in the US market via automated Costa Coffee Smart Caf machines and BaristaBot locations. In both respects I feel they will both achieve their aims. Around 8 million tons of coffee were exported from producing countries in 2019 (International Coffee Organization, 2020), which makes coffee one of the most traded food commodities worldwide (Girotto et al., Reference Girotto, Pivato, Cossu, Nkeng and Lavagnolo2018). One of the challenges facing Costa Coffee is determining the level of productivity of the staff, because the firm relies on the productivity of different units. Figure 2. First details the completed background research and product concepts for Costa Coffee. We do not reject our third hypothesis either, since we find that coffee growers located in the Tarraz region (coefficient 7), have received a higher average price for their berries than that paid in the rest of the regions, as stated in hypothesis H3. The product offered by costa coffee is the main driver in companys business strategy as it uses a pull strategy to gather more customers and be liked by them. The level of competition is expected to increase in the future. Other products include tea, Costa ice, specialty drinks, and food. Our study confirms that coffee prices, which are key for growers' profitability in developing regions, depend on the one hand, on a set of external variables that are beyond the control of farmers but, on the other hand, on their differentiation strategies. Hence, create long-term customer loyalty. Specifically, it creates a consignment mechanism in which prices paid to farmers by coffee mills must be a function of the seasonal average final price, production costs and processing yields (Asamblea Legislativa de Costa Rica, 1961; Adams and Ghaly, Reference Adams and Ghaly2007; Dragusanu et al., Reference Dragusanu, Montero and Nunn2021). New York, NY: McGraw-Hill Higher Education. It has since been working on expanding the brand in the attractive and growing coffee category: not least with products for at-home consumption. It is imperative to note that the level of competition continues to intensify as companies continue being innovative owing to the advancement in technology. 5. We identify three groups of variables that affect domestic coffee prices. Marketing Strategy of Costa Coffee analyzes the brand with the marketing mix framework which covers the 4Ps (Product, Price, Place, Promotion). 1. Figure 1. Company Name. Coffee in its product portfolio is what it is known for and thats why it is a star in the BCG matrix. COSTA Coffee. Valenciano-Salazar acknowledges support from the Scholarship Department of the National University of Costa Rica (grant JB-C-1106-2016). Lets hope consumers find the coffee good enough to be worth the wait. It is involved in CSR activities and has set up Costa foundation to get associated with coffee-growing communities around the world. The names and other brand information used in the Marketing Strategy & Mix section are properties of their respective companies. Nominal coffee prices. The third group has to do with differentiation strategies that farmers can use to put them in a better position, mainly by adopting social and environmental certifications and programs. The restaurant industry, despite being one of the busiest in the markets, is also one of the most competitive. This research paper on Costa Coffee Company Analysis was written and submitted by your fellow WebCosta Coffee. 1 An additional reason to choose these certifications is based on data availability for the period under study. Costa Coffee is a British coffeehouse chain with headquarters in Dunstable, England. This result can be explained as the combined effect of different factors. Thus, they hope the presence of self-service machines will not affect their cafes brand equity if they can convince their consumers to position the two services separately. Costa coffee also sells it coffee vending machine under brand Costa express. Costa Rica. WebCosta Coffee has successfully implemented the differentiation strategy by offering a wide range of high-quality coffee blends, food items, and customer service experience. A diverse economies case study of Tarraz coffee micro-mills, Los Santos Region, Costa Rica, New Zealand, The effects of fair trade on coffee growers: a framework and analysis, Upgrading of lowland coffee in Central America, Global markets, local conflict: violence in the Colombian coffee region after the breakdown of the international coffee agreement, The development impact of fair trade: from discourse to data, Benefits of regional food quality labels for Czech producers, Assessment of the effects of fair trade on smallholder producers in Costa Rica: a comparative study in the coffee sector, Costa Rica's response to the coffee crisis. Forecasting is important because it helps the organization in predicting its future performance, as well as its future financial needs. Whether it is a digital platform or social platform, Costa Coffee has the strong presence in the media which is helping the company in creating awareness and thereby increasing its sales. In other words, there is a possibility of the company recording dismal performance, even when some employees have excelled in their units. Selective targeting strategy is used by the Costa coffee as being present in 29 nations which are geographically separated, following selective strategy is helping the company in catering to the needs of the customers and introducing new products accordingly. Its physical environment strategies involve providing excellent indoor seating, attractive dcor, and high-quality furniture. The company also sells some of its merchandise like its branded cups to its customer. Costa coffee globally focuses on its people ie employees and customers. Since there is not a unified source of FT-certified firms by year, we built this indicator from several sources. There is an important difference, though. The largest coffeehouse chain being Starbucks and then followed by Costa Coffee. In summary, OC growers must reduce chemical inputs and adopt environmentally friendly management practices such as agroforestry techniques that increase the level of biodiversity in farms (Inter-American Development Bank et al., 2002). What Is The Difference Between Product Management And Brand Management, Collaborate with Non-Competing Businesses, Flyer in the right places, to the right people, Grab their attention with promotional banners, Reach out to customers with feedback cards, Mix in offline marketing strategies such as promotions and local partnerships, Run a Facebook advertising campaign on social media. This study provides some insights that can help come up with some recommendations in terms of farmers' strategies and in terms of public policy. Nominal coffee prices. Therefore, quality becomes a very significant factor. There are clearly benefits and drawbacks with both of their strategies. As far as we can tell, Costa Coffee are not currently trading in Russia, based on the following: On the 8th of March, 2022 Coca-Cola, who own Costa Coffee, released the following statement: ATLANTA, March 8, 2022 The Coca-Cola Company announced today that it is suspending its business in Russia. Costa Coffee has its long term projections and the goals that it needs to achieve in the long run. Costa coffee produces coffee based on the needs of its customers. Lewin et al. Costa Coffee is the largest coffeehouse company in Britain and second largest coffee chain in the world. Generally speaking, target markets usually fall into one of three segments: demographic, geographic, and psychographic. Note: Each gray dot represents the annual average price reported by a buyer. Pelupessy and Daz (Reference Pelupessy and Daz2008) concluded that the highest-quality coffees harvested in the highlands of Central America obtain better prices in international markets than coffee harvested in lowland areas, which tend to be of lower quality. (Reference Lyngbk, Muschler and Sinclair2001: 205) show that the average three-year productivity mean of organic farms was 22 per cent lower than that of conventional farms. The Mocha Italia brand is constituted of the Arabica and Robusta coffee blends. Since coffee price is sensitive to some variables that are beyond the control of small growers, such as the fluctuations in the international prices, the intervention of public institutions can be crucial. Similar objectives were set in various countries around the world (see Zou et al., Reference Zou, Xiong, Xue, Zheng, Ge, Wang, Jiang, Pan and Wu2021), including Costa Rica. This also happens to be the major factor why Costa Coffee has been able to thrive in Europe. ensure the integrity of our platform while keeping your private information safe. It should have the equipment that is sufficient to sustain the future increase in productivity. The average revenue per customer of Costa Coffee is much less than its competitors. Altitude is an important determinant of coffee sensorial qualities (body, acidity and aroma).