Good Relationship With Supermarkets

Published Date: 02 Nov 2017

This report investigates the current position and future direction of Just Us Cafés

Key Problem Statement:

The number one issue facing Just Us Cafés is:

Just Us Cafes are losing their competiveness in the Fair-trade market, a market which they pioneered in Canada.

Our Proposed solution is:

Use technology and develop an E Commerce site which will reach a broader spectrum of consumers and improve product awareness through online advertising.

Key Points

The Macro- environmental scan has revealed two key issues .These are

The move of consumers towards more ‘locally grown’ foods may result in a decrease of Just Us’ sales.

Not being up-to-date with technology may result In the loss of potential customers and decrease sales.

The Micro environmental scan had revealed one key issue:

The threat of new entrants is ever increasing and present bringing with it heavy competition and many substitutes to Fair-trade products.

Both issues are summarized in a SWOT analysis.

The issue of the usefulness of the BCG and PLC has been analyzed and it has been concluded that these two tools are not useful to Juliet at current.

Ethical considerations have also been evaluated and it issued identified is cost of coffee beans maybe too high.

An evaluation of the overall customer experience and loyalty programs has highlighted that no customer loyalty programs are in place but loyalty cards were suggested.

An appraisal of the STP AND 4P’s framework has exposed the following weakness:

1. Products are positioned effectively to attract consumers and advertising is lacking to promote Fair-trade awareness.

RECOMMENDED ACTION POINTS

1 Develop an E Commerce site to attract more consumers and increase advertising and awareness.

2. Introduction

This report seeks to analyze the current position of JUS US Café (JU), and determine the possible path of direction it may take to sustain its future. Jus Us Café is the brain child of John Moore, a Canadian who followed his passion, a passion which led him to coffee beans. From one café in 1995 when they opened Jus Us Café to four cafes presently, all still serving 100% Fair-trade (FT) products.

Fair trade is cutting out the middle man and going straight to the supplier (producer). In this manner, suppliers in poverty are guaranteed a better standard of living by getting a standard minimum price for their produce. Additionally, they are offered technical assistance and education to enrich their lives and those in their community. Although Jus Us Café has seen much success since its inception, its growth is currently being restricted by the number of competitors entering the Fair Trade and coffee market.

Just Us Café as a brand has the potential to overcome this limitation in growth and sales by a using focused advertising campaign in order to impact on their target market. However, in order to develop such a strategy, JUS Us Café management must first understand the current situation in which they reside. As such I will start by analyzing their current situation.

3.0 Current Situation Analysis

In order to develop an effective marketing plan for JUST US! Cafe, a current situational analysis must be conducted. A current situational analysis answers one very important question "Where are we now?"

To answer this question an external analysis and internal analysis of the environment within which JU resides must be conducted.

3.1 External Analysis

An external analysis explores both the macro-environment and microenvironment in which JU operates. There are two major analytical tools used to examine the external environment of a business. These are:

PEST Analysis

Porter’s 5

3.1.1 PEST Analysis

To understand the macro-environment within which Just Us operates a PEST analysis will be conducted. This analysis uses 4 headings to collate its findings. These are:

Economic

Initially the recession which consumers and businesses alike are faced with may not affect the sales of Just Us Café, since disposable income is not yet restricted.

However, as consumers begin to tighten their belt and disposable income is restricted they may not be willing to pay the premium for the JU coffee but instead venture to competitors or opt for cheaper products. Additionally, with the fluctuations of commodities such as oil making production more expensive JU may lose additional sales if it transfers these additional costs to consumers.

Social

The consumers within the communities are becoming more ethically aware seeking less commission in the process of foods. This newfound awareness should have been a bonus to JU, hoever, consumers are now focusing on locally produced and cultivated products.

As this is the case, JU may face decreased sales of its Fairtrade products as the coffee beans are imported from outside Canada.

Technological

JU finds itself in an era where technologies are advancing quickly making other versions obsolete. At this rate if JU refuses to become up-to-date then they may lose some competitiveness. For example, Kicking Horse has developed an E-Commerce site which gives the consumer the convenience and safety to order their products online without venturing to a supermarket or café.

This move by Kicking Horse will cause JU to lose sales, if they do not respond in a fitting manner.

3.1.2 Porter’s 5 Forces

Porter’s 5 Forces is a tool made famous by master strategist Michael Porter which explores the micro environment of a business.

Competition

JU operates in an industry where competition is very high. JU faces competition from both small and large business. This competition is not only challenged in its main territory of Nova Scotia but in surrounding provinces where the competitors are creating unique products which rivals those of JU.

In order to ascertain how competitive JU’s current strategy is against its rivals, an assessment must be conducted on the strategies of main competitor.

Current Competitors of JU – see Appendix 1

Kicking Horse

E- Commerce enabled

Good relationship with supermarkets

New Entrants

The threat of new entrants is high. This is due to the lack of barriers to entry within this market. The fair trade market is growing and as businesses become aware of this market they enter in hopes of gaining a slice of the market share and profits.

However, as stated in the Case Study some businesses do not carefully assess the risks of entering such a market such as minimum costs to suppliers, quality coffee beans. As a result these businesses fail to get off the ground or to firmly establish themselves.

Substitutes

With more and more competitors entering the fair trade market due to the lack of barriers, more and more products are being created to satisfy the needs of the consumers. The more products produced the more choices consumers have at their disposal thus the increased possibility of reduced sales for JU.

3.2 Internal Analysis

After examining the external environment through the macro and micro environmental analysis, it is important to take an internal assessment of JU. This internal assessment is designed to analyse how effectively JU’s management uses it resources to combat against the external factors idenitied.

3.2.1 Core Competence

As C.K. Prahalad and Gary Hamel wrote:

Core competencies are the collective learning in the organization, especially how to co-ordinate diverse production skills and integrate multiple streams of technologies...core competence is communication, involvement and a deep commitment to working across organizational boundaries...core competence does not diminish with use. Unlike physical assets, which do deteriorate over time, competencies are enhanced as they are applied and shared.

The core competencies of JU’s organization is embedded in its culture; from its ethical minded owners John and Mary Moore, to their highly trained and educated staff, to their motto "people before profits" to its mission statement. All these elements speak to the strength and dedication to the Fair-trade movement. Moreover, through this dedication and care JU created JUDES which gave technical assistance and provided education to the communities of the FT suppliers. Additionally, a fair trade museum was erected at Grand Pre to raise awareness and education of the FT products.

Another core competence is the high quality of their coffees since they only use the freshest coffee beans and do their own roasting where they roast only small quantities to ensure a high quality product.

3.3 SWOT Analysis of Just Us! Cafe

Swot_Analysis (1)

3.4 Ethical Issues

As a fair-trade business there are mainly advantageous aspects such as a new market, a more ethical foundation and support from government to name a few. On the other hand, there is a general issue that will affect all fair-trade businesses and that is cost.

As a certified fair-trade company governed by the FLO, companies are suppose to follow certain guidelines and standards, one of these standards is to pay a minimum price to the FT producers. Moreover, affixed to this minimum price is usually a premium, here lies the problem for the higher the cost of raw materials then the lower the profit margin. Therefore the main problem here is whether to absorb the additional cost or transfer it to the customer through the product’s selling price.

As in JU’s case, they would rather absorb the additional costs than to pass it onto their customers as can be inferred from their motto "people before profits" (Case Study) However, in the long term if costs continue to rise they may have to consider passing some of the cost onto the consumer.

4.0 "Memo to Juliet: BCG Matrix and the Product Life Cycle"

What is BCG?

The BCG Matrix was created in 1970 by Bruce Henderson and the Boston Consulting Group. The purpose of the BCG Matrix is to determine investment priorities for a company with a portfolio of products/BUs. A scatter graph is used to show how a product/BU ranks according to market share and growth rates. (www.boundless.com)

The results of the BCG matrix are summarized under four (4) headings:

Cash Cow

A cash cow is a product/BU that has high market share and is in a slow growing industry.

Star

A star has a high market share in a high growing industry.

Dog

A dog has a low market share in a mature industry. 

Problem Child

A question mark is a product/BU growing rapidly in a growing industry.

Advantages

Can determine relative market share and the market growth rate of a product line.

According to Orcullo (2007,p.162) the BCG Matrix gives the members of the business organization an idea which among its products or services has a relative advantage or a certain level of competitiveness vis-à-vis its rival firms.

Main Disadvantage

As Kitchen and Proctor (2007) notes the BCG model suffers from its reliance on market share and market growth as the only two dimensions to be used in assessing product portfolio strengths and weaknesses. It can be difficult to classify a product as having high or low market share.

Is it useful?

Although the BCG Matrix has its advantages and maybe a useful tool for larger businesses, this tool does not suit JU currently. Using the tool will result in JU FT products being accounted as stars; the FT market is constantly growing as seen from the statistics (Appendix 2) and will continue to grow in the near future. Therefore, the analogy of a mature market is irrelevant.

Furthermore, with all the competition and new entrants in the FT market, how accurate is the market share data? A slight error in market share may result in products being labeled incorrectly and thus a wrong marketing strategy devised for that product. Therefore, it is easy that without pinpointing and evaluating and correcting these variables the BCG Matrix is not a reliable marketing tool for Just Us! Cafes.

Product Life Cycle

The product life cycle has 4 phases (introduction, growth, maturity, and decline). Each phase needs a different advertising and marketing strategy. Due to inexperience the advertising campaign that should follow products through its life was non- existent. This could have led to premature decline of products or stinted growth. As such to use this model effectively each product should be treated as at the introductory phase.

Both the BCG Matrix and the Product Life Cycle are useful marketing tools to determine where and how resources should be allocated. However, it usefulness is limited to the data used; this data must be timely, accurate and relevant in order to ascertain a truly unbiased result.

After looking at tools that analyse the health of JU’s products it is time to look at ways to improve retail and customer loyalty.

5.0 Retail and Customer Loyalty Strategy

Customer and retail strategies go hand in hand since the more sales generated means either more customers or current customers are spending more. As such you cannot speak about one and not the other. In the case of JU there is not much that can be done to enhance their retail strategy. However, two suggestions are:

Active Selling

The baristas at checkout would give the customer a FT leaflet, ask them if they would like a museum ticket or recommend a product to compliment their purchase.

Increase number of events

The number of events such as artist displays, poetry readings, and live music should be increased; since an increased number of people increase the probability that some of them may become customers thus more sales.

Although these two suggestions may be relevant; attention needs to be focused on customer loyalty.

Customer Loyalty

The Importance of Customer Loyalty

It is said that businesses exist solely to make a profit; this may indeed be factual but their existence is only possible if they have customers. Businesses must create a product which will satisfy the wants of consumers in order to survive. JU has been able to do this since its inception by selling a quality FT product offering. However, with increased competition comes more substitutes and a struggle to maintain market share; this is where customer loyalty is most important.

With increased competition, customers become more aware of their true power and as such they are intolerable to poor customer service or delays. Given this intolerance, service providers have found it increasingly difficult to create a differential advantage in service delivery, and also found that the service environment itself has become fertile opportunity for market differentiation (Lin and Liang 2011). For that reason along with increasing competition, service oriented firms must be certain that their service environments appeal to customers. Recognising the importance of service environments to consumer behaviour, service providers are devoting considerable resources to make improvements (Lin and Liang 2011).

JU already has embedded in it good customer service practices such as highly trained baristas and the interior of its cafes are comfortable and secure to match its surrounding environment. However, there are no specific customer loyalty programs at JU. Below are suggestions of some customer loyalty programs.

Different Types of Loyal Programs

Loyalty Card (One free drink)

The idea here is when a customer buys a coffee they receive a stamp on their card; after five (5) stamps they get a free coffee.

Points System

Each purchase FT product has a certain amount of points attached to it, after one hundred (100) points the customer is entitled to a free product.

Monthly Bundle Give-a-ways

At the end of each month approximately 5 random customers will receive a bundle which may include:

Success stories of the FT farmers and their communities

Samples of newly developed coffee in order to raise awareness of their existence.

Already recognized arrays of FT coffees, coffee bean and teas.

JU must realize that retail success only occurs if there is customer satisfaction and customer loyalty is a byproduct of customer satisfaction. Therefore, customer loyalty programs need to be implemented; not only to reward loyal customers but seek to encourage repeat customers; showing customers much deserved recognition and appreciation. It is easier to retain a customer, than it is to gain a customer.

6.0 STP Analysis and the Marketing Mix

6.1 STP (Segmentation, Targeting and Positioning)

6.2 Segmentation

Segmentation from a broad perspective looks at the manner and method in which a business isolates and targets its consumers. This may be done via geographic or demographic segmentation.

6.2.1 Geographic Segmentation

JU’s head office and roast plant where all the beans are roasted and packaged is located in Nova Scotia, a maritime province in Canada. This geographical location of the plant can be seen as a mere coincidence or as a strategic move to be close to the importation of its raw materials (coffee beans).

JU started from mere and humble beginnings as such it made more sense it now getting established to be located in proximity to the port thus reducing the amount of transportation costs. Additionally, in the future should JU consider exporting through expansion then it is proximity to the shipping hub with connections to Europe and North America.

6.2.2 Demographic Segmentation

JU’s main consumer base i.e. target group is generally young, educated individuals who are ethically minded as such it would be wise to be located within the universities as JU has done or within close proximity.

Moreover, JU’s four locations have all been designed to incorporate the culture of its surrounding environment as such being a comfortable haven instead of an alien.

6.3 Targeting

With regards to a target specific consumer type, JU’s FT products are solely aimed at those individuals who young, educated and ethically minded. Although, this has been successful for JU thus far, with the move to products which are local sourced and produced. This target group may decrease as they boycott JU’s products which do not fit the newish lifestyle since coffee beans are imported into Canada.

6.4 Positioning

At current, JU’s products are not strongly positioned, yes they are in the 3 universities, cafes and the supermarket such as Loblaw but the presence appears to be restricted. The brand would be in the back ground at the supermarket especially since they have started to manufacture their own substitute products.

In order to create a greater position for its products JU should incorporate Juliet’s marketing talents and increase advertising in order to have their products in the face of consumers. Additionally, their products are in

6.5 Marketing Mix

These are the elements a company utilizes to get the product from finished product on the shelf to the consumer.

Product

JU offers a product that is of high quality and ethical since it is Fair trade certified and organic. Additionally, they offer a diversity of products such as teas, chocolates and cocoa. However, the "products" are not just FT products but the success stories of the producers and their communities, this is the total package.

Place (Distribution)

JU has 4 different locations which sell all the FT products. They are all comfortable and adopted to the community’s environment where it is located. This is good since it does not ostracize the community but satisfies the consumer by understanding what they want. Additionally, JU’s products are also distributed by the universities via the kiosk and wholesale retailers with the assistance of the 4 sales team members.

Another link in the distribution chain is the supermarkets which represent 40% of the wholesale revenue. Supermarkets such as Loblaws, the main stockiest of JU’s products has recently introduced their own line of substitute products, as such this link is very risky and can become even riskier if they decide to reduce the amount of JU products to stock or just cancel the contract all together.

Price

Due to the fact that JU provided FT certified products, a premium is attached to these products. At current, this is not a problem for target consumers who care more about the producers stories that the actual price of the product. However, as stated earlier in the report there may be a time when consumers may not be willing to pay the premium if it continues to soar.

Promotion

Austin and the management team of JU’s lacked the experience and time to concentrate on the marketing and advertising aspect of FT products. As a result, advertising has been limited and stifled equating to an under spend of budget to actual.

Currently, consumers are only made aware from leaflets sources from within the cafes, the occasional tv and radio interviews, visiting the FT Museum at Grand Pre, and events hosted at the cafes. However, with the introduction of Juliet as marketing director, a well structured advertising campaign can be developed. This may involve advertising via social media such as twitter and facebook, or using network and industry links to form alliances.

7.0 Choice and Action

The main issue dealt with in this section will be the two strategic options (consolidate or expansion) as a means for the future direction Just Us! Café will take. Therefore, these options will be analyzed with the assistance of the SAF Framework (Suitability, Acceptability, and Feasibility) in order to pinpoint the option with the better strategic fit.

7.1 Strategic Option #1: Consolidation

Using Ansoff’s matrix to determine the options on consolidation, JU could decide to use market development.

7.1.1 Market Development

This is entering a new market segment with the existing product in order to gain market share. The segment which JU should breech is the online market via an E Commerce platform. Since there is only one other competitor Kicking Horse in this segment, JU can enjoy growth of its market share as this segment grows.

Why would it work?

The target markets of university individuals are of this technological era where many sales are done online as such they would welcome the idea.

Enables JU to reach a broader spectrum of consumers even outside of Canada, North America.

Grande Pre Museum’s photos and timetable can be advertised on the site as well as being able to purchase tickets.

Awareness of the FT farmers and products can be raised through the site via success stories.

Advertising can be done of new and existing FT products as well as links to social media sites.

SAF Framework

Suitability

The FT market is still a growing market and this medium brings all of JU’s FT products under "one roof". The E Commerce site would address all of Juliet’s questions; it will create a wider consumer base thus gaining more sales. This will also strengthen their competitiveness since there is only one other competitor with an E Commerce site. Additionally, it can increase the advertising element for JU and encourage links to social media.

Acceptability

Both Juliet and Debra would agree with this option since it is less risky than the full on expansion especially during the recession. In addition, it has the potential to reach even more consumers than the expansion once marketed correctly.

Feasibility

Juliet having been in the marketing environment for a while should know how to use the internet for advertising purposes and how to attract consumers. Additionally, with this option being less risky, it is also less expensive than expansion as such 5% of the 2008 annual turnover of $6m would be sufficient to establish and monitor this new platform.

7.1.2 Strategic Option #2: Expansion

Jeff suggested that expansion of the brand outside Nova Scotia. This option is a more aggressive form of market development. This is growing outside Nova Scotia gradually and as mentioned by Jeff there is an opportunity to use Loblaws outside Nova Scotia as they already stock their products in Nova Scotia.

Suitability

Through expansion, a higher consumer based would be acquired and greater brand recognition. Based on this JU can expand.

Acceptability

"He who is not courageous enough to take risks will accomplish nothing in life."

-Muhammed Ali

John can agree to the above quote, he is a risk taker and thinks this method of expansion can be utilized and successful. Even with the looming recession and the not so distant failure of the joint venture in Toronto; John thinks they now have enough experience to go ahead with this option.

However, both Juliet and Debra are against the expansion since the recession has brought with it an air of instability and doubt. Additionally, it is very risky, since it cannot be predicted how the new provinces will react therefore Debra and Juliet prefer a more cautious strategy.

Feasibility

Although expansion guarantees more consumers being gained, there is no guarantee that the proposed new market growth will outweigh the risk of expansion. Moreover, the financial aspect attached to the expansion option will be too costly including market research and renovating future cafes to reflect their surrounding environment. The budget for the expansion will have to be substantial approximately 10-15% of 2008 turnover of $6m.

8.0 Conclusion

Through analysis of the coffee industry’s environment, it can be seen the fierce level of competition is high. Although JU boosts so many strengths, its main weakness of rising competition gave rise to the threat of losing its competitiveness.

Therefore, it is my recommendation that JU choose the strategic option of consolidation with emphasis on developing an E Commerce site. Once again the benefits of this strategy answers all Juliet’s question especially reaching more target consumers, entering a new market and enhancing and creating more advertising opportunities. Moreover, from a financial aspect is less risky and inexpensive than expansion.