202X Small Business Management Team: BPA1 Member: Jiahao L, Yuqian Z, Hao Y CONTENTS 01 Market Trends 02 Business Analysis 03 Action Plan 04 Conclusion Objective Launch a new signature coffee for the coffee shop - Increase market share & profits - Stand out from compeition -Sustainable growth PART 01 Market Trends Substainal growth of Chinese coffee market Size of Chinese coffee market (unit: billion) Market share of Fresh Grounded Coffee continue to increase 100% 90% 15% 18% 25% 36.50% 80% 40% 70% 60% 50% 69% 72% 40% 64.50% 52.40% 48% 30% 20% 10% 0% 16% 2017 10% 10.50% 11.10% 12% 2018 2019 2020 2021 Ready to drink coffee Instant coffee Fresh grounded coffee PART 02 Business Analysis Close look at coffee industr y - Highly competitive, High bargaining power of consumers Bargaining Power of Suppliers - Low Bargaining Power of Buyers - High Small coffee shops can easily switch suppliers if they are dissatisfied with quality of coffee beans Varieties of options are available to consumers, and they can easily switch to a different coffee shop if price of coffee drinks is too high. Threat of competition - High Intense competition in coffee market Some of the brands are dominating the market, such as RuiXin. Threat of New Entrants -Low Threat of substitutes - High High entry barrier- High start up cost of rent and equipment in China makes it difficult for new businesses to enter the coffee market. There are many alternatives to coffee, such as tea, juice, and energy drinks. Low brand loyalty - consumer can change their tastes esaily SWOT Analysis - High quality coffee and other beverages - L i m i te d m e n u o p t i o n s - A comfortable and cozy atmosphere - L i m i te d m a r ke t i n g b u d g e t - Ability to cater to local tastes and preferences Strength Weakness - A prime location with high foot traffic - D e p e n d e n c e o n of f l i n e s a l e s - L a c k of a d r i v e - t h r o u g h o p t i o n - L a c k of s pa c e s - A strong social media presence - Affordable prices compared to competitors - Economic recession - Intense competition from other - Expansion of the menu to include more food and beverage options - Collaboration with other local businesses Opportunities Threats coffee shops and beverage outlets - Changes in consumer preferences - Online ordering and delivery services and tastes - Expansion to other locations - Government regulations and - Offering catering services for events and restrictions businesses PART 03 Action Plan Action Plan Market Research Product A Red Bean Latte 25 RMB / cup Ingredients: Red bean paste, 1 shot of expresso, 200ml milk Product B Coconut Americano 20 RMB / cup Ingredients: Coconut water 200ml, 1 shot of expresso Product C Expresso to Go 8 RMB / bag Ingredients: Two shots of expresso Product “Expresso to go” What is it? A packaged coffee and its double shot of expresso. Its made by extracting coffee beans into powder Ingredients: coffee beans, water Type of coffee beans Blend offee beans 60 RMB / Kg Region: Yunnan, Huila, Yirgacheffe, Baoshan Process： Washed Variety: Blended Flavour: Ripe fruits, Toffee, Chocolate Product Advantages - Convience （Attract customers who are always on work and don’t have time to wait in line for an espresso drink) - Low cost (The average cost for making a packaged coffee is very low) - Product differentiation ( DIY ) Eg: Prefers latte (Add milk) / Americano (Add water) Stand out from severe competition Pricing Short run : Penetration pricing - Setting a low price for the product to attract consumers Improve profitability & Increase market share Long run: Competitive pricing- once customer loyalty is built, charge prices based prices set by rivals Maintain market share Promotion - Online Type Tranditional advertisements Video & image advertisement on social media Target Customer Coffee enthusiasts Channel Email Introduction of new products & preferential activities Red books Apperence of products Tiktok Vlogs (How product is made) (Customers in the community) Tourist, Students, Business Travelers (Customers outside the community) Content Promotion - Offline -Membership card - Free offers (Buy six, get one free) -Discounts (10% off when customers ordered more than 20 package per month) Increase sales & Build customer loyalty Place Sales channel Online- packaged coffee can also be ordered online and customer might prefer this way instead of going to coffee shop reduce dependence on offline sales Offline- in stores （located at centre of city) – High visibility & attractiveness Logistics - Long term corporation with Coffee beans suppliers & package suppliers Realiable- Large delivery company (ShunFeng) - efficient delivery High avaliability - Large number of coffee beans suppliers Costs and Assumptions Espresso To Go is sold at a constant price of ￥8 per bag Coffee beans used to make 1 bag of Espresso To Go is 18g Price of coffee beans is ￥60 per kilogram The cost of bags is ￥20/100 bags Make delivery cost fixed costs of ￥3000 a month Other expenses such as rent, utilities, and employee wages are ￥15,000 per month. Fixed costs per month are ￥15,000 Sales forecast is 2400 bags for the first month, increasing by 5% each month, constant growth rate of 2% after 1 year. Break even analysis Total Variable Cost per bag = (18/1000) x 60 + (20/100) = 1.28 Break-even point (in bags) = Fixed Costs / (Price per bag - Total Variable Cost per bag) Break-even point = 18,000 / (8 - 1.28) =2679 bags Cash flow forecast Month Sales Volume (bags) Revenue (￥) Variable Costs (￥) Fixed Costs (￥) Total Costs (￥) Profit (￥) 1 2,400 19,200 3072 18,000 21,072 -1,872 2 2,520 20,160 3226 18,000 21,226 -1,066 3 2,646 21,168 3387 18,000 21,387 -219 4 2,778 22,226 3556 18,000 21,556 670 5 2,917 23,338 3734 18,000 21,734 1,604 6 3,063 24,505 3921 18,000 21,921 2,584 7 3,216 25,730 4117 18,000 22,117 3,613 8 3,377 27,016 4323 18,000 22,323 4,694 9 3,546 28,367 4539 18,000 22,539 5,828 10 3,723 29,786 4766 18,000 22,766 7,020 11 3,909 31,275 5004 18,000 23,004 8,271 12 4,105 32,839 5254 18,000 23,254 9,584 Total 40711.41652 NPV （Net Present Value) analysis Year Cash Flow (￥) Discount Factor (1+r)^n Discounted Cash Flow (￥) 0 -15,000 1 -15,000 1 40,711 0.909 37,007 2 121,632 0.826 100,468 3 128,385 0.751 96,417 4 135,273 0.683 92,391 5 142,298 0.621 88,367 Total NPV = 399,651 PART 04 Conclusion Launching the new product “Expresso to go” will help the business to stand out from severe 1 competition It enables business 2 Based on this analysis, the p r o p o s e d E s p r e s s o To G o i s e x p e c te d to g e n e r a te a p o s i t i ve c a s h f l o w a n d N P V o ve r t h e 5 - ye a r p e r i o d , a n d its therefore a viable i n ve s t m e n t . 3 to achieve the objective of increase market share & sustainble grwoth Data Source https://www.mordorintelligence.com/industry-reports/china-coffee-market https://www.statista.com/statistics/1171765/china-coffee-market-size/ https://www.statista.com/statistics/1171833/china-freshly-ground-coffee-market-share-bybrand/ https://www.taobao.com/list/item/wap/685779657561.htm?spm=a21wu.23452756.taglistcontent.2.388010a11z8Lo https://item.m.jd.com/product/10071084346656.html https://www.brewcoffeehome.com/coconut-water-coffee-recipe/ https://espressocoffeeguide.com/all-about-espresso/espresso-drink-recipes/ https://daiohs.com.hk/beans/?gclid=Cj0KCQjw1rqkBhCTARIsAAHz7K1LFIfqhhtL1ydba5iHvodvCe4OX3qkKl0KHK6uRjM2RR-I2ugCj4aAmGIEALw_wcB 202X THANK YOU
