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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 Café Xaragua’s Value Resources - Business knowledge - Deep knowledge of Haiti - Canadian cultural know-how Superiority Distinctive capabilities Capabilities - Supply coffee from a Haiti - Have distinctive environment Value created through passion, connection and distinction Deliver special coffee with a distinctive environment Revenue from distinctive with cultural experience Value sourced from distinctive Haitian beans with business knowledge Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Strengths and Weaknesses of Café 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 Threat of Substitutes •Consumer product Many competitors •HIGH Power of Suppliers •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 Trends - High Canadian coffee consumption - Calgary strong economic area - Increasing café competition Status * Key Industry Success Factors U Perceived quality and brand D Strong supply chain U Capital investment A Consumer insight - Increasing CSR interest - 18-35 years - Gentrification *Key: U – unattained D – developing A - attained 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 • • Organic growth Established market niche Cons • • • Limited expansion opportunities Personal aspiration issues Vulnerable to competition Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Alternatives Café Xaragua Open a coffee shop in Calgary Pros • • • • • Increased customer awareness Offline brand presence Larger growth possibilities Market knowledge in Canada First mover advantages Cons • • • Capital requirements Demand uncertainty High market competitiveness Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Alternatives Open café Xaragua and exporting Open a coffee shop in Calgary Become a supplier of Haitian coffee Establish distribution channels Pros • • • • Flexibility Higher profitability Higher ROI Increased growth Cons • • • • Capital requirements Supply uncertainty Lack of negotiating power Low global market knowledge Analysis Alternatives Recommendation Implementation 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 Conclusion Additional Slides Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Evaluation Criteria Ease of execution • • • • Weight 0.3 Capital requirements Market knowledge Business acumen of the founders Impact • • • Weight 0.3 ROI Profitability Growth • • • Weight 0.2 Establishing clientele Scalability Competition • • • Weight 0.2 Direct competition Competitive response Diversified Concept - Intact Revenue Channels Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Payoff Matrix Ease of execution Impact Growth 1. Status Quo Competition Total 1.8 2. Café Xaragua 1.6 3. Open Café 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 Conceptually sufficient profitability Optimal location Bearish scenario: Product superiority (29.000) USD Higher operating costs o Renew store concept o Adjust branding Relying strictly on product quality to drive The café concept is conceptually strong however certain revenues is not attainable due to the countermeasures are to be taken to avert reliance on the geographical rivalry store to drive profitability Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Recommendation Store Export E-Store o Leverage market/product understanding o Supply high-end players without reach o Use the Kensington location as an SKU o Target Rombouts & Malongo as potential candidates Exporting is attainable and should be pursued in order to mitigate risks of the store opening Analysis Alternatives Recommendation Implementation Conclusion Implementation Establish café Xaragua Create strong brand equity Establish distribution network Additional Slides Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Timeline Short Term (0-12 months) Q1 Physical establishment on café Xaragua Opening café Xaragua Increasing branding efforts Negotiate with Haitian suppliers for exclusive distribution rights Negotiate with Rombouts Negotiate with Malongo Evaluation of café’s performance Evaluation of branding strategy Q2 Q3 Q4 Mid-term (12-36 months) 12-18 18-24 24-30 30-36 Long Term (36-60 months) 36-42 42-48 48-54 54-60 Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Café Layout Roasting Front window promotion Tables and decorations Coffee counter Easy access, interest creation as well as atmosphere creation Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Branding Facebook Twitter Instagram Google+ Content Marketing Own store SEO 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 Ensure Haitian suppliers guarantee to Café Xaragua Protect against uncertainties Negotiation Rombouts or Malongo (Belgium) High quality coffee Unique bean as leverage Control 20% margin offer Marketing by distributors Evaluation annual basis Result is a sustainable business model which is profitable and credible Analysis Alternatives Recommendation Implementation Conclusion 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 Additional Slides Analysis Alternatives Recommendation Implementation Conclusion 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 Additional Slides Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Sales forecasts Rombouts (units) Expected Revenue Operating Profit 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 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 longstanding venture +103.000 USD (EBITDA-2017) New Store Concept & Brand strategy Attract EU players Thank you for your attention! Analysis Alternatives Recommendation Implementation Conclusion 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 Landlord dissatisfaction Make a signed security contract Move to a better location Additional Slides Analysis Alternatives Recommendation Implementation Conclusion Additional Slides Opportunities and Threats Facing Café 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
