Café Xaragua
Robert Curtis
Rachelle Hinchey
Amanda Tindyebwa
Emma Zaorski
Analysis
Alternatives
Implementation
Outcomes
Differentiate
1
How can Café Xaragua differentiate
itself in the competitive Canadian
coffee industry?
Analysis
Alternatives
Implementation
Outcomes
Differentiate
2
Strategic priorities
Social Responsibility
Quality
Brand image
Differentiation
Gather necessary funding
Analysis
Alternatives
Implementation
Outcomes
Differentiate
3
Coffee industry of Canada
High
competition
• Large commercial players
• Small independents
High threat of
new entrants
• Ease to start up
• Low barriers to entry
High subsidies
• Many different casual beverage
options
Need to differentiate product from
competition and substitutes
Analysis
Alternatives
Implementation
Outcomes
Differentiate
Internal analysis
Strengths
Rare product sourcing
Strong relationships with
contacts
Committed to social
responsibility
High quality product
Weaknesses
Limited store front
experience
Limited startup capital
Limited product portfolio
Relying on others for
baked goods
Leverage core competencies
Analysis
Alternatives
Implementation
Outcomes
Differentiate
5
Customer Profile
-Young knowledgeable consumers
-Appreciate affiliation with social good
-Low uncertainty avoidance
-Individualistic
-Affluent aging population
-Price insensitive
-Appreciation for cultural diversity
18-35yrs and 45-60yrs+
Analysis
Alternatives
Implementation
Outcomes
Differentiate
6
Premium coffee industry
Xaragua
Social Impact
GMCR
Bridge
Head
Starbucks
Brand affiliation
Analysis
Alternatives
Implementation
Outcomes
Differentiate
7
Strategic alternatives
License and
open store
Store on
wheels
Differentiate
Focus on
online sales
Analysis
Alternatives
Implementation
Outcomes
Differentiate
8
1- License and open store
Open a store as well as license your product
to local cafés with strong brand recognition
that have similar ideals on social responsibility
Differentiate through outlets
Larger market
exposure
Creates synergies
Analysis
Alternatives
Limited service
differentiation
Potential degrading
of brand image
Implementation
Outcomes
Differentiate
9
2- Store on wheels
Have a temporary store in a mobile food
service truck to increase reach and brand
recognition
Open a store after 4 months
Differentiate through reach
Attract attention and
excitement
Create high levels of
brand awareness
Analysis
Alternatives
Time to acquire
permits
Cost to modify food
truck
Implementation
Outcomes
Differentiate
10
3- Focus on online sales
Increase online sales and begin selling in
grocery stores.
Differentiate on price
Lower cost to
implement
Already familiar with
online sales
Analysis
Alternatives
Difficult to make
partnership with
grocery stores
Less reach
Implementation
Outcomes
Differentiate
11
Key decision criteria
Criteria
Sustainable
Profits to fund social and
environmental programs in Haiti
Ease of implementation
2 direct customer channels in 1
year
Financially feasible
Reach
Analysis
Key performance indicator
Alternatives
Low initial investment
Access to heavy local and tourist
traffic
Implementation
Outcomes
Differentiate
12
Key decision matrix
License and
open store
Store on wheels
Focus on online
sales
Sustainable
3
2
1
Ease of
implementation
2
3
1
Financially
feasible
2
1
3
Reach
2
3
1
Total
9
9
6
Analysis
Alternatives
Implementation
Outcomes
Differentiate
13
Recommendation
Open
store
Short-term
• Raise
awareness
with store
on wheels
Analysis
Alternatives
Implementation
Long-term
• License
product to
other
businesses
Outcomes
Differentiate
14
Analysis
Marketing
Logistics&
Operations
Human
Resources
Finance
Alternatives
Implementation
Outcomes
Differentiate
15
Marketing
Market research
Large use of social media
Store on wheels
Free mini samples in store
Emphasize Haitian culture and social
impact
Analysis
Alternatives
Implementation
Outcomes
Differentiate
16
Logistics & Operations
Lease mobile food trucks
Establish supply contracts
Measure success in trees planted/ year
Train in house roasting to Crave roasting
and Bemard Callebaut
Analysis
Alternatives
Implementation
Outcomes
Differentiate
17
Operations
Rent out food trucks on contractual
basis
Locate and negotiate rent prices for
brick and mortar
Establish baked and specialty goods
supplier
Locate licensees with similar value
proposition
Analysis
Alternatives
Implementation
Outcomes
Differentiate
18
Human Resources
Communicate vision to focus on Haitian
reforestation with quality coffee
Hire and train coffee baristas & license
partners
Engage customers' in Haiti reforestation
programs
Celebrate and reward social impact
Analysis
Alternatives
Implementation
Outcomes
Differentiate
19
Projection analysis
Estimated 200-300 sales per day
Sales per day
Revenue per day
0
50
100
150
200
250
300
Best case
(+10%)
$
-
$
1,191
$
2,381
$
3,572
$
4,763
$
5,953
$
7,144
Operating
Base case
margin
$
-
$
984
$
1,968
$
2,952
$
3,936
$
4,920
$
5,904
Worst case
(-10%)
$
-
$
797
$
1,594
$
2,391
$
3,188
$
3,985
$
4,782
Analysis
Alternatives
Implementation
Outcomes
Differentiate
20
Breakeven analysis
Sell 30.3 cups a day to breakeven
Sales per day
Earnings before income
and tax
Operating
margin
Analysis
0.3
10.3
20.3
30.3
40.3
50.3
60.3
Base case
(+10%)
$
212,113
$
126,387
$
40,661
$
45,065
$
130,791
$
216,517
$
302,243
Base case
$
212,544
$
141,696
$
70,848
$
-0
$
70,848
$
141,696
$
212,544
Worst case $
(-10%)
212,934
$
155,547
$
- $
98,160
40,773
$
16,614
$
74,001
$
131,388
Alternatives
Implementation
Outcomes
Differentiate
21
Finance
Request bank loan from local Canadian
banks such as Scotiabank or RBC
Commit to interest coverage ratio (ICR)
debentures
Current ICR = 26.1
ICR collar = 15
Give bank option to call loan if ICR falls
below collar
Analysis
Alternatives
Implementation
Outcomes
Differentiate
22
Short term timeline
Operations
Marketing
HRR
Finance
Truck campaign
Locate
licenses
Social
tourism
Launch
Store
design
Engage
customers
Communicate
Hire and
train
Bank
Loan
Monday
Analysis
Establish supply
contracts
Lease
trucks
Alternatives
Q1
Q2
Implementation
Q3
Outcomes
1 year
+
Differentiate
23
Severity
Store
Shortage
excess in
of Arabica
case of
grain
storm
Begin
Cannibalization
product
expansion
Lack of
suitable
Begin
due
businesses
diligence
to early
license
with
Likelihood
Analysis
Alternatives
Implementation
Outcomes
Differentiate
24
Financial outcomes & assumptions
Licensing agreement will increase operating profit by
5% for the next 5 years
Marketing expense will increase 1% per year for 5
years
$800,000
$700,000
$600,000
$730
$500,000
$400,000
thousand
$300,000
Net income in
2017
$200,000
$100,000
$-
2012
Analysis
2013
Alternatives
2014
2015
Implementation
2016
Outcomes
2017
Differentiate
25
Thank you!
Questions?
Analysis
Alternatives
Implementation
Outcomes
Differentiate
26
Constants
Shop size
1571
Lease cost per sqft
Lease cost
Fixed Improvement cost
Average Baked good
Employee salaries
Benefits package
Hours per week (2 staff)
$
45
$
70,695
$
35,000
$
1.13
$
1.25
$
50
$
77,765
$
38,500
$
1.38
Incorporation
$ 6,000.00
Licenses and permits
Professional certification
$ 10,000.00
Lease improvements
$
Total one-time expense
$ 51,000.00
35,000
$
16.00
$
3.20
126
$
2,019.20
Weekly staffing
Part time Manager salary
per year
Full time Manager salary per
year
Analysis
$
41
$
63,626
$
31,500
25000
60000
Alternatives
Implementation
Outcomes
Differentiate
27
Column1
2012
2013
$
1,115,856
$
2015
Operating Profit
$
1,171,649
$
Wages
$
32,307 $
32,630 $
32,957 $
Lease expense
$
70,695 $
70,695 $
Manager expense
$
25,000 $
Marketing expense
$
Utilities expense
2016
1,230,231
$
2017
$
1,356,330
33,286 $
33,619 $
33,955
70,695 $
70,695 $
70,695 $
70,695
25,000 $
60,000 $
60,000 $
60,000 $
60,000
1,000 $
1,030 $
1,061 $
1,093 $
1,126 $
1,159
$
393 $
393 $
393 $
393 $
393 $
393
Insurance
$
3,000 $
3,000 $
3,000 $
3,000 $
3,000 $
3,000
Admin expense
$
4,200 $
4,200 $
4,200 $
4,200 $
4,200 $
4,200
Maintenance
$
6,000 $
6,000 $
6,000 $
6,000 $
6,000 $
6,000
One-time expenses
$
Total expenses
$
193,595 $
142,948 $
178,305 $
178,667 $
179,032 $
179,402
EBIT
$
869,125 $
972,908 $
993,344 $
Interest expense
$
32,500 $
32,500 $
32,500 $
Tax expense (.35)
$
292,819 $
329,143 $
Net Income
$
543,806 $
611,265 $
Analysis
1,062,720
2014
1,291,743
51,000
Alternatives
$
1,176,928
32,500 $
32,500 $
32,500
336,295 $
356,673 $
378,074 $
400,550
624,548 $
662,392 $
702,137 $
743,878
Implementation
1,051,565
$
Outcomes
1,112,711
Differentiate
28