Business Management Caribou Coffee Incorporated

Business Management — Caribou Coffee Incorporated

How is the industry structured?

Don't use plagiarized sources. Get Your Custom Essay on
Business Management Caribou Coffee Incorporated
Just from $13/Page
Order Essay

Specialty coffee is an $11 billion a year industry in which the retail sales market is highly fragmented. Specialized coffee consists mainly of coffee produced with the , as opposed to the generic Robusta coffee bean. The specialty coffee market represents more than half ($11 billion annually) of the total coffee industry (approximately $19 billion annually). Generally, the market share is dominated by Starbucks with numerous sources of competition for specific market segments.

The specialty coffee industry itself comprises two specific market segments: (1) fresh coffee sales (whole bean and ground coffee beans), and (2), prepared coffee beverage sales. The primary consumer purchase point of fresh coffee beans is the supermarket whereas the principal consumer purchase point of prepared coffee beverages is (increasingly) specialty coffee houses where customers typically purchase coffee beverages on a regular (i.e. workday mornings) (BTC) basis. Those venues are designed to permit both takeout and a customer-oriented in-store coffee consumption and social experience.

In principle, the concept of specialty coffees is just one example of a much larger consumer product marketing and sales trend. More particularly, consumable food products are “recast” as a more “authentic” product for more “discriminating” consumers, presumably also with the ability to afford the best quality products instead of the mass-produced versions of common quality. Similar techniques have been used to promote alcoholic beverages (especially those incapable of actually being distinguished by the palate, such as un-flavored vodka), beer, organic foods, and (famously) mustard.

2. What is competition like? Overall, is this a highly competitive industry or not?

At the time of the writing of this case study, the specialty coffee market was expanding very strongly and demonstrating the likelihood of continuing that growth trend until 2015. For example, with respect to the number of the specialty coffee prepared BTC beverage market, there were only 500 such establishment in the United States in 1991; by 206, that number had increased almost 50-fold, to 24,000 speciality coffee houses. In 2007, the projected growth rate was 5,000 new specialty coffee houses per year for the next eight years. Significantly more than half the entire U.S. adult population (54%) consumes coffee regularly and typical annual increases have been as much as 1,000,000 new coffee drinkers from one year to the next (ex. 1999 to 2000).

The market was highly competitive and spread across various component segments. More than one-third (36%) of all coffee drinkers (meaning almost 20% of the entire U.S. adult population) regularly purchase speciality coffee products for home consumption. The competitors for specialty market share must compete for each component of the market share because 61% of purchasers acquired these products in supermarkets or grocery stores; 14% purchased them in specialty coffee stores including those that specialize in the BTC “experience”; another 4% ordered specialty coffee from mail order clubs and catalogues; and 2% purchased them from gourmet or specialty food stores. The implication is that specialty coffee manufacturers must be prepared to compete along all those channels simultaneously.

While the data in the case study predate this factor, in all likelihood, the specialty coffee market (and other “specialty” or “high-end” and “gourmet”) food product industry have become much more competitive in the three years since the publication of the case study. That is a direct function of the fact that in times of economic rises and uncertainty, the first casualties from the manufacturing perspective is typically the extravagances such as gourmet products and in general.

3. What forces are driving change in the industry?

On the consumer side, the desire for minor personal indulgences and “rewards” always increase in times of economic strength and decrease in times of economic uncertainty or weakness. That dynamic means that increasing numbers of people will begin looking for the easiest ways to tighten their budgetary expenditures in economic climates such as that which developed in the U.S. In between 2007 and 2010. In many cases, consumer demand for unnecessary luxuries such as specialty coffee often drop precipitously as consumers begin adopting cost-saving measures such as preparing their own meals and suspending indulgences in “gourmet” products.

On the manufacturer side, the challenge presented by the weakened economic climate would be best managed by focusing even more on the main business strategies that have already proven successful within the specialty coffee market. Both Caribou and Starbucks emphasize customer service and the “customer experience” approach to promoting their specialty coffee houses. It seems that increased competition attributable to decreasing customers would be best addressed by ensuring that the customer experience is sufficiently attractive and fulfilling to justify the unnecessary expense of continuing to purchase specialty coffee on a BTC basis in coffee houses.

To capture or maintain the maximum market share in the supermarket or grocery store sales of specialty coffee bean product sales, it would be advisable that manufacturers increase the range of their products to permit consumers to “scale down” their spending without necessarily suspending their purchase of specialty or gourmet products altogether.

4. Who are the key rivals in this industry? What moves are they likely to make next? Why?

Starbucks is by far the strongest competitor in the specialty coffee industry. However, there is significant competition along the various component product lines from convenient stores, restaurants, coffee shops, street vendors, and even fast-food businesses such as Duncan Doughnuts, Krispy Kreme, and McDonalds. It is anticipated that the most likely moves on the part of competitors will be to increase their focus on the and “consumer experience” business model that accounted for the explosive growth of the specialty coffee shop phenomenon in the last two decades. Increased competition decreases the room for error and it would behoove all competitors to follow the Caribou approach to and the primacy of the highest quality of customer service in coffee houses.

In anticipation of the shift from coffee house BTC sales to bulk specialty coffee bean product sales, it would be advisable to add additional choices to permit purchasers of product at every price level to cut costs by downgrading to a less expensive specialty coffee alternative. The more specialty coffee sales shift to bulk sales in supermarkets and grocery stores, the more important it is to maintain increased options in that regard.

5. Is this industry attractive? Explain in detail.

Prior to the current economic recession, the specialty coffee market was very attractive. From the period 2001 to 2006 alone, the entire specialty coffee market experienced a growth rate of 48%. Moreover, more than two-thirds (69%) of that market represented consumer sales of the products with the highest cost and the highest profit margin: BTC sales in specialty coffee houses. The combination of a strong (and increasing) national coffee consumption habit, high wages, economic optimism, high real estate prices, and consumer spending in virtually all market segments in both regular and specialty products and luxury services with the optimistic projection of continued growth of the specialty coffee industry until at least 2015 made this industry very strong.

At that time, the segment of the market with the greatest profit potential was the specialty coffee house. Since the complete economic upheaval in the U.S., that has changed dramatically. While it may be possible to retain a significant percentage of specialty coffee consumers, it is likely that since 2007, market share in that segment has decreased sharply and that market share in the coffee bean product sales had risen substantially in relation to BTC sales, even within the same respective manufacturers.

With consumers likely shifting their purchasing interests from the “experience” consumption model of the specialty coffee house to the bulk bean product purchase instead, competitors in this market should have anticipated that shift immediately and adjusted their production levels, range of product lines, and marketing promotions to reflect the greater potential of that market segment. Since the bulk coffee bean product profit margin is significantly less than the BTC sales profit margin, there is less room for error or miscalculation in the attempt to capture or retain the largest possible portion of consumers. Therefore, strictly on the basis of the data available in the 2007 case study, the specialty coffee market was very strong. However, on the basis of the known effects of economic instability on consumer spending habits, the specialty coffee market is much less strong today and much more dependent on bulk coffee bean product sales.

Calculate your order
275 words
Total price: $0.00

Top-quality papers guaranteed


100% original papers

We sell only unique pieces of writing completed according to your demands.


Confidential service

We use security encryption to keep your personal data protected.


Money-back guarantee

We can give your money back if something goes wrong with your order.

Enjoy the free features we offer to everyone

  1. Title page

    Get a free title page formatted according to the specifics of your particular style.

  2. Custom formatting

    Request us to use APA, MLA, Harvard, Chicago, or any other style for your essay.

  3. Bibliography page

    Don’t pay extra for a list of references that perfectly fits your academic needs.

  4. 24/7 support assistance

    Ask us a question anytime you need to—we don’t charge extra for supporting you!

Calculate how much your essay costs

Type of paper
Academic level
550 words

How to place an order

  • Choose the number of pages, your academic level, and deadline
  • Push the orange button
  • Give instructions for your paper
  • Pay with PayPal or a credit card
  • Track the progress of your order
  • Approve and enjoy your custom paper

Ask experts to write you a cheap essay of excellent quality

Place an order
error: Content is protected !!
Open chat
Need assignment help? You can contact our live agent via WhatsApp using +1 718 717 2861

Feel free to ask questions, clarifications, or discounts available when placing an order.

Order your essay today and save 30% with the discount code WHITE