Term Paper

Subject: Economic condition Analysis

Section – 05

Prepared for:
Dr. Mohammad Monirul Hasan NORTH
SOUTH UNIVERSITY

Date of submission: April 23, 2020

Name ID
Muntasir Kabir Sakib 183 5373 660
Ragib Raonaq 183 5192 660
Md. Rashedul Alam Rashed 172 5145 060
Ahnaf Mosaddek 182 5384 060
Mahathir Mohiuddin 191 5413 660
 HOW CONSUMER’S MONTHLY
EXPENDITURE OF COFFEE CONSUMPTION IS
AFFECTED BY INCOME, PRICE, YEARS OF
DRINKING & DAILY CONSUMPTION OF
COFFEE.

Lettter of Transmittal

April 24, 2020

Dr. Mohammad Monirul Hasan
School of Business and Economics
North South University

Subject: Submission of Term paper.

Dear Sir, we hereby submitting our group research report as the partial fulfillment of the
course – Economic condition analysis we are thankful to you for working under your direct
supervision in order to meet the requirements of this course. The report is based on coffee
impact on monthly expenditure& percentage of their monthly income. We have used basic
GDP growth model for our research purpose.

We would be highly obliged if you kindly accept the submission of our report, and provide us
with your valuable feedback. we hope this report would be useful in shedding light on the
issue to the readers.

Sincerely,
Muntasir kabir sakib
Ahnaf mosaddek
Mahathir mohiuddin
Md Rashedul Alam Rashed
Ragib Raonaq

Acknowledgement

At first we would like to thank the Almighty for keeping us in sound health and allowing us to

complete the report on time. Our utmost gratitude to our honorable course instructor, Dr

Mohammad Monirul Hasan for his kind supervision and instruction. Without his support and

instruction we would not have been able to complete this research report. He helped us in

regression analysis from monthly coffee expenditure, income, price, daily consumption & years of

coffee consumed. We appreciate his valuable guidance and assistance.

 Table of Contents

Lettter of Transmittal...............................................................................................................2
Acknowledgement....................................................................................................................3
Executive Summary..................................................................................................................5
History.....................................................................................................................................6
Origin of the report..................................................................................................................8
Objective of research:...............................................................................................................8
Methodology:...........................................................................................................................8
Regression analysis:...............................................................................................................10
Regression Table:...............................................................................................................................10
Regression equation:.........................................................................................................................11

Results & Conclusion:.............................................................................................................11

Reference:..............................................................................................................................12
Executive Summary

Coffee is the second largest commodity market and growth is expected to continue at a strong
pace for the foreseeable future. The specialty beverage industry is growing at an equally
strong pace, with sales growth in some categories projected to grow at rates of 40% per year.
This growth offers excellent opportunities for new companies to enter this market.

Existing coffee market size in Bangladesh is BDT 600 mn+. Contribution of brewed coffee is
almost two-third of the market while the instant coffee market counts for the rest of the
market. At present, there are more or less 50 premium coffee cafés in Bangladesh which
happen to cater a mammoth market of almost 160 mn+ consumers which clearly indicates that
there is a huge untapped market. Among these 50 cafés, 4 international chain coffee shops
(Gloria Jean’s, North End, Coffee World, and Barista Lavazza) currently operate in
Bangladesh.

Introduction:

Coffee is one of the world’s most popular beverages & an important commodity. Some claim
it is the most widely consumed liquid in the world aside from water. Coffee is more than a
beverage, however. It is a memory, an anticipation, a lifetime of consoling moments of
modest pleasure woven into our lives. Coffee’s success as a beverage undoubtedly is owing
both to the caffeine it harbors and to its sensory pleasure. Coffee lovers come to associate the
energizing lift of the caffeine with the richness and aroma of the beverage that delivers it.Tens
of millions of small producers in developing countries make their living growing coffee. Over
2.25 billion cups of coffee are consumed in the world every day. Over 90 percent of coffee
production takes place in developing countries - mostly South America, while consumption
happens mainly in the industrialized economies. There are 25 million small producers who
rely on coffee for a living worldwide.

In Brazil, where almost a third of the world's coffee is produced, over five million people are
employed in the cultivation and harvesting of over three billion coffee plants. It is a more
labour-intensive culture than alternative culture of the same regions, such as sugar cane or cattle,
as its cultivation is not automated, requiring frequent human attention.

Coffee is a major export commodity and was the top agricultural export for 12 countries in
2004,the world's seventh-largest legal agricultural export, by value, in 2005 and the second most
valuable commodity exported by developing countries.
Coffee Review is devoted to promoting the fine, distinctive cup and celebrating its lore and
pleasures.

History

The café culture is very a recent phenomenon in Bangladesh’s history. Post-independence,

there were just a handful of places for eating out, while restaurants in general were just food
serving places. Local Chinese restaurants were the only popular places for eating out, family
dining and special events. In late 90s, fast food industry had a significant boom in Dhaka as
well as other major urban areas. People first got introduced to local pizza and fried chicken
chains.

During and after 2000, the whole food industry flourished significantly. International
restaurant and fast food chains started opening outlets in the country. Dhaka, being the capital,
experienced the biggest transformation as many new restaurants and fast food shops have
mushroomed, catering to the palate of different consumer segments.

The industry witnessed an upward shift in demand over the last decade, with rapidly
increasing per capita income, changing consumer taste and altering lifestyle. Massive
development in electronic media introduced a complete cultural shift for the entire nation and
like most other service oriented industries; this industry also got a major revamp in terms of
new consumer generation, increased spending and improvement in consumer's taste and
preferences which resulted in tremendous growth in this industry introducing high end
restaurants with specialization in one or multiple cuisines followed by the introduction and the
rise of the café culture in the country and particularly in Dhaka as unprecedented number of
cafés having sprouted up in the key commercial and residential zones of the city. The
traditional local tea stalls and canteens still flourish beside these new coffee joints, suggesting
that the rise in café culture has not stolen business; rather it’s filling up a massive gap in the
market.

This café culture is mainly triggered by the growing number of White Collar young
professionals and college and university going students. The young professionals like to go to
all these cafés for various reasons like business meetings, family hang out with or without
children and catching up with friends and colleagues; while the students prefer to go there for
dating, hanging out with friends and passing the time while browsing the internet and
preparing assignments and presentations. Other than these two groups, there are also people
who are just looking for a nice and warm cup of morning coffee that would make themselves
ready for the day ahead or a strong one to get refreshed after a day’s hard work while
returning home.

The most triggering factor behind the rise of these phenomena has been the flexibility the
customers enjoy in a coffee shop like they can spend as much time as they want without being
asked to leave or make new orders. Moreover, the environment is vastly different and unique
than that of the restaurant environment. It is considered informal but comfortable and cozy.
There are also some cafés which offer Wi-Fi internet connection to the customers which is
very much convenient. Furthermore some cafés also broadcast live football or cricket matches
which further add to their attractiveness.

Origin of the report

To provide students the statistical concepts and foundations, and the use of statistical tools
needed to make decisions while data is given, the MBA program of North South University
offered the course Economic Conditions Analysis. The project was introduced and instructed
by the course instructor, so that the students can get a practical experience of statistical analysis
through the project work. Various types of statistical tools and software were used in this
project to find out the results.

Limitations:
While doing report the biggest challenge was to collect data as due to COVID 19 we could not
collect the primary data physically. Instead of that we have done survey online. Most
challenging task was we couldn’t communicate with our group members and our honorable
faculty. So it was difficult for us to discuss problem & also doing regression analysis.

Objective of research:
The main objective of the term paper is to find out the level of impact & relationship between
monthly coffee expenditure with monthly income, price, daily consumption rate & years of coffee
drinking.

Methodology:
For collecting data, we have used mainly primary data. We have surveyed 27 people who are
active coffee lover. So we took their data by preparing questionnaires related to their coffee
meal. Our target was to find out their coffee behavior. The questions was related to their monthly
coffee expenditure, income, price, daily consumption & years of coffee consumed. We also
used publications, magazine for collecting information. We have calculated the correlations
among different variables to find out the strength of their relationship. Finally we have drawn a
conclusion using multiple regression analysis.

Statistical Approach:
Statistical Tool Used:
 • Trends of each of the variables
• Graphical tools - line charts
• Multivariate Linear Regression using Minitab.

Dependent variable: Monthly coffee expenditure(Y)

Independent variable: consumers daily coffee consumption(X1),years of drinking coffee(X2),
Consumers monthly income(X3), coffee price(X4).

Function Y= f(X1,X2,X3,X4)

Equation of regression model:

Y=β0+ β1X1+ β2X2+ β3x3+ β4x4

Y=Monthly expenditure on drinking

Β0=Intercept
X1= Daily Consumption
X2= years of Drinking coffee
X3= Monthly income
X4= Coffee price

Sample size: Considering the overall situation we have used online forms to fill out the
survey in different facebook groups mostly NSU students around 36 respondents randomly
and among them we found 27 who drink coffee on regular basis. Most of the people were adult
and mostly are coffee lover.

Non-probability sampling: we intend to go for convenience sampling. As we would be

interviewing & conducting our survey on individual who drinks, in this manner our procedure
falls under the convenience sampling category.

Data Sheet:
Monthly Daily years of Monthly
expenditure consumption drinking coffee price income
4800 2 5 80 14000
900 1 2 30 5000
0 0 6 0 30000
300 1 3 10 18000
30000 4 8 250 30000
12600 3 6 140 28000
4500 1 3 150 45000
7200 2 6 120 25000
3000 1 7 100 55000
16800 2 4 280 22000
4500 3 9 50 38000
 4500 1 4 150 20000
15000 2 7 250 33000
3000 1 10 100 70000
3600 1 5 120 30000
3000 1 12 100 55000
31500 3 8 350 44000
54000 3 3 600 0
15000 2 15 250 0
1200 2 12 20 30000
3000 1 13 100 15000
2400 2 4 40 0
15000 2 9 250 0
18000 3 10 200 0
1800 3 10 20 0
3000 4 12 25 20000
5400 1 4 180 100000

Regression analysis:
A regression analysis is a statistical process for estimating the relationships among variables.
It includes many techniques for modeling and analyzing several variables, when the focus is
on the relationship between a dependent variable and one or more independent variables.
More specifically, regression analysis helps one understand how the typical value of the
dependent variable changes when any one of the independent variables is varied, while the
other independent variables are held fixed. In regression analysis, it is also of interest to
characterize the variation of the dependent variable around the regression function which can
be described by a probability distribution. The p-value for each term tests the null hypothesis
that the coefficient is equal to zero (no effect). A low p-value (< 0.05) indicates that we can
reject the null hypothesis. In other words, a predictor that has a low p-value is likely to be a
meaningful addition to our model because changes in the predictor's value are related to
changes in the response variable. Conversely, a larger (insignificant) p-value suggests that
changes in the predictor are not associated with changes in the response. Typically, we use the
coefficient p-values to determine which terms to keep in the regression model.

Regression Table:

Term Coef SE Coef T-Value P-Value VIF

Constant -5579 2082 -2.68 0.014
Daily consumption 3052 718 4.25 0.000 1.39
years of drinking -191 189 -1.01 0.324 1.14
Monthly income -0.0248 0.0278 -0.89 0.382 1.12
coffee price 78.56 5.23 15.01 0.000 1.19
Regression equation:

Monthly expenditure = -5579 + 3052 Daily consumption - 191 years of drinking

- 0.0248 Monthly income + 78.56 coffee price

Y=Monthly expenditure on drinking

Β0=Intercept
X1= Daily Consumption
X2= years of Drinking coffee
X3= Monthly income
X4= Coffee price

The intercept value of -5579 indicates that the regression equation intersects the Y-axis at 5579
when all the dependent variables are zero and it will always remain constant.

B1 of 3052 indicates that a single unit increase of the daily consumption of a person who drinks
coffee, the monthly expenditure of coffee goes up by 3052, while the other variables remain
constant. And the variables share a positive relationship to each other.

B2 of 191 indicates that a single unit increase in the years of drinking coffee, the monthly
expenditure of coffee goes down by 191, while the other variables remain constant. And the
variables share a negative relationship to each other.

B3 of -0.0248 indicates that a single unit increase in the monthly income, the monthly
expenditure of coffee goes down by -0.0248, while the other variables remain constant. And the
variables share a negative relationship to each other.

B4 of 78.56 indicates that a single unit increase in the coffee price, the monthly expenditure of
coffee goes up by 78.56, while the other variables remain constant. And the variables share a
positive relationship to each other.

Here coefficient of determination (R square) = 93.12%, which means that 93.12% of the total
variance can be explained by the four factors for monthly expenditure of coffee consumption.
It also states the measure of the future outcomes which are likely to be predicted by this model.

Results & Conclusion:

In this report ,we tried to find out the relationship of consumers monthly expenditure(Y) on
drinking with consumers daily coffee consumption(X1), years of drinking coffee(X2), monthly
income(X3) & coffee price(X4). According to our regression statistics, we can see that the
independent variable X1(Consumers daily coffee consumption) & X4(coffee price) are both
significant because their p-value is 0.00 & the relationship is really strong with expenditure.
However p-value for X3 (consumers monthly income) is .382 & X2 (Years of drinking coffee)
is .324 are both greater than the level of 0.05, which states that it is not statistically
significant & relationship is not so strong. So we can say coffee price & daily coffee
consumption has an impact & have strong relationship with consumer monthly expenditure
on drinking. Years of drinking coffee & monthly income cannot significantly relate with
consumer monthly expenditure.

From different Hypothesis testing we can illustrate that among four independent variables
coffee price & consumers daily consumption holds strongest relation with monthly expenditure
& a good predictor. There may be other variables like gender, variants coffee types, societal
class might have been a good predictor too but we used only four variables. It would have been
realistic if we could use more variables and our research would be more precise and reliable.

Reference:

1. https://www.marketresearch.com/Global-Research-Data-Services-
v3891/Coffeehttps://www.marketresearch.com/Global-Research-Data-Services-v3891/Coffee-
Bangladesh-Size-Development-Forecasts-8800344/Bangladesh-Size-Development-Forecasts-
8800344/
2. https://www.thedailystar.net/lifestyle/reader’s-chit/coffee-lifestyle-or-just-
anotherhttps://www.thedailystar.net/lifestyle/reader’s-chit/coffee-lifestyle-or-just-another-
alternative-tea-1503541alternative-tea-1503541
3. https://www.lightcastlebd.com/insights/2019/05/23/dfs-in-bangladesh-
beyondhttps://www.lightcastlebd.com/insights/2019/05/23/dfs-in-bangladesh-beyond-coffee-
shops-and-consumer-purchasecoffee-shops-and-consumer-purchase
4. https://knoema.com/WCCOM2018/world-coffee-consumption?tsId=1000250 5.
http://www.theindependentbd.com/home/printnews/17552
6.