The Analysis of Costa Coffee Business Case

Sviatoslav Kolykhaiev
The analysis of Costa Coffee business case

b00781700@essec.edu
Introduction.
Costa Coffee is a world-famous chain of English coffee houses with a 40-year history. Here
you can try unique coffee based on the author's Mocha Italia blend, handmade desserts,
French pastries, and order a delicious breakfast or hearty lunch.
The history of Costa Coffee began in the centre of London in 1971. Then two brothers -
Bruno and Sergio Costa - founded a coffee roasting factory in the Lambeth area. All local
coffee houses adored this unique taste! And 7 years later, the brothers decided to open their
first own espresso bar - Costa Coffee. Today, about 3,500 coffee houses operate under this
brand in more than 30 countries around the world. Here, the original technology of slow and
even roasting of coffee beans is strictly adhered to, and guests are offered coffee exclusively
on the unique Mocha Italia blend (a mixture of Arabica and Robusta in a certain proportion).
“Costa Coffee is the perfect place to meet friends in a cosy atmosphere. At the heart of our
philosophy is the skill of the barista, who will prepare any drink to your taste and put you in
the mood for the whole day! No wonder 7 out of 10 residents of the British capital recognize
our coffee as the best in taste. Here you will find not only your favourite classics, but also
branded drinks. It remains to choose your favourite flavour for this day!” - noted in Costa
Coffee.
By 1995, Costa had 40 coffee shops. Sergio Costa sold them for 20 million pounds and left
for Monte Carlo. The new owner - Whitbread - has increased the number of coffee shops 100
times, made the chain the second in the world after Starbucks and now sells it to Coca-Cola
for more than $ 5 billion.From the London coffee house of the brothers Sergio and Bruno
Costa, the network has grown over 40 years to 4 thousand coffee houses in three dozen
countries in Europe, Asia and Africa.
More than half - in the UK, where among the network coffee shops Costa Coffee has no
equal.
The purpose of this report is to show the deep analysis through 25 steps(from UN
Sustainable Goals to Forecasted Returns) of the Costa Coffee simulator providing valuable
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recommendations and potential strategic steps for Costa Coffee in order to enter a completely
new market in NYC.
1.UN Sustainable Development

Goals.
The Sustainable Development Goals

(SDGs), also known as the Global Goals,
are a general call for action to end
poverty, protect the planet and ensure
peace and prosperity for all people in the
world . Most companies must meet these
goals in order to contribute to the
development of the environment and the global economy. Therefore, this part will analyze
how exactly Costa Coffee can meet these goals and which ones are more key for it.
Goal 1: No Poverty
Despite the fact that the global poverty rate has doubled since 2000, 783 million
people—nearly one out of every ten people on the planet—still live in poverty (on less than
$1.90 a day). South Asia (12.4 percent of the region's population) and South Sub-Saharan
Africa (41 percent of the region's population) are home to the majority of them.
In impoverished communities, there are 122 women for every 100 men between the ages of
25 and 34. Economic growth must be inclusive, according to the UN, in order to create steady
employment and promote equality. To effectively combat poverty, broad measures are
required, including the expansion of social protection systems and the reduction of risks for
countries prone to natural disasters (they are usually among the poorest countries).
Goal 2: Zero Hunger

Poor nutrition affects around 821 million people, or nearly one out of every nine people on
the planet. At the same time, the global population will grow by 2 billion people by 2050.
Fundamental adjustments to the global food production and agricultural development systems
2
are required to feed today's hungry as well as future generations. 500 million smallholder
farmers supply up to 80% of the food consumed in most developing countries. Investing in
these types of production is an important strategy to expand food supply for local and global
markets while also improving the food security of the poorest people.
In many regions, energy poverty is the principal impediment to reducing hunger (and
growing enough food to fulfill future demand).
Goal 3: Good health and Well-being

One of the most important components of sustainable development is ensuring healthy lives
and encouraging the well-being of all people of all ages. The United Nations has found that
far more needs to be done than is currently being done to address the many new and
persistent health problems.
They emphasize access to medical care, sanitation and hygiene, and pollution management as
areas that require investment to save millions of lives.
Reduced premature mortality from noncommunicable diseases, for example, necessitates the
introduction of technology that limits the use of dangerous compounds in food production, as
well as a stronger tobacco control effort.
Goal 4: Quality education

Education is the foundation for bettering living conditions and ensuring long-term
development. At the same time, over 265 million children and young people worldwide are
not enrolled in school, which is roughly a fifth of Europe's population.
The shortage of trained teachers and access to adequate educational institutions are the two
main factors impeding the provision of education. Investments in providing scholarships for
rural pupils, upgrading teacher qualifications, creating contemporary educational facilities,
boosting water supplies, and electrifying schools are all needed to improve the situation.
Goal 5: Gender Equality

Gender equality is a basic human right and a necessary condition for peace, prosperity, and
long-term growth. Economic sustainability is aided by providing women and girls with
equitable access to education, health care, decent work, and involvement in political and
economic decision-making.
3
Gender discrimination is a pervasive practice in today's culture. Patriarchal views and

associated societal standards are frequently to blame. Strengthening the legal framework is a
critical measure for promoting gender equality and empowering women and girls, according
to the UN: many nations' laws need major improvement or radical revision.
Goal 6: Clean water and sanitation

There is enough fresh water on the earth to sustain all of humanity, but millions of people, the
most of whom are children, die every year from diseases linked to poor water supply,
sanitation, and hygiene due to an ill-conceived economy and weak infrastructure.
Drought is wreaking havoc on some of the world's poorest nations, worsening hunger and
malnutrition. There are now 2 million persons worldwide who do not have sufficient access
to safe drinking water. By 2050, about one-quarter of the world's population would live in a
country with chronic or intermittent fresh water shortages.
Serious expenditures in water management are needed, mainly in Sub-Saharan Africa,
Central, South, and East Africa, to fix the existing situation and prevent a future catastrophe.
Goal 7: Affordable and clean energy

The absence of energy in many parts of the world is the key issue linked with Goal 7. Over a
billion people, or one out of every five people on the planet, do not have access to electricity.
Sub-Saharan Africa is home to half of these people. To grow economies, conserve
ecosystems, and achieve fairness, sustainable energy is required. The proportion of energy
derived from renewable sources is steadily increasing. Between 2010 and 2018, the world's
total installed renewable power capacity nearly doubled, rising from 1,210 to 2,330 GW.
Renewable energy accounted for a third of global generation in 2019.
Goal 8: Decent work and economic growth

The essential social contract that underpins all democratic societies and entails broad
involvement in progress is being eroded by a lack of sufficient work prospects, investment,
and consumption.
In many regions, having a job does not ensure that you will be able to escape poverty.
Approximately half of the world's population subsists on less than $2 per day.
To achieve long-term economic growth, nations must create conditions that allow people to
work in high-quality employment that encourage economic growth without damaging the
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environment. Inclusive economic growth requires increasing production, lowering

unemployment, and broadening access to financial services and benefits.
Goal 9: Industry innovation and infrastructure

Infrastructure investments (transport, irrigation, electricity, and information and
communication technology) are critical for achieving sustainable development and
empowering people all over the world.
Roads, information and communications technology, sanitation, electricity, and water supply
are all lacking in most poor countries. In particular, just 16% of the world's population has
access to mobile broadband. In many African countries, a lack of infrastructure affects
corporate productivity by an average of 40%.
The manufacturing industry is the primary generator of economic growth, employment, and
social stability. The volume of conditional net production in this area in terms of per capita in
Europe and North America is $4.5 thousand, while it is only $100 in the least developed
countries.
Goal 10: Reduced Inequalities

There are significant inequalities in access to so-called productive assets, or nearly any
benefit of a contemporary developed society, including medical and educational services,
between countries and within them.
In most jurisdictions, the whole gain in national income is allocated to the top 1% of the
population. The lowest 40% of a country's population accounts for 40% of the population, yet
they receive less than 25% of national revenue.
Goal 11: Sustainable cities and communities

Cities now house half of humanity, or 3.5 billion people. By 2030, it is expected that 5 billion
people will live in cities.
Developing countries will account for nearly all urban expansion in the future decades.
Slums now house 883 million people. This equates to roughly 20% of the world's
metropolitan population. The majority of slum dwellers live in East Asia (about 250 million
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people), Sub-Saharan Africa (over 200 million people), and South Asia (over 190 million
people). It will cost $929 billion to provide adequate homes for all of them.
Goal 12: Responsible consumption and production

Natural resource use is increasing, particularly in developing regions and, in particular, in
East Asian countries. This exacerbates already-existing issues, such as contamination of the
air, water, and soil.
If the world's population grows to 9.6 billion people by 2050, three planet Earths will be
required to meet everyone's needs. Simultaneously, 93 percent of the world's top 250
corporations report on production sustainability. Food production will need to expand by 70%
by 2050 to feed the world's population. Land degradation, falling soil fertility, inappropriate
water usage, overfishing, and degradation of the marine environment, on the other hand, all
contribute to reducing the natural resource base's ability to provide food.
Goal 13: Climate action

Economic development, natural resource management, and poverty reduction are all
impacted by climate change. Overcoming this issue is a tool for achieving long-term
development. The challenge is to improve all countries' resilience and flexibility to climatic
hazards and natural disasters, as well as to include climate change solutions into national
policy and planning.
Goal 14: Life below water

The oceans are the most significant global resource, and their wise utilization is essential for
long-term development. The operation of global systems that make the Earth conducive for
human life is determined by the temperature, chemical processes, currents, and life of the
world's oceans. Not only does the status of the marine environment have an impact on
weather, climate, and coastlines, but it also has an impact on the amount of oxygen we
breathe, drinking water, and, most importantly, our food. Every year, the state of coastal
waters deteriorates substantially. One of the most serious problems they face is
eutrophication, or pollution with excessive amounts of nutrients from land-based effluent,
which causes active plant growth and the mortality of marine species.
Goal 15: Life on land
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Human-caused deforestation and desertification, as well as climate change, are major

roadblocks to sustainable development and have a severe impact on the lives and livelihoods
of millions of people living in poverty. There is a need to reduce deforestation and to promote
an equal distribution of benefits from the utilization of genetic resources, as well as to make
such resources more accessible on agreed-upon terms.
Goal 16: Peace justice and strong institutions

Over the last ten years, the frequency of homicide and human trafficking cases has decreased
dramatically around the world. Thousands of people are at risk of intentional homicide
throughout Latin America, Sub-Saharan Africa, and Asia.
Children's rights are violated in many countries around the world, and kids are subjected to
aggression and sexual violence. Impunity and a lack of statistics on offences are frequently to
blame.
The implementation of birth registration systems and the establishment of more autonomous
national human rights authorities around the world are two of the first steps toward protecting
individual rights.
Goal 17: Partnerships for the goals

Long-term investment, including international direct investment, is required to achieve the
Sustainable Development Goals, particularly in poor nations. Sustainable energy,
infrastructure and transportation, and information and communications technology are among
these industries. It is important to upgrade the processes of verification and control,
legislative rules, and incentive systems that assist their application in order to attract
investment. National oversight institutions, such as supreme audit institutions and legislative
supervision, should also be enhanced.
Having considered the main definitions of global problems and ways to solve them, I would
like to go directly to the attitude of Cola and PepsiCo to these SDGs. For easier
understanding, below is a table.
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Coca-Cola PepsiCo
Goal 6: “the Replenish Africa Initiative Agriculture:Support techniques and

(RAIN) aims to reach at least 6 million technology that improve farmer livelihoods
people throughout Africa with improved and agricultural resiliency(goals 2;13;17)
and sustainable access to safe water by
2020.”
Goals 12;14: UN Global Compact Water Water:“Drive water security to assure

Resilience Coalition: Cola joined the business continuity while positively
coalition to facilitate corporate engagement contributing to communities.”1(goals3;6)
in prioritizing access to clean water
Goal 4: providing some educational projects Product: more nutritious goods(goals

in Lebanon 3;13;17)
Goals 5;6: by delivering water, sanitation Packaging: providing more recycle

and hygiene programs (WASH)2 packages(goals 12;13;17)
Goal 17: Global Water Challenge Climate: reduce general emissions and
greenhouse effect (goals 7;13;15;17)
People: PepsiCo is committed to creating

diverse, egalitarian, and inclusive
workplaces(goals 5;8)
2. Corporate Brand System
In this step we are going to compare 2 largest

companies “Coca-Cola” and “Pepsi-Co”. To be
1
https://www.pepsico.com/sustainability-report/goals-and-progress#
2
https://www.coca-cola.eu/news/supporting-co
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able to do this, Kapferer’s framework is going to be used and then applied and compared to
the both brands. To be more specific, we start from their mission statements and vision. If we
have a look at Coca-Cola’s mission statement: “Refresh the World. Make a difference” and its
Vision: “to craft the brands and choice of drinks that people love, to refresh them in body &
spirit. And done in ways that create a more sustainable business and better shared future that
makes a difference in people’s lives, communities and our planet”. Obviously, Coca-Cola
became not just a simple drink, it became a part of people’s lives existing for more than 100
years. So, what is the secret of coke to be on top for a long time?
Firstly, it has a strong brand advertising’s campaigns, its vibrant red coverage can be
recognised by about 95% of the World’s population. Visual aspects are very significant in
terms of recognition and trust by their customers. This aspect can be one of the main
advantages for Costa Coffee. The Coca-Cola logo represents the company's identity, but it's
more than just the design, writing, and colors. The package design, particularly the bottle
shape, contributed significantly to the brand's success. On a worldwide scale, the shape of the
bottle became as recognized as the symbol without any marks.
Regardless of how well-known the Coca-Cola brand is now, the company has faced various
hurdles over its 130-year existence. In the 1980s, when cherry and diet coke were launched,
the company struggled with brand recognition. The cause for this was an inconsistency in the
new product packaging's usage of the brand's colors and emblem.
Secondly, "One of the most successful marketing

strategies used by Coca-Cola is to focus on the
brand rather than the product. Rather than just
being a soda, Coke is described as "something that
brings family and friends together, encourages
sharing, and brings happiness.". With no doubt, we
can claim that Cola’s brand image is one of the
most powerful in the world, because cola is not only about a drink, cola is also about lifestyle,
memories and emotions. This could be also beneficial for Coca-Cola’s stakeholders.
If we move to the main Coca-Cola’s competitor, which is PepsiCo and look at its mission and
vision statements, we can compare them.
Mission statement: “Create more smiles with every sip and every bite”
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Vision statement: “Be the global leader in convenient foods and beverages by winning with
purpose”
Having looked through both brand’s statements, it is clear that “Coca-Cola” is more focused
on beverages and does not expand its brand into food, evidence of this can also be seen in
their vision statement. While “PepsiCo” mentions not only drinks but also food as well.
3. BCG Matrix
In this part we are going to examine the performance of

Coca-Cola, PepsiCo and some other companies through BCG
Matrix and analyse products according to growth and market
share. Before we move to the results, here is definitions of the
concepts in the table:
-Stars: high growth industries and high market share.
-Question Marks: brands that use low market share in fast
growing markets consuming a huge amount of cash.
-Cash Cows: are the most profitable brands, what should be
“Milked” and reinvested in question marks and stars.
-Dogs: businesses operated in a low growing market having low market share as well.
Generally, having gone through the value of market shares and growth rates of some
companies, it helps us to find out a better picture of which companies are doing better in
which spheres. Here is a more precise analysis of this data.
On the chart below, we can see that Coca-Cola is performing better than their competitors,
especially holding more than half of the market. However, it still cannot go unnoticed that
Coca-Cola has negative Sales Growth value dragging the demand out from all such kinds of
drinks. Summarising these facts Coca-Cola is put in the “Cash Cow” category.
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Now, moving to the “water” companies, all companies have more or less high Market Share
and that's why they are appointed to the “Cash Cow” category. Coca-Cola’s company Dasani
is an average competitor among all others companies not showing really good results but still
staying in a good position.
Talking about sports drinks, Coca-Cola has a complete disadvantage against its competitor
PepsiCo. Having 18.44% of market share against 81.56% and a great decline in sales,
Coca-Cola is allocated to “Dog”.
Moving to the flavoured soft drink category, it is significant to point out that Cola has 20%
more of Market Share, but it has 4 times less Sales Growth value at the same time compared
to PepsiCo. Consequently, PepsiCo’s company SevenUP is put as a “Star” even if Cola has
quite good numbers.
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Fruit Drinks is potentially a very beneficial industry for Coca-Cola. It has one “Star” holding
more than half of the market and having a good sales growth value. Besides, Cola has a
Minute Maid with a higher Sales Growth rate and relatively lower Market Share. It is
assigned to “Question Mark” and should be more invested in to become more beneficial.
In the last category-Smoothies-Coca-Cola is an unparalleled market leader with its brand
Innocent. Having the highest Market Share and a sales growth rate, it is assigned to “Star”
without any doubt.
To sum up, Coca Cola has 2 spheres where it has an absolute advantage over its competitors.
Moreover, Cola has less number of “Cash Cows”,
that means that company has less amount of assets to
invest, this might sound risky for a new brands, on
the other hand Cola has only one “Dog”(Powder
ADE), which will not put a lot of financial pressure
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on the company. Looking at the data below, Coca-Cola seems to be not really reliable in
terms of stability based on its WACC and Cost of Equity and leads to allocation of profits to
its shareholders losing the potential of future investments. The low number of EVA can be
also a good evidence of it, as it shows the true economic profit of the company.
4. PESTLE
In this part, Pestle analysis is going to be applied in order to determine the company's strategy
in the long term. The analysis is going to be done upon 5 main commodities: Arabica and
Robusta beans, sugar, tea, cocoa, and dairy milk fluid.
Coffee Robusta.
The main exporter of coffee(robusta) is Vietnam.

Political:
Vietnam is a communist country with only one (communist) party in power. In comparison to
democratic countries, Vietnam's communist system means more government control over all
aspects of inhabitants' lives (including business). The President is the head of state, and he is
elected for a five-year term by the Parliament from among the deputies. The Parliament is
responsible to it, and it is accountable to it. The government is in charge of executive power.
It is the National Assembly's executive body, and it is answerable to it, the Standing
Committee, and the President. The Prime Minister, many deputy Prime Ministers, and
ministers make up the government.
Agriculture is one of the main key factors for Vietnam and it has a huge success in coffee
production, for instance: “Vietnam produced 29 million 60-kilogram bags of green coffee in
the coffee year 2020-2021”3.
3
https://www.gcrmag.com/a-better-future-for-vietnam/
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Economical:
Аgriculture, fоrestry, and fisheriеs together made up 14% of Vietnam's gross domestic output
in 2021. This sector's GDР share increased for the first time in recent years in 2020. Despite
this, the agriculture sector accоunts for only 15% of total GDP. About half of the total coffee
trees planted in Vietnam are between the ages of 10 and 15, which prоduces the maximum
yiеld. Vietnamese coffee production will rely heavily on these trees in the future years. Other
coffee trees are over 30 percent between 15 and 20 years old, and about 20% are above 20
years old, implying that productivity cannot be guaranteed.
Basically, Vietnam's economy has been reasonably steady in recent years, with a GDP growth
rate of about 6.5-7%, a production growth rate of 5%, a stable currency rate, and healthy
inflation of around 3%.
Social:
The population of Vietnam is about 97 million people and the median age is 32.5 years old.4
Besides, the average working age of people in Vietnam varies from 25-54 years old.This
suggests that Vietnam will not experience a population catastrophe (such as an ageing
population) in the near future, and the workforce will stay strong and stable. Despite the fact
that Vietnam has experienced significant economic success in recent years, there is growing
criticism over income inequality.
Techological and Environmetnal:

Speaking about environmental problems, Vietnam, like many other countries, is experiencing
problems with global warming and soil quality, and for them this is crucial. Also here you can
cancel the need to make a large number of fertilisers to burn a quality crop. “CIAT research
shows that, given the current models of predicted global temperature increases, 50 percent of
the country’s present coffee-growing areas may become unsuitable for production by 2050.”5
Regarding technological aspects, farmer costs have been reduced as a result of technological
advancements, and coffee production in Vietnam has remained consistent in comparison to
other competitors. Using automated and mechanical harvesters to reduce labor-intensive
strip-picking has become the norm. Even hand-crafted equipment benefits farmers by
reducing tree damage. Investing in technology to improve sustainability practices helps the
country's output.
4
https://www.worldometers.info/world-population/vietnam-population/
5
https://international.thenewslens.com/article/64591
14
Legal:
Considering the fact that Vietnam is a low-secure country with a high risk of crime and a big
level of poverty, it has some patterns to worry about, such as child traffic, gender inequality,
law protection of workers, etc.
Cocoa.
Ivory Coast is a large producer of cocoa beans worldwide, hence it will be assessed next.
Political:
Ivory Coast is a federal republic. The political system is one of authoritarianism. The
President of the Republic is the Head of State, who is chosen for a seven-year term by
universal direct vote. The President wields extraordinary power and effectively controls all
other authorities.
Côte d'Ivoire's political system is exceedingly unstable. The first military coup since
independence occurred in 1999. In 2002, the country was split between the rebel-held north
and the government-controlled south by a civil war. Despite the fact that a power-sharing deal
was signed in 2007, the 2010 presidential election resulted in more violence.
Economical:
Prior to the pandemic's worldwide shock, Côte d'Ivoire had one of the most resilient
economies in Africa and the globe, growing at an annual average rate of 8% since 2012 and
accounting for about 17% of its total GDP. The worldwide health situation, on the other hand,
had a negative impact on Ivorian consumers and enterprises, slowing growth to 1.8 percent in
2020. In 2021, the country's economic recovery is predicted to be fueled by strong domestic
demand and stable exports.
Despite the fact that exports reached 95% in 2015, they dropped to 70% immediately after
due to Ebola fears in 2014 and the country's political upheaval in 2012.
Social:
Cote d'Ivoire's labor force has been fluctuating with a favourable trend of roughly 8-9 million
individuals. The age structure reveals a noteworthy preponderance of young people, which is
one of the reasons of child labor, which is one of the country's most important challenges.
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Indeed, “15 percent of Ivorian children are exploited”6. The emergence of a substantial black
market, where farmers escape the minimum prices set by the Farmgate Prices, harming the
domestic economy, is the second most serious concern.
Technological and Environmental:

The main tool of harvesting the crops is human labor. Thus, technological aspects are badly
developed and technologies are not really introduced in Cote d’Ivoire. Besides, all major
cocoa growers show a consistent output pattern: production peaks every 2-3 years. This is
due to the climatic effect, which has resulted in temperature rises as well as a deterioration in
soil quality, forcing farmers to relocate to rainforest regions. This also demonstrates the
detrimental environmental consequences of natural resource overexploitation. Cocoa beans,
which are heavily influenced by drought, will face a significant challenge once the effects of
climate change become apparent. Moreover, there is also a high risk of fires in the country,
again due to droughts.
Legal:
The key problem remains enacting a reform program that promotes the private sector in order
to create better employment, enhance the business climate, give access to funding for SMEs
and VSEs, expand agricultural capacity, and develop human capital, among other things.
Tea.
The biggest world producer of tea is Kenya, that's why this country is going to be examined.
Political:
Kenya is a presidential republic, with a big level of poverty and corruption, pretty similar to
the Ivory Coast. Talking about the tea industry, there are some key organisations controlling
and managing it. For instance, the Tea Directorate, which is responsible for regulating tea
factories, conducting tea research through its technical section, and registering producers and
purchasers, among other things. Another key body in the tea industry of Kenya is the
Research foundation of Kenya, whose mission is to “carry out research on the control of
pests and diseases, improvement of planting material, husbandry, yields and quality.”7
6
https://www.dol.gov/agencies/ilab/resources/reports/child-labor/cote-divoire
7
http://www.kenyarep-jp.com/business/tea_e.html
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Economical:
Kenya's economy grew at an annual rate of 4.7 percent from 2015 to 2019, dramatically
lowering poverty (which decreased to an estimated 34.4 percent at the $1.9/day limit in
2019). Kenya is producing about 450 thousand tones of tea and exports more than 90% of the
total output. The COVID-19 shock impacted the economy hard in 2020, hurting international
commerce and transportation, as well as tourist and urban services activities. Fortunately, the
agriculture sector, which is a cornerstone of the economy, has held up well, contributing to a
GDP drop of only 0.3 percent. The economy rebounded well in 2021, while certain
industries, such as tourism, remained under stress. GDP growth is expected to reach 5.0
percent in 2022, and the poverty rate has begun to drop again after climbing during the
epidemic.
Social:
According to the Wordometr8, the population of Kenya is nearly 56 million people and the
median age is 20 years. Kenyans have a life expectancy of 54 years. Adults (those over the
age of 15) have an 87 percent literacy rate. Access to sanitation facilities is available to 27%
of the urban population. In comparison to other African countries, Kenya has a lower infant
mortality rate. Kenya's population is growing at a pace of 2% per year. Kenya's population is
growing, with around 42 percent of the population aged 0-14 years and 54.5 percent aged
15-64 years.
Technological:
The use of technology is very poor due to the low income and wealth of the population. The
production of tea is mainly divided between small farmers and governmental organisations.
The first ones do not have money to buy new technologies and for both parties it is more
convenient to use human labour rather than expensive technologies with no educated workers
to use them.
Environmental:
Kenya is suffering from global warming and temperature rising.This is because of climate
change bringing about a temperature increase of over 2°, which will result in heavier
rainfalls, which will present a particular adversity for the Rift Valley region. Furthermore, the
8
https://www.worldometers.info/world-population/kenya-population/
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calamity will largely damage the tea taste and quality - up to diminishing its contribution to
health. In order to deal with the threat, the country should dedicate a lot of its effort to
encouraging sustainable production, as well as R&D within the industry in search for possible
solutions to this problem.
Legal:
Despite the existence of national institutions aimed at supporting the industry, such as the
Kenya Tea Board or the Tea Act of Kenya, which regulate the industry and are responsible
for ensuring quality prоduction, the country's government still fails to devote enough
attention to small-scale producers in one of its most important export industries.
Dairy milk fluid.
Political:
Germany is one of the world's most stable and industrialized countries.
In Germany, milk production is not a vital economic industry. Despite this, it receives
government assistance in the form of farmer subsidies to encourage the growth of milk
production in the country. Germany is a democratic country with a well-developed legal and
social infrastructure. The country's basic legislation is the Constitution, which establishes the
basis and framework of the country's legal and political institutions, as well as outlining the
fundamental rights of German citizens, which cannot be infringed by any governmental entity
or individual.
Economical:
Germany is a leading country in many economic sectors. It has a high economically active
portion of the populatiоn, about 44 million people. Export-oriented industries play a critical
role in the country’s еconomic model. The automobile business continues to be the most
profitable, with revenues of 436 billiоn еuros in 2019. It is a significant cщntribution to
development and success as an innovator. Because it has tight ties with enterprises in the
chemical, elеctrical еngineering, steel, metal, and tеxtile industries, vehicle manufacture also
provides revenues for other industries. Cоmpanies in other industries, such as the healthcare
business (372 billion euros in 2019) or the electrical engineering and electrical industry,
create substantial turnovers as well (191 billion euros in 2019).
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Social and Technological:

Germany is a well-known country for its new and modern technologies, especially
automobile production. However, many new technologies are also being applied in the
agricultural sector and milk production. Technologies are helping to increase the amount of
output per certain period and replace human labor.
Regarding the social aspect, Germany is regarded as one of the most desirable locations to
live. German women have an average life expectancy of 83 years, while men have an average
life expectancy of 78 years.
Environmaental:
The most critical problem is the experience and concentration of European citizens on the
problems of nature conservation and environmental conservation. In this regard, there are
concerns that dairy milk production harms the environment and requires a lot of water.
Legal:
The primary challenge for a commodity business in a developed country is legislation and
strict quality control, which also applies to the production of milk. While the business is
already suffering from climate-related concerns, weather cоnditions vоlatility, and low
market prices, complying with quality requirements costs German milk producers a lot of
money.
Coffee (Arabica) and sugar:
The biggest producer of Arabica and sugar is Brazil.

Political:
Brazil is a democratically elected government. Presidents of the executive branch are chosen
for a four-year term by a universal mandate. In terms of doing business in Brazil, the
government has erected two major roadblocks. The first is bribery. Brazil is presently ranked
94th out of 180 nations and territories in Transparency International's Corruption Perceptions
Index (Transparency International, 2020). The second stumbling block is taxation. Brazil, on
the other hand, is pursuing new business reforms in order to ameliorate the situation.
Coffee is one of the most important sectors in Brazil. It receives a huge support from the
government, for instance, “Coffee Quality Program”, which helps to motivate and stimulate
local producers and the industry as a whole.
19
Economical:
Generally, Brazil produces around 30% of total coffee global output. “Brazil produced 68
million bags (60 kg/bag) of green coffee in 2020, a record amount.”9
Regarding sugar, “Brazil is the world’s top producer and exporter of sugarcane. It supplies
50% of the world’s sugar, producing 654.8m tonnes of sugarcane, 41.25m tonnes of
processed sugar, and 29.7bn liters of ethanol annually. But the proportion of Brazilian land
that is dedicated to sugarcane production is just 1% (8.66m ha) of the country’s total land
area.”10
Social:
Brazil's employment is shrinking somewhat, hovering around 105 million people. The
population is similar in age to that of Vietnam, indicating that there will be no significant
negative influence on the workforce in the near future. Life expectancy is roughly 74 years,
which is not very high. However, severe unemployment and poverty are major issues in the
country. Numerous investigations by international human rights advocates are also pressing
the authorities on the problem of slavery in the coffee sector. On the one hand, it allows Costa
to purchase goods at lower costs, and purchasing more of them increases employment in the
nation.
Technological:
Brazil is a more or less decent user of technologies, especially in the agricultural sector.
Brazil is noted for pioneering several technical advancements in agriculture. Brazil went
above and above in bringing about effective upmarket technology in order to enhance the
manufacturing processes for both coffee and sugar. Both commodities profit from enormous
endowments devoted to their R&D departments, and Brazil is, as a result, a global leader in
both thanks to its current advances.
Environmental:
Due to global warming and droughts during the last few years, Brazilian farms are
experiencing some difficulties with their crops, “the coffee plants are experiencing the
9
https://gro-intelligence.com/insights/brazil-2021-coffee-production-seen-plunging
10
https://brazilianfarmers.com/sugarcane/
20
predicted degradation–the plants are yellow and damaged, and the beans are ruined. The
problem here was a lack of rainfall mixed with higher than normal temperatures.”11
Agricultural diseases, temperatures, insects, and water quality that Brazilian farmers rely on
are all influenced by global hardship, posing a serious danger to the country's capacity to
meet ever-increasing global demand.
Legal:
Brazil is facing nearly the same problems as all other low-income countries. The main
problem is the children workforce and low level of law enforcement. In order to stabilise this
situation, the level of security and law-abiding should be increased.
5.SWOT
In this part SWOT analysis is going to be applied in order to understand what influence
Coca-Cola has on Costa and whether it is profitable for Costa or not.
Strengths:
-Dominant in the beverages industry. Coca-Cola is the biggest company dealing with
non-alcoholic beverages, it sells about 3.2% of the total beverages servings worldwide(60
billion). Besides, the company is included in top-50 companies by market capitalization, the
estimated value is 231 billion dollars.
-High level of Diferestion. As it has already been mentioned, Coca-Cola has a fairly wide
range of drinks from sports to iced tea(Fuze Tea).
-Famous brand name. Brand name awareness of Cola is one of the key aspects. “If you
displayed the Coca-Cola logo to 7.1 billion people, they would know it. That's 94 percent of
the world's population, which is incredible given that only half of the world acknowledges the
cross as a Christian symbol”12.
-Huge operating profit margin, compared to its competitors. For instance, Coca-Cola has
around 23.5%, when its main rival PepsiCo has 14%.
11
https://www.panoramas.pitt.edu/economy-and-development/coffee-versus-climate-coffee-production-b
razil#:~:text=Brazilian%20coffee%20producers%20are%20already,and%20the%20beans%20are%20
ruined
12
https://brandmarketingblog.com/articles/branding-definitions/what-is-brand-awareness/
21
-The largest advertising budget. Except for 2020, when Coca-Cola spent just approximately
2.8 billion dollars on advertising, the company has spent an average of 4 billion dollars per
year on global advertising during the prior seven years. Over a quarter of the total
expenditure is spent in the United States.13
Weaknesses:
-Sustainability issues. Coca-Cola is the world's top plastic trash generator, according to the
Complaint, producing 2.9 million tons of plastic garbage per year. It consumes around
200,000 plastic bottles each minute, accounting for nearly one-fifth of the world's PET bottle
production. This plastic is also made with fossil fuels, which results in large CO2 emissions.14
-Strong reliance on soft drinks generated the main revenues for the company. About 70
percent of the profits of the stake comes from the sale of drinks. This entails a rather large
dependence on this particular market.15
-Unhealthy drinks. Since Coca-Cola is based on the production of mainly drinks containing
a large amount of sugar and various flavors, the brand is perceived and criticized for their
effect on health.
-Strong competition with PepsiCo, which shows better results in some indries, noticed in
Part 3.
-Lawsuits. Several cases resulted from unethical corporate tactics, such as a complaint
alleging fraud in recycling procedures or patent infringement through the use of a
customisation dispenser. Although the company's lawyers were able to avoid a lawsuit, such
charges put employees' loyalty and confidence in jeopardy.16
Opportunities:
-Expansion of Ready-to-Drink coffee beverages.”The global Ready to Drink (RTD) Coffee

market size was valued at USD 22.44 billion in 2019 and is projected to reach USD 42.36
billion by 2027, exhibiting a CAGR of 8.31% during forecast period”17. This may appear a
good opportunity for Cola to increase their power in this market.
13
https://www.statista.com/statistics/286526/coca-cola-advertising-spending-worldwide/
14
https://www.natlawreview.com/article/coca-cola-sued-deceptive-sustainability-claims
15
Taken from the Coca-Cola Financial report for 2017
16
https://www.theguardian.com/environment/2020/feb/27/california-plastic-pollution-lawsuit-coke-pepsi
17
https://www.fortunebusinessinsights.com/industry-reports/ready-to-drink-rtd-coffee-market-100285
22
-Establishing or acquiring an alcoholic brand. Coca-Cola now lacks a strong brand that
produces alcohol, which might be a promising growth for the corporation.
-Coca-Cola has a large network of firms throughout the world as a result of previous
collaborations and acquisitions, which opens up a lot of options for the company in terms of
distribution and cooperation, as well as cost savings in the supply chain.
-Introduce new products in the health segments, it can play into Cola’s hands in terms of
targeting those who are focused on healthy lifestyle
Threats:
-Extension of “soda tax” in some cities in the US. For the first time in 2015, the soda tax
was introduced at Berkeley as demand for carbonated drinks fell by 23 percent, but at the
same time, water consumption rose by 60 percent. As a result, in 2018, several more cities
approved a similar tax.18
-Improper attention given to the new Costa brand as a result of failed attempts to join the
coffee industry in the US.
-Environmental potential threats. Reduced production of commodities that the hot drinks
sector relies on, such as coffee beans, cocoa, and tea, as a danger to Costa Coffee and
Coca-Cola, all caused by environmental adversity, lack of sustainability in the major
exporting countries, and the pressing issue of climate change and water usage.
-Coca-Cola's reluctance to expand new markets and James Quincey's position on James
Quincy's aversion to more bоld differentiation as well as the lack of a forward-looking vision
-Increased competition and Costa’s awareness in the US. Growing beverages industries,
such as RTD coffee drinks are facing a huge amount of new entrants, especially in the US. It
can prevent Coca-Cola from decent results on a new market.
Recommendations:
Coca-Cola is still the largest soft beverages drink company in the world. It is strongly
recommended to try to diversify and enter new markets, especially specialised in healthy
drinks and RTD healthy beverages. Moreover, it would be more beneficial for Cola to focus
and invest in recyclable and sustainability friendly products to show its attention to the world
environmental impact as well.
18
https://www.thebalance.com/state-taxes-4073925
23
6. McKinsey Strategic Planning
Costa will now be evaluated using the McKinsey Matrix. It is a brand marketing and product
management method that aids a corporation in deciding which items to produce and
determine the market attractiveness. The McKinsey model is a 9-cell matrix used to
compare the strategic business lines of a corporation.
In the simulation, the 60 important indicators were rated from 0 to 2, with 0 being assigned to
indicators that have no influence and 1 and 2 being assigned to criteria that have an impact on
the outcome, with 1 indicating a static criterion and 2 representing a variable criterion. The
indicators were divided into ten categories. All results are shown below:
Group 1: Bargaining power

Costa has a relatively solid DSO, despite the negative variation, but weak DPO and cash
conversion indices, indicating that it has been increasingly difficult for Costa to convert its
resource investment into sales cash over time.
Group 2: Cost of Goods Sold Management

The revenue cost is low, but the positive variance is considerable, while the DIO is excellent,
indicating it takes COSTA only a few days to convert inventory into sales, the variation rate
is rather high, placing the brand below all fast-food restaurants as well as McCafe, Tim
Horton's, and Seattle's Best Coffee.
24
Group 3: Productivity Management

The Capex to Revenue ratio compares a company's total sales to its capital expenditures on
property, plant, and equipment. The profit-reinvestment ratio illustrates how aggressively the
company reinvests its profits. Profits are reinvested in productive assets.
Group 4: Marketing Performance

Generally, one of the lowest performances among all players on the market. Ads, Marketing
expenses are leading to huge expenses.
Group 5: Sales Team Effectiveness

Generally, the problem is the low revenue for Costa per employee, however Costa is doing
good in this sphere, having positive revenue variance and low payroll cost and its variance as
well.
25
Group 6: Working Capital Management
Group 7: Profitability Analysis

Costa shows the finest performance among the competitors represented, with exceptionally
gоod gross prоfit, fairly poor operating prоfit, and adequate net prоfit
Group 8: Corporate Debt Management

Decent performance, showing a good ability to pay back Costa's debts.
Group 9: Shareholder Value Creation
26
Group 10: Economic Value Added

Inferior performance at this stage, high cost of capital, negative economic value and small
variance.
Conclusion:
As we can investigate the most attractive products on the market, Coffee shops lead in the
category of out-of-home, whereas the winner in the in-home category is coffee pods &
campsuls. Therefore, Costa Coffee should allocate their resources and invest in coffee shop
and coffee pods & capsules.
7.Five Forces Analysis

The model demonstrates how companies may acquire a competitive advantage by executing
the right tactics. The approach emphasizes three major strategies: cost leadership,
distinctiveness, and focus. Companies can acquire a competitive advantage by decreasing
expenses or differentiating their services from rivals along the most coveted aspects to justify
27
the higher pricing. Companies can gain a competitive edge by following a specialized
marketing strategy, a broad focus approach (targeting certain market segments), or an
industry-wide strategy (by offering products to maximum market segments). The usual
strategic alternatives available
differ according to the nature and
scope of competitive advantage.
Evaluation will be based on five

items with a grading system from
0 to 5:
1. Threat of New Entrants

Grade 3. The market is rather
easy to access. It may be observed
in new entries such as Cafe Nero
and Seattle's Best. The presence of powerful brands, on the other hand, limits the
number of new prospective competitors. As a result, the danger of new rivals might be
classified as medium pressure.
2. Threat of Substitute Products or Services

Grade 4. A large number of companies in comparable businesses that provide cheaper
or more advantageous alternatives (such as the other McKinsey model categories well
represented by several brands), such as fast-food restaurants, coffee pods & capsules,
instant coffee, and so on.
3. Buyers' Bargaining Power

Grade 4. Another significant point due to the some factors: low switching costs, a
large number of substitutes on the market, and a proclivity to shift for specific clients
owing to price sensitivity.
4. Suppliers' Bargaining Power

Grade 2. Because of the large number of providers and the fierce rivalry on the
market, this is the least relevant factor. Another explanation might be that the basic
components for soft drinks are limited, and Coca-Cola is the primary source.
28
5. Competitive Rivalry Among Existing Firms

Grade 5. Because there are so many competitors on the market with varied sizes and
structures dealing with low similarity items, this industry is extremely competitive. As
a result, this point is rated as the most significant force exerting high pressure.
Conclusion.
Based on the assumptions shown above, Costa Coffee can expand its customer base
in New York City by highlighting distinctive product features and employing focus
and differentiation as a main approach. Costa Coffee's strategy aims to stand out
by embracing innovation and addressing the rising health concerns of its customers.
Coca-Cola should increase its product line in order to separate itself from competitors
and broaden the scope of market possibilities after examining altering customer tastes,
rather than investing in diversification.
8. Focus Group
The main goal of the focus group is to get opinions about the subject of research and to
identify the behavioral motives of people. Therefore, after analyzing the quotes and placing
the most significant factors, the result obtained turned out to be the following: Analyzing the
most significant factors, we can come to the conclusion that the most logical and rather
correct way is to focus on Adventurous and Cosmopolitans and the cost of focus group
appeared to be 2.555$.
These two focus groups are extremely demanding, as they enjoy the entire process of coffee
consumption as well as the cafe's atmosphere. That is to say, a high-quality coffee is
insufficiently gratifying. Costa should also offer a memorable and distinct flavor,
environment, and branding. In other words, these people focus on “gourmet” products
sacrificing any amount of money to achieve the needed amount of satisfaction.
29
Making a perfect espresso shot for these 2 segments, it was essential to pay attention to their
tastes and preferences. For instance, we should focus on sweet and fruity aromas and avoid
making coffee with sour or watery qualities. The recipe for 2 target markets(Adventurous &
Cosmopolitans) is shown below:
Having done all the assumptions, we end up with the nearly highest COGS for Costa among
the competitors and the highest score at the same time.
30
9.Price Survey
The psychographic sample frame was chosen at this point. This is due to two factors. First,
Adventurers and Cosmopolitans are more focused on their lifestyle, tastes and preferences
rather than economical concerns and money. Second, regarding the previous stage, one of the
most influential factors was psychographical. It is preferable to study on the same segments
in order to integrate our analysis of the previous stage and current step.This is why the
psychographic sample frame was chosen over the socio-demographic sampling frame.
The initial confidence interval was set at 99.8%, which resulted in a p-value of less than
0.0001, indicating the survey's dependability and high quality. However, it will come at a
high cost of $8.755, and will become a burden for the SH results.
Then we move to the final adjusted results to be more confident in the selection of potential
target markets.
31
The psychological price survey suggests that there are big differences in price elasticity of
demand among different segments. The survey results show that the price attracting the most
buyers (64%) is the highest price of $5.99. This shows that our differentiation strategy picked
before would be perfectly working for the main target market-Adventurous, who is ready to
accept any price in order to increase their utility and satisfaction.
10. Positioning
Certain indicators for Costa Coffee will be determined in this part using the Perceptual
mapping simulator in order to bring about the positioning matching to the suggested
approach. As a result, if we want to focus on these two groups, we must first study and
analyse what these individuals enjoy and prefer. A deep research of these people's tastes and
opinions will help us more clearly identify items that meet their needs.
In general, adventurous individuals are those that are motivated by hedonism, which is
defined as a lifestyle that is centred on pleasure and enjoyment. In fact, they are willing to
pay whatever it takes to receive joy, as we saw in part 9 of the psychological pricing chart.
Generally, prices are more or less irrelevant for them compared to the quality of the product
and its uniqueness and unforgettable experience.
Besides, Costa's position should be consistent with a number of United Nations Sustainable
Development Goals. The Goal 3 is to promote the health and well-being of your clients. Goal
32
8: implementing more organic ingredients compared to industry average. Aim towards Goal
12 for responsible consumption and production since the firm sells ethically sourced or Fair
Trade merchandise. Goal 13: for climate action aiming to minimise greenhouse gas
emissions. By limiting plastic and non-recyclable items, it moves towards goals 14 and 15.
Finally, having applied all approaches mentioned above and taken into account all aspects,
we found costa in the bottom left corner of the Perceptual Map targeting the Adventurous
and Cosmopolitans.
33
11. Segmentation & Targeting

As previously stated,
our core target market
is made up of
Adventurous and
Cosmopolitans types,
which accounts for
16.4 percent and 15.5
percent of the
population,
respectively.
Then we'll look at the
market penetration rate
for a new café in NYC in its first year. From the lowest to the highest scenario, we must
choose one. Looking at Seattle's Best Coffee, which is owned by Starbucks and has only one
location in NYC at the moment, the MPR was 0.03. As a result, we predict the worst-case
scenario for Costa is 0.02 for
the first four months, 0.03 for
the following four months, and
0.04 for the entire year. The
estimated number of clients for
each scenario can then be
calculated, revealing that the
predicted increase would range from 551 to 1101.
Knowing that demand for these two microsegments is extremely elastic shows that these
individuals should be constantly motivated in terms of new items and developments. Finally,
we know that these hedonists might spend up to $4.51 per week on drinks and $4 per week
on meals. Furthermore, we can observe that the weekly MU is 1.52, implying that the value
of coffee is 1.52 times that of food. Given that Starbucks coffee costs 1.7 times as much as
meals, we could charge even more for beverages for our microsegments.
34
This data will be used in the future steps, such as pricing of beverages and designing the
production level.
12. Design Thinking

Design thinking is a method used by designers to solve societal issues and find suitable
solutions for customers (Naiman, 2017).
This section will examine design thinking as a progressive approach to business behaviour
that Costa Coffee should adopt. Yet, design thinking enables for a wider range of independent
personalities to be taken into account since it allows for a more customized and, as a result,
better experience, which leads to greater connection.
Costa Coffee is a narrative about progressive, responsible individuals who are industrious and
health-conscious. Costa's coffee is coated with their progressive and responsible thinking,
35
which aspires for a greener environment. Making an impression on Costa's potential

consumer is important and a key sign of success and enjoyment. Costa should strive to make
customers feel as though they are participating in the development of the future and being a
part of the whole family of Costa and share its values. Design thinking will assist us in
identifying innovative non-standard solutions that will allow us to grab customer attention,
such as improving product personalisation and thereby raising sales volumes.
Potential ideas of new design ways that would increase the attractiveness of customers and
increase sales volume could be:
-to inspire all customers to join a rewards program and collect data on how much they
spend at Costa, and then to display the most loyal customers for each store - as well as a
general display of the most loyal individuals across all locations, how much they purchased,
and how much of that amount is allocated to donations to different SDGs, such as poverty
alleviation or climate change action - on the display.
-customized coffee mugs have recently shown to be an effective approach for businesses to
improve product sales. Coca-Cola firms have utilized this strategy in the past with their
"share Coca-Cola with..." campaign, where they created Coca-Cola cans with names,
Starbucks writes their customers' names on coffee cups. In this regard, we also propose that
Costa's goods be personalised. And for this, we offer to manufacture prints on coffee mugs
using images provided by consumers. Customers will be able to post photographs or name
tags or some sort of nicknames to their cups using the Casto application, which will let them
connect to their social networks or just upload photos that they would want to see on their
cups(which could also be reusable) and even share it with others.
13. Product Branding

In this part we are going to provide a product branding analysis using a Kapfere’s Brand
Identity Prism. The Brand Identity Prism is a graphic that helps us comprehend these aspects
and their relationships. The factors enable organizations to develop powerful brands, which
allows them to be readily remembered and recognized.
Taking into account our main target market, Adventurous and Cosmopolitans, all 6 pillars of
this prism are going to be assessed in order to determine the full brand image of Costa in NY
and potential strategic elements in order to flourish.
36
Physical:
Upscale
Extravagant
Delicate
Fancy
Sense of excitement
Relationship:
Exclusivity
Individualization
Trustworthy
Target Customer:
Customers that have a high-end consumption habit
Сonnoisseurs of quality and delicious coffee
Customers wishing to be contributed to SDG
Searchers of new unforgettable experience
37
Hedonists
Personality:
Gourmet
Exclusive
High class
Differentiating
Eco-friendly
Benefits:
Delighted
Relaxed
High status
Consuming the best
Socially and environmentally responsible
Culture:
Italian
British
Superior
Urban
Fair
14. Distribution channel

Costa Coffee's distribution channel is discussed in this section. We will estimate the opening
hours for the NYC stores, personnel hiring characteristics, presumed client figures, and
accompanying financial indicators, earnings, and costs based on the three probable scenarios
depending on the penetration rate (low, medium, high).
Opening hours:
We chose to look at our opponents' work schedules to establish working hours. So our plan
was to locate our niche and pick something in between a lengthy work week, like Mcafee
38
(126 hours per week), and a short work week, like Peet's Coffee & Tea (83 hours per week),
which we can also rely on, since this chain is quite young and has a small number of cafes.
Another aim was to demonstrate our superiority over our biggest competition, Starbucks,
whose main target audience is Cosmopolitans as well.
Jobs by hourly rate:

Because a high quality of service is one of the most crucial consequences for our clients, we
feel that our staff should be paid more than the market norm. Also, keep in mind that our
clients value the quality of the beverages and all provided services as a whole, thus in order to
produce high-quality items, we will hire highly qualified employees who will be paid well.
Finally, we must remember Costa's commitment to the Sustainable Development Goals,
particularly Goal 8: Decent employment and economic development.
39
Strategic planning dashboard:

When targeting a group with a positive price elasticity of demand, it is always better to raise
the price in order to maximize revenue. Price elasticity of demand, on the other hand, varies
and might be negative at times. In actuality, there is a limit to how much income we can
increase by changing the pricing level. We thought that the average price of $5.79 is
appropriately positioned to reach hedonists.
Data was collected from Part 11.
YEARLY SALES & PRODUCTION PERFORMANCE FORECASTS:
HUMAN RESOURCE EXPENSES & RETURNS:
40
Space and Comfort:

We anticipate that the number of guests who will be visiting the café will fluctuate
throughout the day. Customers were predicted to sit and eat-in less (10 percent -25 percent)
in the morning, and more (50 percent -85 percent) after lunch, depending on the situation.
41
RETAIL SPACES FOR LEASE:

We suppose that in the case of a low hypothesis, the 29-22 Northern Boulevard Long Island
City would perfectly suit the lowest scenario. In the case of a medium and high hypothesis,
we will choose 21-30 44th Dr HUNTERS POINT and 4008 Queens Boulevard SUNNYSIDE
as the best alternative, which provides the biggest space required to serve all potential
customers.
15. Packagings and Flatware
In this part packagings and flaware will be discussed in order to find the best alternative to
our targeting segments. Packaging is designed to fulfil the demands of customers as well as
market segmentation and targeting. When the case study addresses UN Sustainable
Development Goal 3, it shows that it safeguards the health and well-being of the clients. As a
result, it is critical to choose packaging alternatives that correlate to the usage of recyclable
42
materials and cause the least amount of environmental impact. Besides, we chose three main
sises of our mugs: Small(236 ml), Medium(472 ml) and Large(590 ml).
When choosing suitable products, it is worth noting that the cheapest of them are made of
plastic. But since we cannot save money on the preferences of our customers and neglect
SDG(12-15), we are forced to use alternative substitutes such as wooden straws or edible
cups.
The biggest disadvantage of these products is their high cost. Therefore, from the entire list,
we had to abandon, for example, edible straws and replace them with wooden ones.
Nevertheless, many of our rivals have lower expenses than we do. However, because of our
devotion to environmental protection, we anticipate a great demand for our products.
16. Capital Expenditure
This section delves deeper into Costa's capital expenditures as a result of the equipment it
acquires. Decisions will be made on the basis of costs and strategy. It's important to
43
remember that Costa is working hard to contribute to the SDGs. Costa will determine which
assets to purchase at this time by setting clear priorities. Once it refers to resources that are
directly linked to our company's basic value, the first aim is to select qualitative and
environmental friendly asset, in terms of electricity and water usage, at the same time.
Moreover, Costa's differentiating approach, selecting the greatest quality is crucial to offering
excellent customer service and provide clients with high-quality gourmet products.
Consequently, all choices made accordingly to the preferences and tastes of our target
audience are shown in the table below:
ESPRESSO MACHINES: La San Marco 105 E High Cup.
DRY BAKERY CASES: Avantco BCD-60
REFRIGERATED BAKERY CASES: Avantco BC-60-HC
REACH-IN REFRIGERATORS: Avantco SS-2R-G-HC 54
UNDERCOUNTER ICE MACHINES: Scotsman 20 (100 lbs)
UNDERCOUNTER COOK & HOLD OVENS: Alto-Shaam 750 (120V)
UNDERCOUNTER DISHWASHERS: UL30 Low Temp
WASHERS: Samsung 4.2 ft3 (8 CY)
WORK TABLES & STATIONS: TSKG-366 36 in x 72 in
STOCK & ORDER PICKING CARTS: Utility Cart 18 in x 36 in
CONDIMENT CARTS: Condiment Cart
CASH REGISTER STANDS: Stand & Station
(CASH REGISTERS: Epsilont
IPADS: iPad 32GB
44
DISPENSERS: San Jamar Dispenser
STAINLESS STEEL FLATWARE SETS: Bellwood Flatware
SERVING TRAYS: Bamboo Tray
CHAIRS & TABLES: Bar Height Set
LOVESEATS: Black Leather
COFFEE TABLES: Olee Sleep
Furthermore, we have strengthened our commitment to UN SDG objectives, by incorporating

the idea to purchase the most sustainable asset, with the exception of cases when the
greatest quality is essential. Costa's unique approach necessitates picking the highest quality
in terms of the core value of their operations in order to provide excellent and qulity
customer service. In the medium hypothesis, the study analyzes all utility and depreciation
charges and concludes that total capital expenditures are $161,679.22, total depreciation
expenses are $33,484.44, and total utilities expenses are $18,097.89.
45
17. Website creation

Website Creation was considered the notion of advertising to promote Costa Coffee
Company's products at its new branch in New York City. As a result, advertising is the
company's most significant marketing technique, as it must appeal to broad consumer
markets.
In general, the
organization, creation,
registration and other
costs of a website add
up to a fairly small
amount. Therefore, we
have no right to
neglect quality in
comparison with
competitors already
present in the new
market. As a result, for
each option, it was
decided to use a VIP
package, which again
does not incur large costs in any of the scenarios, but at the same time provides the
opportunity to create a logo, which in our time is one of the main ways to recognize a brand.
Below are the costs for each of the hypotheses:
46
18. Smartphone App

To date, applications on mobile devices are one of the most common ways of marketing and
communication between a company and its customers. This is even more significant than the
website we talked about earlier. So, it is critical to create a high-quality app since it may
either create a significant first impression or influence interest and loyalty. Costa may also
utilize the app to carry out its loyalty program of consumer contribution to sustainability and
several SDGs..
As a result, using the App Builder Pro+ to get the desired effect for the Costa app is the
recommended option for all 3 hypotheses. Moreover, this package includes API access,
which will be a good tool to build quality apps and unlimited subscription in case of huge
numbers of new customers. Consequently, we will only employ the professional in the best
scenario.
The all costs are provided below:
47
19. Google AdWords

Today, millions of individuals in New York use the internet every day, Google AdWords is a
critical tool for attracting their attention. Furthermore, during the last decade, the Internet has
become one of the most popular places for individuals to locate or search up information on
anything they're interested in, whether it's a certain destination, a specific business, or a
famous person.
VIP+APP Builder Pro+ will be used for a year in all circumstances to make our ads
successful. We shall analyze the performance on an annual basis and may alter our choice
based on the results of our advertisement.
The potential Costa's keywords will include "top coffee shop in New York," "new coffee
shop in NY," and "growing coffee shop in New York," among others. Other prospective
adventurers and cosmopolitans will use keywords like "opening coffee shop in NY," "fair
trade coffee in NY," and "organic coffee in NY."
Finally, we got almost 3 thousand dollars per day as a cost of Google AdWords Campaign.
20. Social media Presence

The focus of this part is on the many social media techniques that Costa may employ and
how to choose the best one. It investigates the costs of implementing various social platform
programs. Businesses may utilise social media as a marketing and public relations tool to
advertise their products and services. It provides us with an excellent opportunity to engage
with clients and gain their confidence and loyalty.
Nowadays, more than half of the world population is on social media. If we look at the table
of frequent use of social media by Americans shown below, we can already highlight some of
the most popular and trendy social media services among users.
48
To be able to determine which social media platform is better to invest in, we firstly need to
find out which of them gives the most interactions and the most usable among other
competitors. “Twitter was the QSRs' preferred advertising platform. Nearly 40% of all ad
impressions came from Twitter, followed by YouTube (33%), Facebook (15%) and Instagram
(13%).”19 Moreover, Costa's penetration rates on Twitter, LinkedIn, Facebook, Instagram,
YouTube, and Pinterest
should be higher than
its nearest competitors
by size, Caffe Nero
and Seattle's Best
Coffee, in order to
overcome them. To
enhance the success of
our social media
marketing, we should
concentrate on
Instagram, YouTube,
and Twitter. Because
our new businesses
service the New York
market solely, Costa does not need to invest as much in extending penetration as Dunkin and
Starbucks do. It's preferable to keep your penetration rate below such big chains, which have
so many properties and cafes all over the US.. However, because controlling the market on
19
https://www.restaurantbusinessonline.com/marketing/which-chains-spend-most-social-media-ads
49
the YouTube platform is relatively affordable and because it is a video-based platform,

focusing on acquiring a dominant market share on the YouTube platform may be considered.
In addition, Costa's aggressive positioning in New York City is unsuitable. Because, as it has
already been said before, adventurers and cosmopolitans seek a unique, “gourmet” and
unparalleled product and customer experience. An aggressive marketing strategy is highly
questioned and risky to use focusing on cosmopolitans and adventurers. Costa should
emphasize the distinctiveness of its goods and atmosphere, as the film will only be seen by a
small number of people.
21. Beverage Prices

The price a firm charges for its product or service is one of the most important commercial
choices that management makes. Pricing may be used as a targeted weapon to help a business
capitalize on advertising possibilities.
50
The pricing for all goods in Costa's beverage line will be set in this part based on costs,
consumer perception, and the desired market strategy.
All our current spends are shown in the table.
Value-added consumers feel that higher-priced items are of higher quality and hence worth
the money, as it has already been mentioned they are ready to pay in order to achieve
satisfaction and meet their needs no matter what price it costs. Than create this perception in
the minds of consumers, the company must focus its advertising on how its features and
advantages are superior to those of its rivals.
Considering that our prices are going to be high, we decided, the report attempts to establish
prices approximately 30-40% above unit costs. As it has already been said before in the price
survey, the best utility is achieved at a higher price, consequently we decided to set an
optimal price-$5.79. Using cost-based pricing, we came up with our final results, shown
below:
51
Summarizing, breakeven points (days) are projected to be 279, 268, and 248 days in the low,
medium, and high scenarios, respectively. We do believe that these results are quite optimistic
since we will be able to recoup all of our capital in less than one year, operating on a new
market.
22. Food Prices

In this part, we will set prices for food, as in the previous one we did it for drinks. To
determine which commodities or meals to purchase and in what amounts, we must first
52
determine how many clients buy food, regardless of whether they sit down. We input the
amount of hedonists into the simulator based on the time of day, sit-down and take-away
options, acquired in the previous steps.
The waste percentage for purchased items was chosen at a rate of 2.5 percent on average.
This figure was set to accommodate any potential operational mishaps.
The weighted average was used to alter the value of MUB/MUF of our target audience in all
hypotheses. From part 9, we see that weekly MU is 1.52, which means that the value of
coffee is above the value of food for 1.52 times. Considering that Starbucks prices coffee is
1.7 times higher than food, we could go further up for beverages for our microsegments.
Besides, the average markup for food is 30% and the average price is 2.89$. Below, there are
some final statements about the potential food sales. All numbers from parts 21 and 22 will
be used further.
53
23. Sales Promotion

At this stage, we will examine different sales campaigns that Costa might use as part of its
business plan to increase revenues and make our own decision about the discounted amount
for a second good. So the first thing is to figure out what happy hours are. The most
important component is the time when the majority of guests arrive at the café. According to
our prior research, the majority of clients visit the Costa coffee shop in the afternoon.
The next step is to figure out how much of a discount the second product will receive. A
discount coupon for the next product is a good alternative for enticing clients, and it has
shown to be beneficial in most circumstances. This reduction will not have a significant
impact on the cost of goods and will more than cover its costs by recruiting new consumers.
It's also worth noting to put from 5 to 8% discount, having at least 25% of the mark-up for a
low scenario. Consequently, it is not damaging our profits, nevertheless it is playing into our
hands by increasing the EBIT.
Having filled in the necceseserry data acquired in the previous steps, we got next results:
54
55
24. Sponsorship Schemes

All company strategic and tactical moves, including sponsorship programs, must be real and
trustworthy. This part is closely related to UN SDGs. Costa's chosen business strategy,
including its positioning and touching its targeted segments, all of which place a high value
on contributing to everyone's well-being and fostering a better future, makes it critical that
Costa allocates a large percentage of its revenues to the organizations listed in the simulator.
Being a charitable business is a fantastic approach to enhance your organization's visibility
and improve your reputation with your target audience. Participating in philanthropic events
held by many firms enhances participants' networks of connections and helps to create
partnerships between businesses and run co-branding initiatives.
As a result, the success of the communities there is critical to our interests, and it is also our
job to build a sustainable value chain so that our suppliers are treated properly by us. There is
no doubt that this mission is critical to our socially responsible positioning and keeping our
commitment to the UN SDGs.
The main charity organization we would like to invest in is the New York Foundation,
besides touching the SDG 11, it will also provide some publicity for us, as the organization is
based in New York and is well-known among the general public. Participating in their
initiative will eventually help the Caste acquire more clients and provide a good reputation.
Besides, being a massive importer of different products all over the globe we would also
invest a decent amount in The United Nations' Food and Agriculture Organization (FAO).
Costa, as a company that provides high-quality coffee and food, cannot remain silent when
millions of people across the world go hungry.
56
Generally, Costa is going to spend around 10% of its EBIT on all charities organisations,
which we do believe would be more than enough to satisfy and cover all our potential
customers’ wants. In case of final success, Costa absolutely ought to increase its donations to
specific charities programs.
57
25. Forecasted Returns

Now we are ready to say that the introduction of the Costa Coffee in New York is a rational
idea. After entering all the previously obtained indicators, the results make a positive
impression and give promising hopes for the success of the company.
58
To sum up the case study, the analysis determined that Costa will perform a fine job in New
York City.
Firstly, we can look at the net profits in the income statement, shown below, which makes
the idea of implementing Costa very promising.
Secondly, It can be justified by a large return

on Equity (ROE), which in an average is
greater than 95 percent. Return on equity
(ROE) is a financial performance indicator
59
that is computed by dividing net income by shareholders' equity. Consequently, Costa would
be able to produce a profit that was greater than the cost of capital put in the firm.
Thirdly, net profit margin is about 30% on

average, which is also a decent result considering
the fact that we are operating in a completely
new market for the first time.
Finally, we do believe that these results and innovations introduced into the structure of the
company will be useful for further decisions not only by Costa in New York, but also the
positioning and behaviour of the brand as a whole.
Bibliography:
UN SDG:
-https://www.pepsico.com/sustainability-report/goals-and-progress#
-https://www.coca-cola.eu/news/supporting-communities/meeting-the-sdgs--the-greatest-glob
al-change-happens-together
-https://sdgs.un.org
-https://stories.starbucks.com/stories/2017/a-commitment-to-coffee-1-billion-new-coffee-tree
s/
-https://stories.starbucks.com/press/2016/100k-opportunities-initiative-exceeds-hiring-goal/
-https://www.coca-colacompany.com/news/how-coca-cola-is-driving-social-environmental-pr
iorities-and-sustainable-goals-during-covid-19-pandemic
- https://www.costa.co.uk/behind-the-beans/coffee/responsible-sourcing
PESTLE:
-https://www.gcrmag.com/a-better-future-for-vietnam/
60
-https://www.statista.com/statistics/1027971/vietnam-gdp-contribution-of-agriculture-forestry
-and-fishing-sector/
-https://www.worldometers.info/world-population/vietnam-population/
-https://www.worldbank.org/en/country/cotedivoire/overview#1
-https://www.dol.gov/agencies/ilab/resources/reports/child-labor/cote-divoire
-http://www.kenyarep-jp.com/business/tea_e.html
-https://www.worldbank.org/en/country/kenya/overview#1
-https://www.worldometers.info/world-population/kenya-population/
-https://www.make-it-in-germany.com/en/living-in-germany/discover-germany/economy
-https://gro-intelligence.com/insights/brazil-2021-coffee-production-seen-plunging
-https://www.britannica.com/place/Brazil/The-economy
-https://www.panoramas.pitt.edu/economy-and-development/coffee-versus-climate-coffee-pr
oduction-brazil#:~:text=Brazilian%20coffee%20producers%20are%20already,and%20the%2
0beans%20are%20ruined
SWOT:
-https://brandmarketingblog.com/articles/branding-definitions/what-is-brand-awareness/
-https://www.macrotrends.net/stocks/charts/KO/cocacola/profit-margins#:~:text=Profit%20m
argin%20can%20be%20defined,31%2C%202021%20is%2025.28%25.&text=The%20
-https://www.statista.com/statistics/286526/coca-cola-advertising-spending-worldwide/
-https://www.theguardian.com/environment/2020/feb/27/california-plastic-pollution-lawsuit-c
oke-pepsi
-https://www.natlawreview.com/article/coca-cola-sued-deceptive-sustainability-claims
-https://www.fortunebusinessinsights.com/industry-reports/ready-to-drink-rtd-coffee-market-
100285
-https://www.thebalance.com/state-taxes-4073925
-https://www.statista.com/statistics/269221/operating-profit-margin-of-pepsico-worldwide/#:
~:text=PepsiCo%27s%20operating%20profit%20margin%20amounted%20to%2014.3%20pe
rcent%20in%202020
-https://investors.coca-colacompany.com
Social Media Presence:

-https://www.restaurantbusinessonline.com/marketing/which-chains-spend-most-social-media
-ads
61
-https://backlinko.com/social-media-users#social-media-in-the-us-by-numbers
-https://www.gwi.com/reports
-https://www.statista.com/statistics/266466/net-revenue-of-the-starbucks-corporation-worldw
ide/#:~:text=Starbucks'%20net%20revenue%20reached%2024.61,previous%20year's%20tota
l%20of%2019.61.
-https://www.restaurantbusinessonline.com/marketing/which-chains-spend-most-social-media
-ads
Other resources:
-https://medium.com/@jkysharma/pixar-a-journey-in-design-thinking-e78de88b5975
-https://chools.in/wp-content/uploads/2021/03/The-Fearless-Organization_-Creating-Psychol
ogical-Safety-in-the-Workplace-for-Learning-Innovation-and-Growth.pdf
-https://www.comunicaffe.com/costa-coffee-is-uks-second-fastest-growing-brand-in-the-2019
/#:~:text=Success%20stories%3A%20Costa%20among%20the%20fastest%20risers&text=50
%20after%20increasing%20its%20value,for%20social%20and%20environmental%20sustain
ability.
-https://www.quirks.com/articles/strategies-for-marketing-to-cosmopolitan-consumers
-from https://www.quirks.com/articles/strategies-for-marketing-to-cosmopolitan-consumers
-https://www.investopedia.com/articles/markets/081415/comparing-cocacola-and-pepsis-busi
ness-models.asp
-https://1000logos.net/costa-coffee-logo/
-https://www.strategy-business.com/blog/Diversify-or-Focus-The-Best-Strategies-Do-Both#:
~:text=When%20you%20define%20focus%20in,you'll%20diversify%20for%20it.
-https://www.%20businessinsider.in/Coca-Costa-says-millennials-are-%20decimating-sales-o
f-Diet-Coke-and-now-its-going-to-%20war/articleshow/62953387.cms
-https://www.forbes.com/sites/larryhusten/2014/04/27/what-role-should-coca-Costa-play-in-o
besity-research/#bf5573da51b4
-https://www.paperdue.com/essay/strategic-management-at-coca-cola-and-pepsi-2150858
-https://simplymeasured.com/blog/lessons-from-coca-colas-social-media-strategy-cohesive-c
ampaigns-and-creative-content/#sm.00048ofq1dcnd3l10ba19umrctpea
62
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Sviatoslav Kolykhaiev

The analysis of Costa Coffee business case

1.UN Sustainable Development

The Sustainable Development Goals

Goal 2: Zero Hunger

Goal 3: Good health and Well-being

Goal 4: Quality education

Goal 5: Gender Equality

Gender discrimination is a pervasive practice in today's culture. Patriarchal views and

Goal 6: Clean water and sanitation

Goal 7: Affordable and clean energy

Goal 8: Decent work and economic growth

environment. Inclusive economic growth requires increasing production, lowering

Goal 9: Industry innovation and infrastructure

Goal 10: Reduced Inequalities

Goal 11: Sustainable cities and communities

Goal 12: Responsible consumption and production

Goal 13: Climate action

Goal 14: Life below water

Goal 15: Life on land

Human-caused deforestation and desertification, as well as climate change, are major

Goal 16: Peace justice and strong institutions

Goal 17: Partnerships for the goals

Goal 6: “the Replenish Africa Initiative Agriculture:Support techniques and

Goals 12;14: UN Global Compact Water Water:“Drive water security to assure

Goal 4: providing some educational projects Product: more nutritious goods(goals

Goals 5;6: by delivering water, sanitation Packaging: providing more recycle

People: PepsiCo is committed to creating

2. Corporate Brand System

In this step we are going to compare 2 largest

Secondly, "One of the most successful marketing

In this part we are going to examine the performance of

The main exporter of coffee(robusta) is Vietnam.

Techological and Environmetnal:

Technological and Environmental:

Dairy milk fluid.

Social and Technological:

Coffee (Arabica) and sugar:

The biggest producer of Arabica and sugar is Brazil.

-Expansion of Ready-to-Drink coffee beverages.”The global Ready to Drink (RTD) Coffee

6. McKinsey Strategic Planning

Group 1: Bargaining power

Group 2: Cost of Goods Sold Management

Group 3: Productivity Management

Group 4: Marketing Performance

Group 5: Sales Team Effectiveness

Group 6: Working Capital Management

Group 7: Profitability Analysis

Group 8: Corporate Debt Management

Group 9: Shareholder Value Creation

Group 10: Economic Value Added

7.Five Forces Analysis

Evaluation will be based on five

1. Threat of New Entrants

2. Threat of Substitute Products or Services

3. Buyers' Bargaining Power

4. Suppliers' Bargaining Power