Illy Ground Coffee Marketing Analysis

1002 words (4 pages) Essay in Marketing

30/05/17 Marketing Reference this

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Nowadays, Illy can be characterised as one of the leading producers of high quality ground coffee in the coffee manufacturing industry. Illy has entered the coffee sector in 1933 by Francesco Illy, and in 1990s had its most important innovation, which began to look for the best coffee in Brazil, Africa, Central America and Asia (italtrade.com, 2010). It is based in Italy with a workforce around 700 people and operates in a wide range of global network (Datamonitor, 2009).

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Illy ground coffee can be used in all methods of coffee preparation and especially for espresso machines. The product comes in various forms of medium roast, dark roast and decaffeinated. While medium roast is about a smooth flavour mixed with aromatic bits of caramel and chocolate, dark comes to enrich the flavour with notes of cocoa (illy, 2010a). Similarly to medium roast, decaffeinated contains aromatic flavour of caramel and chocolate with reduced caffeine (illy, 2010a).

Within the industry, Illy is known as an innovation pioneer, as it focuses on coffee perfection rather than creating something trendy and seductive. Achieving €280 million with net profits of €8 million, Illy succeeded by attaining 54% of total sales through exportation (illy, 2010b)

The country and coffee market attractiveness

PEST Analysis

Regarding Morisson (2006), PEST analysis can assist the business in building up the best possible knowledge of the external environment in which the company is planning to operate in, so as to avoid costly mistakes. Therefore, an analysis has been carried out and can be viewed in Appendix 1 below. Upon reflection, the most important key environmental influences of PEST analysis have been considered and highlighted below:

Economic Events: The recent global recession had directly affected the industry where people buy only essentials products, as their incomes have been decreased (Euromonitor, 2010a).

Regulations: Legislations that the law establishes can directly affect the industry. Taxes and business regulations are rather heavy, making it hard to conduct business (Euromonitor, 2010a).

Globalisation: Globalisation can be characterised as one of the most powerful factors that have changed the conditions and situations of the world economies, and especially for businesses (BBC, 2010). The reduction of national boundaries and the freedom of companies to transport is also important factor of change.

Ground’s Coffee Market Analysis

McLoughlin and Aaker (2010) suggest that an examination of the market can assist to determine its current and future attractiveness. Even in the negative impact of recession, the Turkish coffee industry has shown a positive growth. Statements show that during the last years, ground coffee had a 5% increase in volume sales with the total of 33.6 TL million which is expected for a further 4% increase until the end of 2014 (Euromonitor, 2010a).

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With Nestle controlling 61% of the markets’ share and coffee unit prices increasing in recent years, the market has as consequently shown a positive growth (Euromonitor, 2010b). Considering the distribution channels, the market includes various ways of supply such as restaurants, bars, cafes, stores and so on.

Competitive Analysis

In order to identify the attractiveness of an industry, Johnson et.al (2008) argues that the five forces framework is a helpful tool for such a process. Thus, a Porters five forces Analysis has been carried out in Appendix 2. From the analysis summary, we can see that even with its growing direction, the coffee industry can be defined as an industry where brand loyalty is of major importance to the existence of a business. A strong emphasis is required in order to achieve good customer relationships and market share over the current competitors. In addition, the threat of new entrance is still high even throughout strong competitive conditions that exist in the market. Finally, the threat of substitutes is high as new alternative products can satisfy the need of coffee. Tea and hot chocolate are the major players for substitutes.

Buyer Analysis

Nowadays, competition has become stronger than other decades. Therefore, creating a good understanding of the potential customers (Buyer Behaviour) can be a vital tool for the company to get one step ahead of the competition. According to Euromonitor (2010a), ground coffee has been punched by the instant coffee where its sales are increasingly becoming much more than ground coffee, with young people preferring the more convenient method of instant coffee. On the other hand, older people insist on the traditional ground coffee. In addition, people try to get a cup of coffee mostly from bars, restaurants and coffee shops rather than to drink at home during every season of the year, while during winter; the consumption of coffee usually has a higher demand.

3) Opportunity Statement

Casson and Buckley (2010) defines opportunities as the advantageous position that products, services, raw materials and methods include in order to increase company profits in the new market.

4) Marketing Objectives

Brassington and Pettit (2006) suggest that objectives are important drivers of what the company’s marketing strategies must be able to achieve. Following SMART concept (Specific, Measurable, Achievable, Realistic, Time able), Illy’s main business objective is to manufacture and market products in such a way as to create a value that can be continued over the long term from stakeholders (Hollensen, 2010). Another important aspect of marketing objectives is the brand’s reputation that the company must achieve in the new market. A smart and long-time promotion with the combination of customer satisfaction can lead to the brand awareness and to profitable sales.

The company can understand the significance of loyalty where illy must build on that as without loyal customers the company would not exist. As a consequence of customer loyalty, customers are willing to buy more from the same brand/company. Therefore, the company must be prepared to establish a wide range of coffee ground selections (MindTools, 2009). In addition, illy must manage to maintain its promise to follow and respect all applicable local laws in each of its potential markets.

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