This assignment report outline strategic and marketing approach to be undertaken for the current year by the Costa Coffee, a chain- part of a UK- based Multinational conglomerate Whitbread Family. Whitbread PLC is The UK’s leading Hospitality Company with franchises all over the world. Their business covers Hotels, Restaurants (Household names like TGI Friday), Health and Fitness plus other Businesses. The contents of this report include market segmentation, positioning and targeting along with the growth opportunities and marketing and promotion strategies.

In 1971 Bruno & Sergio Costa created their popular coffee slow-roastery in Lambeth, London, supplying local Italian coffee shops with a delicious coffee, roasted Italian style. They could not supply the entire market so in 1978 they decided opened the first Costa espresso bar in Vauxhall Bridge Road in London. Since then, they still use the same method of slow-roasting their coffee beans, serving the brothers’ authentic blend of 6 Arabica beans to 1 Robusta in each coffee shop all over the world. Nowadays Costa Coffee is a part of the Whitbread, family of brands. They operate the number one brand in the UK and around the world. Together, they welcome with a smile more than 10 million customers a month. The brand is reputed renowned and preferred. In the year 2004 Costa netted a turnover of £ 1,043.7 million. Costa Coffee operates 1069 stores in UK market as of April 2010, leaded them to become a largest British coffee chain in terms of stores. It has also one of the widest connections among other UK coffee brewers made possible through a network of distributors and breweries. The Costa Coffee brand already has a premium status in all its markets. It is practically the main profit provider of the company in the broad markets of UK.

The Coffee Culture and the increase of Coffee drinkers in Pakistan show a healthy growth rate in 2005. This was an enormous opportunity area for Costa Coffee due to was arriving to a new market that the population were aware of the product, however not every Pakistani was familiarize with Costa Coffee Brand. At this stage, the company launched multiplex advertising campaign to encourage people within its existing market in order to choose its product or consume more of it. The market penetration strategy was aggressive in communication, product information, promotion, loyalty programs and prices. Costa Coffee started the challenge activity of built its own social responsibility in this new market based on obtains recognition and gain market share.

The market development strategy implemented by Costa Coffee (Refer graphic N°1) started in 2002 when they opened new geographical market in Dubai and Saudi Arabia, creating new market segment, adopting different price police to attract different customers. Since the success of this strategy the company from 2002 to 2005 opened 79 stores in international market and until February 2010 the company has 528 stores in 24 countries such as Oman, Egypt, Qatar, Bahrain, Kuwait, UAE, Jordan, Lebanon, Syria, Europe, Russia, Pakistan, Beijing, Shanghai and the other two countries mention before.

Studies has been showed that main competition is selling more things to the same people with the minimum effort of extending their product by producing different variants, or packaging existing products in their new ways. Having this in main Costa Coffee’s business-boosting beverage has added yet another term to the baffling menu boards of Britain’s coffee shops introducing the flat white (latte) and the babycino (frappuccino). The flat white may appear to be just another cup of coffee, but aficionados plead otherwise. The difference is that unlike other milky coffees such as lattes there is only a small amount of heated – but not frothed – milk blended into three small shots of espresso to give a “velvety, smooth texture”. This success product development strategy implemented by Costa Coffee has become it start performer this year, with sales up 35% compare to 2008.

Costa Coffee is expanding very rapidly in western culture, having a tremendous acceptance in United Kingdom. Recently opened new stores in Pakistan. Five forces analysis assumes that there are five important forces that determinate competitive power in the business. Being a sole producer of coffee in Pakistan, Costa coffee has no barriers regarding suppliers due to is its own supply chain management. Therefore, makes it easy to Costa Coffee to take control of the market through prices and costs. Costa coffee has the monopoly in Pakistan, being the only International brand in the market, there is no competition for Costa Coffee. Costa Coffee is taking advance of this opportunity capture customer’s attention and grab the consumer’s loyalty as they do not have any other alternative. According to Costa Coffee research’s department, it is found that there is zero competition in the market as it is the first International Coffee company launched in Pakistan. So far, it is observed by the R&D that there is no such a competition prevailing in the market. Therefore, there is no point of substituting product by any other brand in Pakistan.

The Porter’s 5 Forces is a powerful tool for understanding where power lies in a business situation. This is useful, because it helps the company to understand both the strength of the current competitive position, and the strength of the company’s position considering moving into. With a vivid understanding of where power lies, Costa Coffee is advantage the current situation of strength, improve a situation of weakness, and avoid taking wrong steps. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable.

The name Costa signifies luxury, excellence and perfection all over the world. In today’s market environment, along with quality, Image and Status are also all important. The theme has been designed specifically with the Costa’s consumers in mind to invite them to enjoy the best coffee in the true Italian style. The emphasis is on luxury and comfort- with style. The ambiance provided is trendy as well as soothing. The sobriety of Costa invites consumers to spend a pleasant time with their company without the tacky flash and glitter. Costa Coffee first ventures in Pakistan are greatly anticipated and it intend to meet and go beyond these expectations.

Porter’s Five Forces Costa Coffee

9.2 Prices

Coffee is internationally renowned for is unique blend of Italian Coffee, first-rate service, Highest regard for quality and a determination to provide the best handmade coffee for the most discerning consumers worldwide. They will value Costa’s commitment to their satisfaction and realize that luxury comes at a cost. A cost that will not deter them from pursuing the excellence of the coffee at Costa. The prices of all the products are comparatively higher at Costa. But this is offset by the outstanding quality and discerning tastes at Costa. One of the reasons for choosing the privileged and higher middle classes in the target market is the prices.

9.3 Promotion

The promotional strategy for the Launch of Costa in Pakistan has been mostly low key. Though it is a coffee house and the coffee house culture is building up as an upcoming trend in Pakistan, a lot of advertising is unnecessary. This is so because Costa’s brand name is enough for them to muster the required target market. Most of the awareness will be through the word of mouth of people amongst the masses. Hence the reputation is more that counts.

9.4 Place

Before expanding into any market, its opportunities and risks have to be analyzed. Smart Business is to venture into markets that have opportunity for profit maximization. The attractiveness of any market depends on the certain factors that have to be duly considered before launching any new project and even after launching it to continue a balanced growth of the market share. The decision to expand to any new markets depends largely on the market attractiveness and the Business Strength. After thorough research, and competitive analysis the perfect locations in terms of exposure, accessibility and competitive edge have been acquired. Karachi, due to its metropolitan way of life and culture and ideal market potential was chosen to be the launch pad for initiation into the Pakistani market.

10.0 Public Relation strategy – loyalty strategy

Costa’s new marketing strategy has been implemented to demonstrate to the public that Costa is the only brand with real coffee authority; they source, store, blend, roast, grind and extract all their own coffee. No one else is involved. They plan to deliver this key message through world class branding and marketing. Costa’s commitment to being the dominant player amongst the region’s coffee shops was reinforced. Recent loyalty card launch saying:”as the coffee shop sector becomes increasingly competitive, improving customer loyalty and retention will be fundamental. Costa is happy to be able to introduce a loyalty card scheme for the benefit of their customers and along with our high quality coffee is another reason for them to keep coming back. The new loyalty card was recently distributed to customers in residential areas through a leaflet drop which included a pre-stamped card offering a free coffee for redemption in any Costa outlet. Additional loyalty cards will continue to be available at all stores for customers to pick up when they purchase their next cup of coffee. Redemption on the cards also extends to Costa’s popular Frescato range giving increased flexibility for customers which is paramount in today’s market. “In today’s competitive market, choice is in abundance and Costa wants to differentiate itself from other coffee shop chains as it believes its product to be of a higher quality. Costa aims to resonate with its target market through its branding and messaging strategy. During these uncertain times Costa believes its customers would appreciate the offer of free coffee with the new loyalty card.”

11.0 Effectiveness of the marketing strategies implemented by Costa Coffee

12.0 Conclusion

Costa Coffee has been able to remain one of UK’s leading coffee brewing companies for more than a century now primarily because of the execution of the company’s branding and positioning strategies to perfection. Add to the mix the company’s dedication to high quality of service and the formula for success is at hand. Moreover, the utilization of the appropriate knowledge management tools is necessary for their products to reach out to people even in different cultures. However, certain points have to be taken into consideration by Costa Coffee regarding knowledge management tools. Since their income is relatively higher than most coffee brewing companies, the time for implementation of their chosen knowledge management tools would take longer than usual, aside from being expensive. But since the goal of Costa Coffee is towards a long-term dominance and stability in the brewing industry, then the pursuit of these promotional campaigns will be beneficial for the company in the long run.

The findings above notify that Costa has very strong market intensification potential. We can observe that Costa has exceptional sales all through its first year after entering the Pakistani market. The rationale following this is the unique taste and the highly reputed image of Costa in the European markets. The word of mouth only has played a significant role in their success. The cash inflows are projected to increase much this year and in the next year with the development plans. After expansion Costa will be able to establish a firm and strong foothold in all the major markets of Pakistan. Since the targeted market segments include only the higher middle and elite classes, therefore the venture is even more successful. The sales forecasts give you an idea about the market share of students and youngsters and the professionals increasing spectacularly over the span of these three years. This is due to the quick adaptation by our youth and their fondness towards the new trends. The professionals on the other hand, always seem to be in the hunt for calming and serene locations to carry out unofficial or official business meetings. Costa has proved to be a first-rate spot for the purpose, as the sales figures suggest. Apart from this the professional sales with relation to media will also increase since there is a very strong showbiz industry in Lahore. From the beginning a number of TV channels have already started airing their programs art Costa. Hence this would certainly increase the revenue generation.