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Mystic Monk Coffee

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by

Siegrid Atienza

on 24 November 2012

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Transcript of Mystic Monk Coffee

Case Analysis Mystic Monk Coffee Statement of the Problem What action should the Mystic Monk Coffee do
to help in funding the expansion of the
monastery through acquiring the Irma Lake
ranch with a listed price of $8.9 Million? Facts of the Case Objectives •Father Daniel Mary would like to transform the present small brotherhood of 13 monks by creating a 500 acre new Mount Carmel Monastery in the Rocky Mountains which will cater accommodation for 30 monks and would also include a gothic church, convertor for Carmelite nuns, retreat center for lay visitors and hermitage but they don’t have enough money/funds to procure $8.9M worth of land. •Monks believed that they can acquire the property through donations and profits generated by the Mystic Monk Coffee operations •About 30 million coffee drinkers in the United States preferred premium quality specialty coffees that sold for $7 to $10 per 12-ounce package. •Mystic Monk Coffee is priced at $9.95 per 12-ounce bag Demand for Mystic Monk Coffee had not yet exceeded the capacity but the monastery planned to purchase a larger, 130 pound per hour roaster which costs $35,000. •Majority of sales were made through its website, but on occasion telephone orders were placed with the monk’s secretary. Mystic monk offered commission for secular website operators on its sales through its Mystic Monk Coffee Affiliate Program which earned 18% commission on sales made to customers. •Cost of sales averaged 50% of the revenues, inbound shipping cost accounted for 19% of revenues, and broker fees were 3% of revenues. •Operating Expenses averaged 37% of revenues. To increase the sales of the Mystic Monk Coffee Objectives To decrease the total cost and expenses of the Mystic Monk Coffee Mystic Monk Coffee should purchase a larger roaster to increase the production of coffee. The roaster shall be bought through the donations from the Carmelites. Alternative Courses of Action Advantages It allows the production of the coffee to increase from 540 pounds per day to 780 (6 hours of work x 130 pounds per hour = 780)
Minimize labor efforts for the monks
Increased production may result to higher profit margin and can be an advantage for economies of scale, thus maximizing cost. Additional cost of production
Increased production may result to product surplus.
High inventory associated cost Disadvantages Mystic Monk Coffee can widen the distribution of the product through supplying to famous high-end coffee shops. Advantages Mystic Monk Coffee shall enter into supplying to high-end coffee shops, in order for them to create relationship with the buyer. In effect, company is able to deliver customer value which is significantly attached to potential sales consistency.
High inventory turnover
Retailers shall be the one responsible for delivering the product to the end consumer resulting to decreased shipping costs.
The image of the Mystic Monk coffee will be associated with that of the high-end coffee shops Uncertainty of having a good negotiations with potential buyers since they are new in the industry
Unmet demands of the coffee shops may occur
Bargaining power of the coffee shops
Additional costs in negotiating with the coffee shops Disadvantages Mystic Monk Coffee can go through in-store merchandising and direct selling through the church volunteers within a specific geographic area. Advantages Increase in brand awareness through in-store merchandisingPotential increase in sales since coffee beans are readily available on stores
Closer reach to potential and existing customers
Elimination of brokerage fees since they already have direct sellers earning through commissions to deliver the product to the end consumers
The product is promoted through merchandising without incurring advertising expenses
Decreased shipping costs since the product is already distributed in different geographic areas. Another expense shall be incurred in distribution of the coffee beans through the grocery stores.
Problems with inventory cost of the retailers
Inconsistency of church volunteers in selling the product due to lack of motivation Disadvantages •Intense competition in the market
•Emergence and presence of other religions
•Changing consumer demands •Large percentage of the coffee drinkers with 150M consumers
•Large percentage of US Catholic coffee drinkers supporting the Monastery Mission
•Emergence of technological advancements
•Support from the Catholics •Lack of funds and resources
•Shallow distribution channel
•The production is limited by time devoted to prayer, silent meditation, and worship
•The capacity of Mystic Monk Coffee's roaster limited production to 540 pounds per day
• •No definite objectives and performance targets for achieving Father Prior’s vision
•Production of Mystic Monk coffee didn’t generate the kind of cash flows to pay for the Irma Lake ranch
•Brand isn’t readily available in the retail stores
•Limited market for Catholics •The Wyoming Carmelite Monastery has a coffee business to fund the cost of ranch.
•Mystic Monk Coffee is produced by using high-quality fair trade/organic Arabica beans
•Their coffee business has a website to reach loyal and potential customers
•The monastery has funds coming from donations and coffee operations •The monastery has its own foundation “New Mount Carmel Foundation”
•Mystic Monks Coffee has variety of flavors
•Mystic Monk Coffee website features T-shirts, gift cards, CDs featuring the monastery's Gregorian chants, and coffee mugs.
•Free labor, non-profit with no taxes and roasting coffee in monastery creates and delivers value to customers
•Their prices are cheaper than the others' well-known brands Threats Opportunities Strengths Weaknesses
Full transcript