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Caffebene Case Study

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by

Kim Hernandez

on 30 January 2015

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Transcript of Caffebene Case Study

Caffebene
About Caffebene
" We model ourselves after the traditional European coffee houses. Caffebene is a destination of rest and relaxation amid the hectic scene of city living."
Timeline
2008: Launch
Opened the first branch store
2009: Brand Setting
Started daily production, delivery, and consumption system
Opened their 100th store
2010: Rapid Growth
Established U.S. branch.
2011: Brand Expansion
Opened 500th store.
2012: Global Expansion
Expanded to U.S., Philippines, China
2013: Recognition
Awarded 2013 Korea's Global Leader Award
Opened 1,000th store worldwide
2014: Global Recognition
Awarded the Best Coffee brand by Customers
Case Study
Summary
How has Caffebene become successful in such a short period of time?
Will expanding to the U.S. really be a smart investment?
What are the benefits from expanding to the U.S. as opposed to the benefits from expanding to China?
What would you recommend Caffebene should do next?
Case Study Analysis
Nick Ybarra
Amanda Capellino
Sam Al-Basith
Kim Hernandez

Four P's
SWOT
Porter's 5 Forces
Recommendations on Expanding to U.S.
Receiving constant customer feedback and adjustments for the store in New York.
Research accordingly.
Prices may need to be lowered in New York and rise as popularity grows.
Advertise uniqueness as strength, example: library, well known for desserts, sandwiches, and open late.
Must be prepared for new customers and exceed expectations.
Offer rewards and promotions to encourage loyal customers
Menu Selection
How has Caffebene become successful in such a short period of time?
Will expanding to the U.S. really be a smart investment?
What are the benefits in expanding to the U.S. as opposed to the benefits in expanding to China?
Cozy Ambiance
Book Cafe
Marketing Strategy
Customer Appreciation
"Many world famous brands like Starbucks are already in all the countries. There are also competitive local brands in every market. We can't just sell licenses and expect our local partners would survive the fierce competition. We need to be hands-on and help build the business in each market. I also have concerns working with certain investors. Some wealthy people only see Caffebene's achievement, but ignore the process or the pains and difficulties behind the scenes. They think if you just inject capital in the business, utilize their personal network, everything will work out... there are too many moving parts in food service franchising. It's a very hard business."

-Sun Kwon Kim
"Should we take the safer path? If we follow conventional wisdom, we will never create a global brand. China seems safer from both cultural and logistics perspectives. Entering the U.S. through Los Angeles' Koreatown seems safer, but that defeats the purpose of going global... Wherever we open our first intentional store, we would work equally hard to be successful - to develop a new menu, research consumers, and design the interior. We would commit to the same level of effort. Therefore, I made the decision to open our store in a place that can bring the biggest success. I chose New York which is the center of the world's economy and culture,"
-Sun Kwon Kim
Threat of New Entrants
Threat of Substitutes
Industry Rivalry
Bargaining Power of Suppliers
Bargaining Power of Buyers
Medium
There are a lot of small businesses looking to obtain what Caffebene has accomplished.
They have high customer loyalty in South Korea and some loyalty in the U.S.
Products are similar to competition, but they still have their unique items.
High
Personal roasting facility.
Farm to Table contract with Ipanema
Medium
There are few suppliers, but many buyers.
Cost of switching raw materials would be high.
Suppliers do not have a lot of control.
High in the U.S. because their are substitute products.
Low in South Korea because it is well established and popular.
Medium
There are many competitors.
Industry of growth is stabilizing.
Customer loyalty has been established.
Recommendations
Prices still too high, match competitors (Small coffee priced 4.45, Starbucks priced 1.75)
Customer service improvements (slow, rude)
Staying in stock with items
Partnership with a waffle company to increase their specialty/ Beverage quality improvements
Property expansions (use profits to create larger store and hire new staff)
Holiday drinks
Product
Customers are not necessarily looking for a product but certain consistent tastes that CaffeBene has been known to consistently provide.
They serve a localized menu for for example Belgian Waffle, Gelato, great coffee as well as a 5 grain latte
Menu is healthy and natural which are two key factors in customers needs. Offering natural fruits, smoothies, Soya, Non fat yogurts and teas .
The menu has many quality items to appeal to that of young professionals who are willing to pay for quality elegant menu items
Satisfaction of heavy coffee and frap drinkers is balanced along with natural fruit and smoothie Products made available, this covers two types of potential customers.
Sizes and portions range in standard small medium and large , In branding and the appearance of the products CaffeBene uses a font which is not constrained by any formality to depict an image of a freewheeling and artistic cafe in Europe.

What makes CaffeBene different from competitors is its natural rich taste and appeal in the product compared to that of Starbucks or Dunkin Donuts Coffee.
Some consumers have stated that the CaffeBene “cup of coffee “ is slightly inferior to that of its competitors and therefore in 2012 Caffebene invested more capital into providing stores with more high quality coffee beans to improve taste of coffee .
The Variety of options on the menu to go along with the coffee also give more incentive to customers to chose CaffeBene over its competitors
Place
The location of CaffeBene stores most successfully are in urban areas .
Places in which customers can come sit down during their daily activities and brakes and realx to enjoy CaffeBene. Locations most successful are in that of other surrounding business areas that are busy with heavy flow of activity .
The stores designs of CaffeBene are designed to create an elegant atmosphere providing comfortable ambiance which coincides with their elegant menu items. This also helps create a comfortable atmosphere for an available longer stay which suits Local Korean culture.
With more stores being franchised and opening up the concern for management in the distribution channel to decline . Therefore keeping a tight management system in the distribution channel will be essential.
Price
CaffeBene pricing on its coffee and drinks is higher than that of its competitors with its standard cup of coffee being sm- $4.45 med- $4.95 Lg - $5.45
It's main competitor Starbucks has their prices set for a standard cup of coffee at
tall (sm)- $1.75 grande (med) $1.95 Venti (Lg) $2.25
This higher pricing pattern is consistent with the rest of their variations of drinks such as teas, Lattes , Frapps etc.
CaffeBene pricing its drinks higher than its competitors by about double the price is very bold. However there is something more that customers feel they are paying for and don't have problem doing so. This is the elegant atmosphere of the store and the compliment products Caffee Bene offers such as fruits, waffles , Gelatos etc.
Promotion
CaffeBene has invested a lot of capital into High Budget promotional strategies , Using celebrities and product placement on TV
Their main target audience is young female professionals
They also have a high hold in social media
CaffeBene used young stars and celebrities in promoting their product. For example they used Ye-Seul Han who is praised for her intellectual beauty in their promotions and this showed immediate results . CaffeBene started becoming known in the nation as the “ Han Ye- seul coffee” and the public who enjoyed Han's Facade began to enjoy the CaffeBene coffee that now shared Hans image .
This strategy worked especially well in Korea due to the fact that celebrities tend to have incredible influence in Asian Societies.
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