Kusmi tea case free essay sample

The key difference between Starbucks and Kusmi Tea is the brand experience. Starbucks offer fresh-made coffee that is generally to be consumed in-store. Because of this Starbucks has to ensure a consistent experience in all their stores. Kusmi Tea’s key product is packaged tea, and tea consumption is more geared towards in home consumption where out of home tea consumption is driven by need for premium tea experience. These different expectations of their customers will lead to different retail strategies for the two brands (see question 3). Brand Awareness in France Awareness but no preference High awareness in premium tea segment Competitors Starbucks and Kusmi Tea compete in the same product category: beverage. Specific competitors for each brands vary by distribution formats (shown on the right) Physical Store Coffee Shops: Costa Coffee; Nothing Hill; traditional cafes Tea salon: Laduree/ Mariage Freres/ Fauchon/ Meert/ etc Supermarket Retailers Illy, Nescafe and other bottled coffee brands Lipton/ Tetley/ Twining Premium outlet/ retail Nespresso Mariage Freres/ Pammamn/ Palais Des Thes Market Situations/ Trend/ Challenges Strong coffee culture in France; Zinc Culture Repositioning of Tea Category to be more modern/ health-oriented and appealing to young clienteles Consumers Profile Demographic -Unisex -Tourist/ Business clients/ Nesters -85% Female -Younger, modern, and more dynamic clientele -Socio-professional categories Consumer Trend (consumption trend -Towards in-home consumption -Social dimension of tea consumption makes tea consumption more popular in home than out of home -When out of home, customers prefer high-end tea Hero Product Frappuccino Fresh-made coffee drinks -Well-Being range (Detox: 35% of sales) -Packaged tea range Brand Extension Coffee, beverages and confectionary Tea related Distribution Coverage Kusmi Tea is more selective in distribution strategy, focusing on premium outlets. We will write a custom essay sample on Kusmi tea case or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page -Major cities (56 outlets in France) -Bottled coffee drinks in leading supermarkets -Major cities -30 retail outlets -160 Monoprix -Geographic: Ile de France region and western parts Distribution Format Starbucks has more consistent distribution formats -Own-store and Franchise -Bottled coffee, ice-cream distributed through supermarket retailers -Company-owned stores; franchises, corner in major stores, e-commerce, retailers, and tea salon SKUs/ Assortment Merchandising Consistent assortments throughout all store formats: Beverage, accessories, bakeries -Inconsistent assortment, depending on store formats -350 SKUs Territory Expansion (France) External Intrusion: From American ? European Internal Extension: European - European North America Key Business Issues Profitable Growth mainly due to 1. Store organization 2. Organic growth 3. Brand Extension 4. Distribution channel Profitable Growth of diverse retail outlet networks, which varies from 30-150m2 1. Inconsistent retail formats 2. Commercial policy (heterogeneous pricing policy) 3. International Expansion 2. Work on an economic and commercial model for Kusmi with a shopping mall of 6 million visitors Business Model Best, base and worst case scenario calculations and monthly sale figures are presented respectively: EUR 117,000,000/ EUR 65,520,000/ EUR 35,100,000. We suppose there will be 6 million visitors to the shopping mall per year. And according to the Kusmi tea, the sales in 2012 in main companies is â‚ ¬ 21,702,273. Therefore, the number that we calculate is reasonable because the sales that generated in the corner shops in shopping mall is only one dimension of Kusmi’s tea distribution channels. Kusmi tea sill has other retail outlet such as independent store, supermarket, and flagship stores to gain ideal sales. 1. Capture rate: 3 levels of capture rates according to different seasons. 10 % ? more visitors walk into the Kusmi store during the sales seasons. 7% ? during the weekends when people spend their leisure time in shopping mall. 5% ? Normal time. 2. Conversion rate: Unlike Starbucks store, Kusmi store don’t provide ready-to-drink tea in the store; therefore different conversion rate represent different situation. 3. Items: Taken from current products offering in Kusmi France, customers usually place an order per visit. 4. Average Price: According to the case information, we don’t take extreme such as gift box of different size, the average price is between â‚ ¬ 11. 7~ â‚ ¬ 14. 5; therefore, we decide an average price on â‚ ¬ 13. Economic Model Best, base and worst case Scenario calculations and annual net income figures are presented respectively: EUR -243,700/ EUR 872,130/ EUR 2,045,600. Worst Case Base Case Best Case Annual Sales 1,170,000 2,184,000 3,900,000 %Gross Margin 70% 70% 70% Net Margin 819,000 1,528,800 2,730,000 MARK DOWN Salaries 50,400 50,400 50,400 OPEX (20%) 234,000 436,800 780,000 Logistics (7%) 81,900 152,990 273,000 Rent 648,000 648,000 648,000 Key money 25,000 25,000 25,000 Other Costs (2%) 23,400 43,680 78,000 Total Operating Expense 1,062,700 1,356,870 1,854,400 Net Income (profit/loss) -243,700 827,130 2,045,600 1 Gross Margin%: the gross margin of Kusmi was 68. 5% in 2011. With the increasing sales tendency, we assume the Gross Margin of 2013 could be 70% 2 Salaries: 2-4 staffs per store, depending on store size. This calculation based on 1 corner store in a shopping mall with 2 full time staff. (2100 per month x 2 x12=50400) 3 Logistics: Kusmi need to import their raw materials from famous tea producing countries such as Ceylon, China, and India. Thus, their overall logistics expenses are higher to cover the international transport. 1. OPEX: Assume 20% OPEX comprising of colorful in-store decoration and marketing promotions, etc. 2. Rent: The calculation assumed information provided in the case; EUR1800/ month is an average between 1,550 euro and 2,000euro) 3. Key money: Based on the information given in case, we assume the leasehold acquisition fee for a corner store with 30 m? could be 250,000 euro. 4. Other Cost: Assume a constant 2% other costs. 5. The negative net income of the first column based on our worst scenario of the sales income, which is relatively low. 3. Identify the main issues / priorities recommendations Main Issues: Profitability of diverse retail outlet networks, which varies from 30-150m2 1. Inconsistency of retail (company-owned store) formats 2. International Expansion—structure and strategy No issues found in selective retail distribution (in Monoprix). Recommendation Manage stores by geographic locations. We propose to maintain current distribution through selective retailer (Monoprix) and manage 3 store format types in France and International expansion plan: Flagship Kusmi Tea Salon; Kusmi Stand alone outlets (for packaged tea only); Kusmi corner in shopping mall 1. Flagship Kusmi Tea Salon (250m2) in Major cities in France and International Expansion: To keep in line with market need for premium out of home tea consumption and to reinforce differentiating modern image of Kusmi Tea, Flagship Kusmi Tea Salon would feature a hedonic experience of premium, modern tearoom and shop area. The Tea Salon section would offer tea-related menus, including variety of tea selections, fancy snacks and finger food that goes with tea i. e. small sandwiches, pastries, macaroon, etc. The current menus used in Le Cafe Kousmichoff can be kept. But, the brand should discontinue main meal because it sways the image of brand into ‘restauration’ instead of premium tea destination. Instead the food offer light/healthy selections of food that reinforces on the well-being image of Kusmi Tea. A portion of store will be shop area offering Kusmi packaged teas and accessories (full merchandising). The flagship store has to take into consideration operating hours, peak time and non-peak time as well as in-store organization that ensure profitability: Operating hours: 10am-7 for salon; 9am-9pm for store Manage peak-time: Between meals i. e. 10-12 am Manage non-peak time: 12-2pm lunchtime/ 7:30-9pm Dinnertime Offer only light/ healthy (bio) that serve as lunch and reinforces on the well-being image, which is unique to brand 1 Kusmi stand alone outlets offering packaged tea gift only 2 Corners in shopping mall offering packaged tea gift only. Particularly important to build awareness among tourists Before expanding, Kusmi needs to strengthen their presence within the 4 presently occupied countries (Italy, Germany, UK Canada). The flagship stores in cities such as New York and London should be modeled after the flagship model explained above. With regards to further international expansion, Kusmi Tea will have to expand their network of company owned store in large cities and their presence is premium retailers. Kusmi Tea will need to establish a strong brand positioning (European, premium, young and trendy, modern, etc. ) in their stores differentiating from local competitors. Kusmi must only expand in countries where customers are open minded to foreign tea culture and where the culture gap can be offset. Markets with strong tea cultures such as the Asian market should not be entered on the basis that although the consumers will be responsive to a Franco-Russian tea salon, there is no possibility of further expansion into retail. Pricing policy 4. Look at the advertising campaign of Kusmi on Internet make the Kapferer prism, analyze the campaign and give our analysis Advertising campaign The campaign conveys sophistication, art and modernity. The hired artistic director was from a fashion background so as to make the brand fashionable and trendy. They have tried to move the brand away from the traditional gastronomy positioning and rejuvenate not only the brand but also the image of tea. The diversity of the models, the colored costumes (which can be seen as metaphors for flowers) and the underwater dance depicts the blends from various origins. The chandelier, the flowers and the bright colored flowy dresses shows a strong link to Kusmi Tea’s bright and premium brand identity. Kapferer’s Brand Identity Prism model 2014/02/13 Kusmi tea case discussion Kusmi Starbucks Fashion brand Product Store Gift Main issue: growth Average basket: 25 euros Professional staff who can present tea culture very well Communication: go into industry that is far away from food industry More fashion-oriented office Working on strategic growth (international expansion, retail format diversification, distribution channels) Social brand Drink Coffee store Moment Main issue: profitability Average basket 7 euros Store efficient: have dynamic staff More Google style office Retail format: consistency Size: 50~250 m2 Location: capture rate, and high conversion rate possibility Store concept: Use flagship store at Champs-Elysee to test if the commercial model goes well, at least you will have high brand exposure at this place. Internationalization: where, which city†¦etc (method? ) Distribution channel: flagship, Monoprix, travel retail. Profit Rent Salary Head office 6% Comments on Advertisement: How many products you need to sell to generate sales to have advertising campaign