Free Keurig Company Case Study Sample
Marketing Objectives: for Coffee maker I.1- Profit
In 2014, Keurig had a Gross Profit of $1,815,860, or 38.6% of net sales, as compared to $1,619.4 million, or 37.2% of net sales, in fiscal 2013 (2). This growth was attributed to an increase of basis points due to favorable green coffee costs, logistics productivity, and sales shift in sales mix between Keurig brewers and portion packs. This year, Keurig aims to maintain a positive, steady growth each quarter, and increase the profit margin by 1% every quarter. Keurig will also look into expanding internationally. It will first focus on meeting the increased demand from importers in Taiwan with whom they have established relationships for larger orders. These importers are important because they increase Keurig's ability to acquire additional accounts in Canada and the United States without having to spend a lot on sales effort.
Keurig will also focus on increasing the volume, while maintaining percentage of sales of coffeemakers sold to the internal Taiwanese market. Once Keurig has reached maximum sales to existing channels they can then shift the majority of their focus to securing additional import accounts.
3- Market share
The leading Taiwanese coffee in 2013 was Nestle. It had a retail value share of seventeen percent. Its Dolce Gusto coffeemakers have had a good performance, which resulted in the decreased popularity of instant coffee. Nescafé offers instant coffee in both the standard and premium variety in Taiwan. It continues to be sold largely in retail shops and continues to enjoy the loyalty of older customers. In addition, sales for the Nepresso coffee pod decreased due to the entry of cheaper coffee pod options from companies such as Caffe Tiziano (4). The Taiwanese coffeemaker market is becoming increasingly competitive. With established brands such as Nescafe and Caffe Tiziano pervading the market, Keurig needs to differentiate itself in order to gain foothold. Since Keurig offers premium coffeemakers and k-cups, their target market could be socioeconomic classes A and B.
II.1- Target market in Taiwan “Taipei”
The coffee drinking culture in Taiwan has been rapidly flourishing. Because of this, Taiwan is a promising market for Keurig. According to Taiwan Coffee Association statistics, in 2011, Taiwanese coffee consumption has reached 100cups per person per year. In addition, Ministry of Finance import statistics shows that coffee products imports have had a three-fold increase within 13 years (7). Raw coffee beans, roasted coffee beans and ground coffee, as well as various products utilizing coffee, amounted to 7,990 tonnes in 1997, and had risen to 25,085 tonnes by 2010. Due to the increasing demand of Taiwanese coffee drinking, the market is expected to grow by 15% over the next 5 years. Consequently, with this growth comes a challenge for the coffee industry. Consumers are now becoming more sophisticated in taste. They are now on the lookout for novelty coffee products. The coffee industry continuously comes up with creative ideas to effectively compete in the market. Because of this, Keurig, with its sophisticated coffeemakers and a wide variety of K-cups, could become a major key player in the Taiwanese coffee industry.
Aside from individual households' demand, Keurig could also cater to small franchise coffee shops. Currently there are more than 2,000 coffee shops in Taipei, half of them chain stores like Starbucks, Dante, Barista, IS Coffee, Ikari and Mr Brown. The price of a cup of coffee ranges from 35 Taiwan dollars ($1) at Dante to 50 Taiwan dollars ($1.5) at Starbucks. Besides franchise coffee shops, there are more than 12,000 individual shops in Taiwan (5).
In addition, the majority of residents are regular patrons of coffee shops. An estimated 60% of urban residents visit a chain coffee shop at least once a week. Coffee drinking is already a part of Taiwanese culture. The demand for coffee will only increase because of new innovations in the market. Thus, Keurig could target households and coffee shops alike.
This statistic displays the per capita coffee consumption in Taiwan between 1990 and 2012.
III.1- Product Rationale and Position
Should Keurig decide to expand its international market, Taiwan offers the best growth opportunity over the medium- to long-term because of its pervasive coffee culture. With its escalating demand for innovation in the coffee industry, the Taiwanese market are welcoming new coffee players, and Keurig has the potential to be the leading international coffeemaker brand. Keurig's home market also has a flat category growth and limited opportunities for market share expansion without heavy levels of investment. International expansion, specifically in Taiwan, provides new markets where sales may be 100 % incremental. In addition, Keurig has already established a relationship with Taiwanese importers, therefore they do not have to launch an extensive campaign to gain foothold in the market and develop brand awareness. This will save them time and sales efforts. Furthermore, international sales create a larger and hopeful company. The added sales revenue will supply a scale dividend that could be incorporated into the system, including Keurig's home market. This translates to improvement in procurement of raw materials, packaging materials, transportation, advertising agencies, and negotiations with global retailers.
There are two methods Keurig could choose from to go global. First, Keurig could choose to expand to Taiwan by working through agents and distributors. Establishing a partnership with local sales agencies or trading houses could give them access to Taiwanese market while still being involved in control of the sales and terms and conditions. Hiring a third party will allow them to build their export expertise and be able to receive information about new trends or market shifts. Since they already have existing exporters, Keurig could easily attract other investors to reinforce their products in the local market.
On the other hand, Keurig could opt to market and deliver their products directly. Between the two choices, this requires more time and resources. They could begin by joining forces with non-competitor businesses and customize their offerings to meet the needs of the Taiwanese market. They could also get advice from government trade representatives, financial institutions, freight forwarders, distribution networks, agents and even shipping space. However, there are risks involved with this method. First, adjusting to the local market trend could take a considerable amount of time. Secondly, it requires larger investments in marketing and brand awareness campaigns. Lastly, establishing connection with local partners might be difficult because of language and cultural barriers.
"2015 Taiwan Tea, Coffee & Wine Expo." 2015 Taiwan Tea, Coffee & Wine Expo. Web. 12 Apr. 2015. <http://www.chanchao.com.tw/nov/market.asp>.
"Create Your Own Export Library." Why International ? Web. 12 Apr. 2015. <http://www.exportsolutions.com/ExportTipsDetails.aspx?id=47&title=Grading New Products>.
"Coffee in Taiwan." Coffee in Taiwan. Web. 12 Apr. 2015. <http://www.euromonitor.com/coffee-in-taiwan/report>.
"Taiwan: Total Coffee Consumption 2012 | Statistic." Statista. Web. 12 Apr. 2015. <http://www.statista.com/statistics/314994/taiwan-total-coffee-consumption/>
"Investors." Annual Reports and Proxies. Web. 12 Apr. 2015. <http://investor.keuriggreenmountain.com/annuals-proxies.cfm>.
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