Date : 20 August 2007
Candidate’s Name : Biplab Yakso
Advance Diploma in business and Marketing
Project work about The Annual marketing Plans
The Annual Marketing Plans
Executive Summary |
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The Daily Coffee (TDC) is a specialty beverage retailer. TDC uses a system that is new to the beverage and food service industry to provide hot and cold beverages in a convenient and time-efficient way. TDC provides its customers the ability to drive up and order (from a trained Barista) their choice of a custom-blended espresso drink, freshly brewed coffee, or other beverage. TDC is offering a high-quality option to the fast-food, gas station, or institutional coffee.The Daily Coffee offers its patrons the finest hot and cold beverages, specializing in specialty coffees, blended teas, and other custom drinks. In addition, TDC will offer soft drinks, fresh-baked pastries and other confections. Seasonally, TDC will add beverages such as hot apple cider, hot chocolate, frozen coffees, and more.The Daily Coffee will focus on two markets:
The Daily Commuter- someone traveling to/from work, out shopping, delivering goods or services, or just out for a drive.
The Captive Consumer- someone who is in a restricted environment that does not allow convenient departure and return while searching for refreshments, or where refreshments stands are an integral part of the environment.The Daily Coffee will penetrate the commuter and captive consumer markets by deploying Drive-thru facilities and Mobile Cafes in the most logical and accessible locations. The Drive-thru facilities are designed to handle two-sided traffic and dispense customer-designed, specially ordered cups of premium coffees in less time than required for a visit to the locally owned cafe or one of the national chains.In addition to providing a quality product and an extensive menu of delicious items, to ensure customer awareness and loyalty, as well as good publicity coverage and media support, we will be donating up to 7.5% of revenue to local charities based upon customer choices.The Daily Coffee financial picture is quite promising. Since TDC is operating a cash business, the initial cost is significantly less than many start-ups these days. The process is labor intensive and TDC recognizes that a higher level of talent is required. The financial investment in its employees will be one of the greatest differentiators between it and TDC’s competition. For the purpose of this pro-forma plan, the capital expenditures of facilities and equipment are financed. There will be minimum inventory on hand so as to keep the product fresh and to take advantage of price drops, when and if they should occur.The Daily Coffee anticipates the initial combination of investments and long term financing of $425,000 to carry it without the need for any additional equity or debt investment, beyond the purchase of equipment or facilities. This will mean growing a bit more slowly than might be otherwise possible, but it will be a solid, financially-sound growth based on customer request and product demand.The Daily Coffee chooses to become the Drive-thru version of Starbucks between the mountains, obtaining several million dollars through an initial public or private offering that would allow the company to open twenty to thirty facilities per year in all metropolitan communities in the North, Midwest, and South with a population of over 150,000. This is the preferred Exit Strategy of the Management Team. The danger in this is that competitors would rise up and establish a foothold on a community before–or in the midst of–the arrival of The Daily Coffee, causing a potential for a drain on revenues and a dramatic increase in advertising expenditures to maintain market share. Knowing these risks–and planning for them–gives TDC the edge needed to make this scenario work.The balance sheet estimates a Net Worth of $1,075,969 for the third year, cash balances of $773,623 and earnings of $860,428, based on 13 Drive-thru and four Mobile Cafes, it is not unrealistic to put a market value of between $4 and $9 million on the company. At present, such companies are trading in multiples of four to 10 times earnings, and it is simple mathematics to multiply the success of TDC by the number of major and smaller metropolitan areas between the mountain ranges of the United States.
The Daily Coffee has established three firm objectives it wishes to achieve in the next three years:
1. Thirteen Drive-thru locations and four fully booked Mobile Cafes by the end of the third year.
2. Gross Margin of 45% or more.
3. Net After-tax Profit above 15% of Sales.
The Daily Coffee Mission is three-fold, with each being as integral to our success as the next.
Product Mission – Provide customers the finest quality beverage in the most efficient time.
Community Mission – Provide community support through customer involvement.
Economic Mission – Operate and grow at a profitable rate through sound economic decisions.
There are four keys to success in this business, three of which are virtually the same as any foodservice business. It is our fourth key–the Community Mission–that will give us that extra measure of respect in the public eye.
The Daily Coffee is a specialty beverage retailer. TDC uses a system that is new to the beverage and food service industry to provide hot and cold beverages in a convenient and time-efficient way. TDC provides its customers the ability to drive up and order from a trained Barista their choice of a custom blended espresso drink, freshly brewed coffee, or other beverage. TDC is offering a high quality option to the fast-food, gas station, and institutional coffee.
The Daily Coffee is a Limited Liability Corporation. All membership shares are currently owned by Bart and Teresa Fisher, with the intent of using a portion of the shares to raise capital.The plan calls for the sale of 100 membership units in the company to family members, friends, and Angel Investors. Each membership unit in the company is priced at $4,250, with a minimum of five units per membership certificate, or a minimum investment of $21,250 per investor.If all funds are raised, based on the pricing established in the financial section of this plan, Bart and Terri Fisher will maintain ownership of no less than 51% of the company.
The Daily Coffee start-up expenses total just $370,170. The majority of these funds–roughly $300,000–will be used to build the first facility, pay deposits, and provide capital for six months of operating expenses. Another $35,000 will be used for the initial inventory and other one-time expenses. The Daily Coffee anticipates the need for roughly $30,000 in operating capital for the first few months of operation.
| Start-up |
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| Requirements |
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| Start-up Expenses |
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| Legal |
$3,500 |
| Office Equipment |
$4,950 |
| Drive-thru Labor (6 months) |
$65,000 |
| Drive-thru Finance Payment (6 months) |
$12,300 |
| Drive-thru expenses (6 months) |
$8,520 |
| Land Lease (6 months) |
$7,200 |
| Vehicle Finance (6 months) |
$3,700 |
| Administration Labor (6 months) |
$54,000 |
| Website Development & Hosting |
$5,600 |
| Identity/Logos/Stationary |
$4,000 |
| Other |
$5,000 |
| Total Start-up Expenses |
$173,770 |
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|
| Start-up Assets |
|
| Cash Required |
$25,500 |
| Start-up Inventory |
$35,000 |
| Other Current Assets |
$0 |
| Long-term Assets |
$131,400 |
| Total Assets |
$191,900 |
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| Total Requirements |
$365,670 |
| Start-up Funding |
| Start-up Expenses to Fund |
$173,770 |
| Start-up Assets to Fund |
$191,900 |
| Total Funding Required |
$365,670 |
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|
| Assets |
|
| Non-cash Assets from Start-up |
$166,400 |
| Cash Requirements from Start-up |
$25,500 |
| Additional Cash Raised |
$0 |
| Cash Balance on Starting Date |
$25,500 |
| Total Assets |
$191,900 |
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|
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| Liabilities and Capital |
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|
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| Liabilities |
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| Current Borrowing |
$9,000 |
| Long-term Liabilities |
$131,400 |
| Accounts Payable (Outstanding Bills) |
$0 |
| Other Current Liabilities |
$0 |
| Total Liabilities |
$140,400 |
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|
| Capital |
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| Planned Investment |
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| Partner 1 |
$10,000 |
| Partner 2 |
$10,000 |
| Partner 3 |
$10,000 |
| Partner 4 |
$10,000 |
| Partner 5 |
$11,500 |
| Partner 6 |
$10,000 |
| Partner 7 |
$11,500 |
| Partner 8 |
$10,000 |
| Partner 9 |
$11,500 |
| Partner 10 |
$10,000 |
| Partner 11 |
$11,500 |
| Partner 12 |
$11,500 |
| Other |
$97,770 |
| Additional Investment Requirement |
$0 |
| Total Planned Investment |
$225,270 |
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| Loss at Start-up (Start-up Expenses) |
($173,770) |
| Total Capital |
$51,500 |
|
|
|
|
| Total Capital and Liabilities |
$191,900 |
|
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| Total Funding |
$365,670 |
Start-up
| Company Locations and Facilities |
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The Daily Coffee will open its first drive-thru facility on Manchester Road in the Colonial Square Shopping Center. Twelve more drive-thru facilities will be placed throughout the metropolitan area over the next three years. The drive-thru in the Colonial Square Shopping Center will serve as the commissary for the first mobile unit.The demographic and physical requirements for a Drive-thru location are:
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Traffic of 40,000+ on store side.
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Visible from roadway.
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Easy entry with light if less than 30,000 cars.
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Established retail shops in area.
The Daily Coffee provides its patrons the finest hot and cold beverages, specializing in specialty coffees and custom blended teas. In addition, TDC will offer select domestic soft drinks, Italian sodas, fresh-baked pastries, and other confections. Seasonally, TDC will add beverages such as hot apple cider, hot chocolate, frozen coffees, and more.
TDC provides its customers, whether at a Drive-thru facility or one of the Mobile Cafes, the ability to custom order a coffee beverage that will be blended to their exact specifications. Each of TDC’s Baristas will be trained in the fine art of brewing, blending, and serving the highest quality hot and cold beverages, with exceptional attention to detail.Besides coffees, The Daily Coffee will offer teas, domestic and Italian sodas, frozen coffee beverages, seasonal specialty drinks, pastries, and other baked goods. Through the website and certain locations, TDC will market premium items such as coffee mugs, T-shirts and sweatshirts, ball caps, and more.
The Daily Coffee considers itself to be a player in the retail coffee house industry. However, it knows that competition for its products range from soft drinks to milkshakes to adult beverages.The Daily Coffee primary competition will come from three sources:
1. National coffee houses such as Starbucks and Panera.
2. Locally owned and operated cafes.
3. Fast food chains and convenience stores.What will make The Daily Coffee stand out from all its competitors are two things:The Daily Coffee will be providing products in the most convenient and efficient way available–either at one of the two-sided Drive-thru shops, or at one of the Mobile Cafes. This separates TDC from the competition in that its customers won’t need to find a parking place, wait in a long line, jockey for a seat, and clean up the mess left by a previous patron. TDC customers can drive or walk up, order their beverage, receive and pay for the beverage, and drive off.The second differentiator is The Daily Coffee ’s focus on providing a significant benefit to the community through a possible 7.5% contribution to customer-identified charities, schools, or other institutions.
The Daily Coffee purchases its coffees from PJ’s Coffee. TDC also has wholesale purchasing agreements for other products with Major Brands, Coca-Cola, Big Train, Al’s Famous Filled Bagles, L&N Products, and Royal Distribution.The Drive-thru facilities are manufactured by City Stations and the Mobile Cafes are manufactured by Tow Tech Industries.Fulfillment equipment suppliers include PJ’s Coffee, City Stations, Talbert Ford, and Retail Image Programs. The Daily Coffee ’s computer equipment and Internet connectivity is provided by NSI Communcations.
The Daily Coffee ’s delivery system is based on its technology. TDC is using state-of-the-art, two-sided, Drive-thru facilities to provide convenience and efficiency for its clientele. An architectural exterior diagram of the Drive Thru building can be found on the following page. The Daily Coffee Coffee has also designed state-of-the-art Mobile Cafes that will be deployed from time to time on high school and college campuses, corporate campuses, and at special events.
As seasons change, The Daily Coffee will be offering products that will enhance sales and satisfy its customers’ desires. During summer months, TDC will subsidize lower hot beverage sales with frozen coffee drinks, as well as soft drinks, and other cold beverages. TDC will also have special beverages during holiday seasons, such as Egg during the Christmas season and Hot Apple Cider in the Fall.The Daily Coffee ’s primary desire will be to listen to its customers to ascertain what they are looking for most, and provide it.
The Daily Coffee will focus on two markets:
1. The Daily Commuter- someone traveling to or from work, out shopping, delivering goods or services, or just out for a drive. 2. The Captive Consumer- someone who is in a restricted environment that does not allow convenient departure and return while searching for refreshments, or where refreshments stands are an integral part of the environment.
The Daily Coffee will focus on two different market segments: Commuters and Captive Consumers. To access both of these markets, TDC has two different delivery systems. For the commuters, TDC has the Drive-thru coffee house. For the captive consumer, TDC has the Mobile Cafe.Commuters are defined as any one or more individuals in a motorized vehicle traveling from point “A” to point “B.” The Daily Coffee ’s greatest concentration will be on commuters heading to or from work, or those out on their lunch break.Captive Consumers would include those who are tethered to a campus environment, or in a restricted entry environment that does not allow free movement to and from. Examples would include high school and college campuses, where there is limited time between classes, and corporate campuses where the same time constraints are involved, but regarding meetings and project deadlines, and special events–such as carnivals, fairs or festivals–where there is an admission price to enter the gate, but exiting would mean another admission fee, or where refreshments are an integral part of the festivities.The following chart and table reflect the potential numbers of venues available for the Mobile Cafes and what growth could be expected in those markets over the next five years. For a conservative estimate of the number of Captive Consumers this represents, multiply the total number of venues in the year by 1,000. As an example, in the first year, The Daily Coffee is showing that there are a total of 2,582 venues at which we might position a Mobile Cafe. That would equate to a Captive Consumer potential of 2,582,000.Similarly, there are well over 2,500,000 commuters in the metropolitan area, as well as visitors, vacationers, and others. It can also be assumed that these commuters do not make only one purchase in a day, but in many cases, two and even three beverage purchases.The chart reflects college and high school campuses, special events, hospital campuses, and various charitable organizations. A segment that is not reflected in the chart (since it would skew the chart so greatly) is the number of corporate campuses in the metropolitan area. There are over 1,700 corporate facilities that house more than 500 employees, giving us an additional 1,700,000 prospective customers, or total of 2,582 locations at which we could place a Mobile Cafe.
Market Analysis
| Market Analysis |
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2001 |
2002 |
2003 |
2004 |
2005 |
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| Potential Customers |
Growth |
|
|
|
|
|
CAGR |
| Public High School Campuses |
1% |
80 |
81 |
82 |
83 |
84 |
1.23% |
| Private High Schools |
0% |
88 |
88 |
88 |
88 |
88 |
0.00% |
| College Campuses |
0% |
77 |
77 |
77 |
77 |
77 |
0.00% |
| Golf Courses |
0% |
99 |
99 |
99 |
99 |
99 |
0.00% |
| Special Events |
3% |
43 |
44 |
45 |
46 |
47 |
2.25% |
| Non-Profits w/$500K+ Budgets |
2% |
362 |
369 |
376 |
384 |
392 |
2.01% |
| Hospital Campuses |
0% |
100 |
100 |
100 |
100 |
100 |
0.00% |
| Total |
1.10% |
849 |
858 |
867 |
877 |
887 |
1.10% |
| Target Market Segment Strategy |
TDC’s target market is the mobile individual who has more money than time, and excellent taste in a choice of beverage, but no time to linger in a cafe. By locating the Drive-Thru in high traffic/high visibility areas, this unique–and abundant–consumer will seek The Daily Coffee out and become a regular guest.To penetrate the target market for the Mobile Cafes, these units will do what they were designed to do. The Daily Coffee will take the cafe to the customer! By using the community support program TDC is instituting, arrangements will be made to visit a high school, college campus, or a corporate campus once or twice a month (Even visit these facilities for special games, tournaments, recruiting events, or corporate open houses). And, for every cup or baked goods sold, a portion is returned to the high school or college. It becomes a tremendous, painless way for the institution to gain a financial reward while providing a pleasant and fulfilling benefit to their students or employees.
The United States is a very mobile society. With the introduction of the automobile, we became a nation that thrived on the further freedom of going where we wanted when we wanted. It has only gotten worse. There are over 250 million men, women and children in America, half of whom are too old, too young, or too poor to drive an automobile. Yet, there are more licensed vehicles in the country than people. And that mobility has created a unique need in our society.Our market is made up of consumers who have busy schedules, a desire for quality, and disposable income. As much as they would like the opportunity to sit in an upscale coffee house and sip a uniquely blended coffee beverage and read the morning paper, they don’t have the time. However, they still have the desire for the uniquely blended beverage as they hurry through their busy lives.
Nearly twenty years ago, a trend towards more unique coffees began to develop in the U.S. There had always been specialty coffee stores, such as Gloria Jeans and others, but people began to buy espresso machines for their homes and offices, and people began to have coffee tastings. Then espresso bars began to appear and, inevitably, along came Starbucks … the quintessential bastion of the upwardly mobile professional who wanted to take control over how their beverage would taste and smell.However, we have also become more rushed for time during that same period. Those same consumers who helped push Starbucks to $2.2 billion in global sales are now rushing kids to soccer and basketball games, running to the grocery and trying to get to work on time and back home in time for dinner … or to get to the next soccer game. Yet, they still have the desire for that refreshing, specially blended coffee each morning.Lately, we’ve seen the introduction of beverage dispensers at convenience stores that spit out overly-sweet, poorly blended cappuccinos in flavors such as french vanilla or mocha, and consumers are paying as much as $3.00 for these sub-standard beverages.The market is primed for the introduction of a company that offers a superior quality, specially blended product in a convenient, drive-thru environment at a price that is competitive to the national coffee houses.
According to industry statistics, the consumption of coffee and flavored coffee products is growing rapidly. The largest national brand for retail coffee outlets achieved $2.2 billion in sales in 2000 with 3,000 retail outlets. They are anticipating opening 7,000 more outlets in the next five years and increasing revenues to over $6 billion.That is the coffee consumer market. The segment of that market we are targeting is the commuter and that number is increasing. In the metropolitan area, as with many metropolitan areas in the country, there is a migration away from the cities.It is estimated that there are well over 2.5 million commuters driving to and from work each day in our market. Statistically, at least 50% of those are coffee drinkers. That gives The Daily Coffee significant daily target for its products. Those numbers are growing by 6% per year.
The coffee industry has grown by tremendous amounts in the U.S. over the past five years. Starbucks, the national leader, had revenues in fiscal 2000 of $2.2 billion. That is an increase of 32% over Fiscal 1999. Starbucks plans to increase revenues to over $6.6 billion from 10,000 retail outlets by 2005.Even general coffee sales have increased with international brands such as Folgers, Maxwell House, and Safari coffee reporting higher sales and greater profits.America is definitely a coffee country and the coffee industry is reaping the rewards.
There is only one national Drive-thru coffee franchise operation in the U.S. with any legs, and that is a subsidiary of Chock Full ‘o Nuts called Quikava. Quikava operates predominantly on the East Coast and in the Upper Great Lakes. The East and West coasts, and even some Mountain and Midwest states, have smaller local drive-thru chains such as Caffino, Java Espress, Crane Coffee, Java Drive, Sunrise Coffee, and Caffe Diva. However, other players in the premium coffee service industry would include Starbucks, Gloria Jean’s, Caribou Coffee, Panera and locally owned and operated coffee shops or “cafes.”
The cafe experience comes from the Italian origins of espresso. The customer comes in to a beautifully decorated facility, surrounded by wondrous aromas and finds himself involved in a sensory experience that, more often than not, masks an average product at a premium price. However, the proliferation of cafes in the United States proves the viability of the market. It is a duplication of the same delivery process as currently exists in Europe.
| Competition and Buying Patterns |
There are four general competitors in The Daily Coffee ’s drive-thru market. They are the national specialty beverage chains, such as Starbucks and Panera, local coffee houses–or cafes–with an established clientele and a quality product, fast food restaurants, and convenience stores. There is a dramatic distinction among the patrons of each of these outlets.Patrons to a Starbucks, or to one of the local cafes, are looking for the “experience” of the coffee house. They want the ability to “design” their coffee, smell the fresh pastry, listen to the soothing Italian music, and read the local paper or visit with an acquaintance. It is a relaxing, slow paced environment.Patrons of the fast food restaurants or the convenience stores are just the opposite. They have no time for idle chatter and are willing to over-pay for whatever beverage the machine can spit out, as long as it’s quick. They pay for their gas and they are back on the road to work. Although they have the desire and good taste to know good from bad, time is more valuable to them.Competitors to the Mobile Cafes on campuses would include fast food restaurants–assuming they are close enough to the consumer that they can get there and back in the minimal allotted time, vending machines, and company or school cafeterias. The consumers in this environment are looking for a quick, convenient, fairly priced, quality refreshment that will allow them to purchase the product and return to work, class, or other activity.Competitors to the Mobile Cafes at events such as festivals and fairs would include all the other vendors who are licensed to sell refreshments. Attendees to such events expect to pay a premium price for a quality product.
When measuring head-to-head, direct competitors, we have found that there are none in the metropolitan area. The Daily Coffee will be the first double-sided, drive-thru coffee house in the metropolitan area. However, there is still significant competition from traditional coffee houses and other retailers.
National Chains:Starbucks, the national leader, had revenues in fiscal year 2000 of $2.2 billion. That is an increase of 32% over fiscal year 1999. Starbucks plans to increase revenues to over $6.6 billion from 10,000 retail outlets by 2005.Panera had revenues of $151 million from corporate owned stores and $350 million from franchised locations in fiscal year 2000. This fiscal year revenue was an increase in 28.9% on a per store basis versus fiscal year 1999.The Daily Coffee believes it has a significant competitive advantage over these chains because of the following benefits:
Local Cafes:The toughest competitor for The Daily Coffee is the established locally owned cafe. TDC knows the quality and pride that the local cafe has in the product purchase by their customers. Any local cafe has a customer base that is dedicated and highly educated. The quality of beverages served at an established cafe will surpass any of the regional or national chains.The competitive edge The Daily Coffee has on the local cafes is based on the attributes of:
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Drive-thru Service
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Supply Discounts
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Mobile Cafe
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Consistent Menu
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Community Benefit
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Quality Product
Drive-thru Coffee Houses:There is not a drive-thru specialty beverage retailer with significant market presence in the central United States. The only company with similar depth to that of The Daily Coffee is Quikava, a wholly owned subsidiary of Chock Full’o Nuts. However, Quikava has limited its corporate footprint to the East Coast and the Great Lakes Region.In the drive-thru specialty beverage market, The Daily Coffee has a competitive edge over the smaller retailers, and even Quikava, due to:
Fast Food and Convenience Stores:These are two industries where The Daily Coffee will experience a certain level of competition. The national fast food chains and national convenience store chains already serve coffee, soda, and some breakfast foods. The national fast food chains obviously know the benefits and value to customers of drive-thru. TDC knows that within the specialty coffee and tea market, the quality of the products sold will be much greater than what can currently be purchased at fast food and convenience stores. The addition of domestic soda sales for these stores is a large part of revenue. TDC knows the quality of our products, along with the addition of domestic soda and the ease of drive-thru, gives it a competitive edge over fast food and convenience stores.
Other competition:The Daily Coffee knows that once it has entered the market and established a presence, others will try to follow. However, TDC believes that the corporate missions and even the organizational design will be imitated, but never duplicated. TDC will constantly evaluate its products, locations, service, and corporate missions to ensure that it remains a leader in the specialty beverage industry.
Biplab Yakso
Advance Diploma In Marketing and Business Project work on Annual Marketing Plan
