issue presentation finalized

The Story of CafédirectSocial Enterprise Marketing

Agenda

IntroductionSocial EnterpriseFair TradeCafédirect

TheoriesCorporate-Reputation QuotientKano ModelProduct/Market Grid

Case Application

Learning Insights1

Agenda

Case Application

Learning Insights2

Social Enterprise

Social enterprises

social mission driven organizations which trade in goods or services for a social purpose.

Social Enterprise Commercial business

To generate profit to further their social and environmental goals

To maximize shareholder value

e.g. Cafédirect e.g. The Body Shop

SocialEnterprise

What is Cafédirect?

Cafédirect is a UK-based alternative trading organization and it is currently one of the largest fair trade hot drinks companies in the world.

Fair trade? „is a trade partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade.

„contributes to sustainable development by offering better trading conditions to, and securing the rights of, disadvantaged producers and workers - especially in the South.

„is usually conducted by alternative trading organization (ATOs), which have often been founded particularly for the purpose of fair trade

How fair trade work?

A minimum price, which always be paid even if the world market price falls below this point.

A price premium of a given percentage, which is paid when the world market price rises beyond the minimum price.

Pre-financing of 60% of the total order to allow smallholders to buy raw materials.

Training in quality control and marketing know-how to build the capacity to also trade on the world market independently of fair trade.

Sources: see Littrell and Dickson, 1999; Mayoux,2001; Tallontire, 2001a 6

Cafedirect

1989• Collapse of the

International Coffee Agreement

1991• Cafédirect

was born

2004• Cafédirect

become a publicly listed company

2007„Cafédirect was voted as the most recommended brand in the nation in a survey of 2,000 companies

The History of Cafédirect

1994• Sales of

Cafédirect start increasing dramatically

Timeline (1989-1993)

Cafédirect knew that they could not depend upon the fair trade message alone to convince buyers.

In order to compete, they would have to deliver real value to the consumers and meet the needs of the supermarket buyer.

Timeline (1989-1993)

Increase of products quality

At the very beginning, the company focus purely on charity rather than quality, which led to an dissatisfaction towards its products.

After Penny Newman stepped onto the company’s MD, she accelerated the organization’s shift from charity spin-off to ethical business venture, by pushing for more customer focus and repositioning Cafédirect as a high quality coffee brand.

Sales Growth (1992-2000)

Timeline (1995-present)

The success of Cafédirect

Old communication approach:

Advertising 1993-1995• focus on the fair-trade message• emphasize on producer advantages.

Changes of communication approach

CafedirectNew communication approach

Advertising 1996-1998• address the quality coffee story• focusing as it does on how to make the perfect cup• the producer still remained the central theme of these campaigns.

Advertising 1999-2001The picture of a smiling Machu Picchu conveyed products qualities-its smell, its freshness, and its exotic origin.

Cafedirect

In 1993,Gained national distribution in the Co-op and other supermarkets.

Later stages,Offering its products through vending machinesExpanding its products distribution channels to overseas

Original

Oxfam’s over 600 shops Traidcraft’s mail-order catalogue

Increase of distribution channels

Source: Marketing Relationship, Helen Peck, Chartered institution of Marketing

CafedirectIncrease of products varieties

Cafedirect– 39 grower organizations across 13 developing countries

– 260, 000 farmers and directly improving the lives of more than 1.4 million people

-- In 2007, the company's market share for hot drinks equated to 34%, 32%, and 14% respectively of the UK's Fair-trade coffee, tea, and drinking chocolate markets.

-- In the overall market, Cafédirect is the 5th largest coffee brand and 7th largest tea brand in the UK.[

Cafedirect

Agenda

Case Application

Learning Insights18

Corporate Reputation QuotientTheory 1

• Six drivers of the corporate reputation quotient

Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations

Corporate Reputation Quotient

Products and Services– To guarantee high quality

• Cafédirect controlled the products delivered• It also invested heavily in training producers on the ground

– Key achievements in 2000 demonstrated Cafédirect’s success in attaining high quality• “Best coffee” by Best magazine, awarded 5 stars by Prima magazine • Voted “ favorite coffee” by the UK’s leading consumer magazine

– Fair trade Direct trade• By providing long-term contracts and producer education, direct trade allows

importers to obtain high quality coffee ‟ year in and year out • While most large coffee importers buy coffee beans on the spot market, direct trade

has a built-in supply chain for reliable high-quality gourmet coffee.

Theory 1

Vision and leadership– Ian Lepper: Cafédirect’s first CEO.

• After he left, Cafédirect went through some turbulent stages:– The partnership between the four founding ATOs was being stretched.– Overall sales in 1998 increased by only 8%.

– Penny Newman:• Bring Cafédirect from charity spin-off to ethical business venture• New vision: reposition Cafédirect as a high quality coffee brand

– Anne MacCaig: Cafédirect’s new Chief Executive• She has a wealth of business and marketing experience

– She has an economics degree from the University of Birmingham. – In the past 20 years she has worked with major brands here in the UK and

abroad, including Persil and Rolls-Royce plc.

Theory 1

Workplace environment:

– For Cafédirect, employees are their producers (small-holders in the third world)

– Several benefits are provided to its producers (this is also how fair trade works)• A minimum price, which will always be paid even if the world market price falls

below this point.• A price premium of a given percentage, which is paid when the world market

price rises beyond the minimum price.• Pre-financing of 60% of the total order to allow small-holders to buy raw

materials.• Training in quality control and marketing know-how to build the capacity to also

trade on the world market independently of fair trade.

Theory 1

Social responsibility:

– Cafédirect’s mission statement:

• At Cafédirect our mission is to change lives and build communities through inspirational, sustainable business. We focus our social and economic impact in the developing world.

Theory 1

Kano ModelTheory 2

Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-48

Delighters

Excited Quality

Dissatisfier

Must-be

Expected Quality

“Didn’t know I

wanted it but I

like it.”

“Cannot increase

my satisfaction, but

can decrease.”

Dissatisfaction

Satisfaction

Service

Performance

Service

Performance

Satisfier

One Dimensional

Desired Quality

Kano Model

3 categories of quality attributes influence customer satisfaction:

„ Basic FactorsDissatisfier , Must be’s ,‟Cost of Entry, Basic needs

„ Performance Factors Satisfier, More is better, Competitive, Performance

„ Excitement FactorsDelighter ,‟Latent Need, Differentiator, Surprise

Theory 2

Kano ModelTheory 2

Factors KANO Category How to do better

Sanitation & Safety Basic Needs

Have to keep the customers

above the average

satisfaction levelQuality Basic Needs

Taste Performance

Sustaining improve on to

gain more return

Package Performance

Distribution Performance

Sales Promotion Surprise

Dig and focus onBrand Surprise

Kano Model applied to Food&Beverage industry

Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-4826

Kano ModelTheory 2

Quality- Clients were usually concerned citizens for whom the charity aspect of fair

trade prevailed over product quality.- Penny Newman-reposition Cafédirect as a high quality coffee brand- Direct Trade(long-term contracts and producer education built-in supply chain

for reliable high-quality gourmet coffee)

Sanitation & Safety - Government report - Product Recall of Cafédirect product (found small pieces of

glass)- Hazard Analysis Critical Control Point, or HACCP, is a standard of food

safety management system for any food producer wanting to sell into the UK and other European markets. Now it is for all parts of the supply chain

Basic factors27

Kano ModelTheory 2

Performance factors

Distribution- Charity, Church & Fair-trade world shops- Target the mainstream distribution channels such as supermarkets, catering, and coffee bars

Taste-"Some batches tasted very good and others tasted very poor. That generated a lot of negative reaction in the UK to Cafédirect in the first years." (Hudghton, 2002, interview)- Cafédirect's Gold Standard Programme - Train growers to professionally taste their own products, helping them to improve quality and understand market value

Kano ModelTheory 2

Performance factors

Package- Pure for charity (poor people & slogan for sympathy)- Cafédirect undertook a major brand relaunch in 2006 to help unify the brand look and aid it competitiveness

Kano ModelTheory 2

Excitement factors

Brand - 8 Awards in 2008

- August 2008: Cafédirect triumphs in Great Taste Awards

- In a survey of 2,000 global brands Cafédirect ranks No. 1 as the most recommended brand

Social Enterprise concept- Combining taste, price, ethics, and availability

- 良心消費主義 (ethical consumerism)

Product/Market GridTheory 3

Source: Cafédirect annual report 2006-2007

Ansoff Matrix

Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124

Cafédirect use 3 major approach

Encourage current customers to buy more

Attract competitor’s customers Try to change incidental clients

to regular clients

Tesco increased its Cafédirect offering by another five products in 2006

Morrison’s expanded Cafédirect range, adding Medium Blend, Organic Decaffeinated, Machu Picchu and Palenque Roast etc in 2006

At the beginning of 2007, Co-op increased the number of their stores selling Cafédiret’s products. They have agreed a strategy to encourage customers to buy more Cafédirect products this year. (annual report 2007 p.21)

Costa coffee shops decided to sell Cafédirect’s products.

Keep high quality products

Emotional approach

When the current product is launched in a new market, there are three approaches to develop the market:

1. Expand distribution channels. 2. Sell in new locations. 3. Identify the potential users.

Cafédirect Annual report 2005-06

Cafédirect introduce existing products in foreign market Hong KongListing with a major supermarket chain “Parknshop” (50 stores)

IrelandNow available in all their major supermarket and many independent storesSales increased by 19% in 2005

Singapore

Source: Cafédirect annual report 2006-2007 37

Originally, coffee, later, hot chocolateWhen a new product is launched in the current market, the intensive growth strategies could be to:

1. Develop new features. 2. Develop different quality levels. 3. Improve the technology.

Agenda

Case Application

Learning Insights41

Nike vs. child labor in the 90s

application

Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations

People criticizes:•“Nike’s success story is not based on good name and advertising alone but also attached to it is the tears of tortured workers and child labor.”•“Nike has the habit of hiding behind its good public image and its effective means of promotions and advertising. “

Stock price 1992 Nov, US$79.511993, Sep. US$ 41.98reduced 47.2%

application

Nike’s solution

– Code of Conduct,1992– Minimum age for employment, 1998

• Footwear(18), others(16)• Apply Occupational Safety and Health Administration

(OSHA) standard– Nike set up a Corporate Responsibility and

Compliance Department, 2000• Join the Global Alliance for workers and communities and

Fair Labour Association

application

Nike’s Current Code of Conduct

– Prohibition of forced labor – Prohibition of child labor– Compensation:pay at least the minimum total compensation

required by local law– Benefits :comply with all provisions for legally mandated

benefits– Ensure overtime payment– Ensure a health and safety working environment– Environment: continuous improvement in processes and

programs to reduce the impact on the environment– Maintain on file and documentation to demonstrate compliance

with this Code of Conduct, and to make these documents available for auditor's inspection upon request

application

Kano Model application

✴ Active Links✴ Legibility✴ Safety

✴ Storage✴ Upload speed✴ Tag & Search

✴ Photo Editing✴ Community✴ Fun

Photo Editing

Community

Product/Market Grid

application

„Aggressively expanding the number of stores in Japan

„Strengthening the group’s core brands and maintaining flexibility with regard to distribution channels and retailing formats

Product/Market Grid

applicationThe result was a 2.2% increase in net sales to 136,312 million yen

Product/Market Grid

application

„Business Expansion in the Asian and American Markets„Overseas sales increased 17% year on year 2007 due to the business expansion on China, Taiwan and South Korea.

Product/Market Grid

application

2006, Perfume containing natural fragrancesSkin care series featuring natural fruit extracts

Agenda

Case Application

Learning Insights61

Learning Insights

New Cafédirect Old Cafédirect

Style Business Idealistic

Skills Sales, Marketing Intellectual

Values Commercial but ethical Non-commercial

Staff Professional Semi-volunteers

StructurePerformance-based,clear responsibilities

Democratic, Political

From Cafédirect’s case, we learn that1. SE should keep long-term relationships with small-holders and set high standard of quality2. SE should market itself just like commercial organizations3. Guarantee basic factors, improve performance factors and make “Social Enterprise” identity as the excitement factor4. Expand to mass market by increasing distribution channels

The Divine Chocolate

• One of the fairtrade organization selling chocolate bar in UK

• Owned by South African cocoa farmers co-orpeative

• Their chocolate bar was sold through charity and fair-trade channels (e.g Worldshops) before 1997.

Learning Insights

Go for mainstream market

• In 1997, the cocoa farmers decided to invest in a chocolate bar of their own. They decided to produce a mainstream chocolate bar to compete with other major brands in UK.

Product innovation and good quality

In October 1998, Divine Fairtrade milk chocolate, made from its own best of the best fairly traded cocoa beans was launched and by Christmas, had made it onto the supermarket shelves .

Continuous quality improvement/control and innovation had made Divine successfully enter the mainstream market.

Learning Insights

Good quality/ Good company image

Beans mean BusinessIn a ferociously competitive chocolate market worth almost £4 billion in the UK alone, as so many people adore delicious chocolate, the potential for Divine's success is huge.

Divine has been developed to appeal to the British public's palate, and it tests favorably against all the market leaders. The UK has one of the highest per capita levels of consumption of chocolate in the world and therefore, even capturing a small proportion of this market translates into real benefits for cocoa farmers.

Learning Insights

• Profit goes back to the farmers(i.e the smallholders)In 2006, one of the organization’s founder The Body Shop made the brilliant decision to donate its shares in the Company to the cocoa farmers in South Africa- so now the farmers' cooperative has an even bigger stake in Divine.

Learning Insights

Divine Partners(Smallholders in South African)

Learning Insights

Backup

Fair Trade

2007 $2,381,000,000

2006 $1,623,000,000

2005 $1,141,570,191

2004 $831,523,066

2003 $554,766,710

2002 $300,000,000

2001 $248,000,000

Global Fair trade Sales

issue presentation finalized

fair trade message

fair trade work

international trade

trade partnership

companies cafdirect

high quality cafdirect

direct trade allowsimporte

social purpose

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