mky issue 2

The Story of Cafédirect

Social Enterprise Marketing

AgendaAgendaIntroductionIntroductionSocial EnterpriseSocial EnterpriseFair TradeFair TradeCafédirectCafédirect

TheoriesTheoriesCorporate-Reputation Corporate-Reputation QuotientQuotientKano ModelKano ModelProduct/Market GridProduct/Market Grid

Case ApplicationCase Application

Learning InsightsLearning Insights

SSocia

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

Triple bottom line: people, planet and profit

social, environmental, financial

not-for-profit -- more than profit

SSocia

FFair Tra

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.

Its organizations are actively engaged in supporting producers in awareness raising and in campaigning for changes in the rules and practices of conventional international trade

FFair Tra

2007$2,381,000,00

2006$1,623,000,00

2005$1,141,570,19

12004 $831,523,0662003 $554,766,7102002 $300,000,0002001 $248,000,000

Global Fair trade Sales

CCafed

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

CCafed

– 39 grower organizations across 13 developing countries– 260, 000 farmers and directly improving the lives of more than 1.4 million people

– Invested more than £3.3 million of profits directly into communities of growers, and paid more than £13 million over and above market prices for the raw material

CCafed

1993 -1995

CCafed

1996 -1998

CCafed

1999-2001

Corporate Reputation QuotientCorporate Reputation Quotient Theory 1Theory 1

• Six drivers of the corporate reputation quotient

Corporate Reputation QuotientCorporate Reputation Quotient

• Products and Services– To guarantee high quality

• Cafédirect controlled the produce 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 1Theory 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%.– The underlying direction of the charity spin-off was unclear.

(the interests of business partners, producer groups, grassroots supporters and founders diverged)

– Penny Newman:• She was a milestone MD of Cafédirect. • 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.– Most recently, as Ribena’s Marketing Director, Anne led the

brand’s strategic turnaround

Theory 1Theory 1

• Workplace environment:– For Cafédirect, employees are their producers

(small-holders in the third world)

– Several benefits are provided to its producers• 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 1Theory 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 1Theory 1

Kano ModelKano Model Theory 2Theory 2

Kano ModelKano Model

3 categories of quality attributes influence customer satisfaction:

• Basic FactorsDissatisfier - Must be’s – Cost of Entry

• Excitement FactorsDelighter – Latent Need – Differentiator

• Performance Factors Satisfier – More is better – Competitive

Theory 2Theory 2

Factors KANO Category How to do better

Sanitation & Safety Basic NeedsKeep and have to satisfy

customers above the average level

Quality 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

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 factors

Performance factors

Distribution - 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

Performance factors

Package - Cafédirect undertook a major brand relaunch in 2006 to help unify the brand look and aid it competitiveness

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 GridProduct/Market Grid Theory 3Theory 3

Ansoff Ansoff MatrixMatrix

Source: Cafédirect annual report 2006-2007

Ansoff Ansoff MatrixMatrix

Cafédirect use 3 major approach

Encourage current customers to buy more

Attract competitor’s customers

Convince non-users to use the product

Tesco increased its Cafédirect offering by another five products in 2006

Morrison’s expanded Cafédirect range, adding Medium Blend, Organic Decafeninated, 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)

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.

Annual report 2005-06

Cafédirect introduce existing products in foreign market Hong KongListing with a major supermarket chain “Parknshop” 50 storesIrelandNow available in all their major supermarket and many independent storesSales increased by 19% in 2005Paris

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.

Nike vs. child labor in the 90s

CorporatCorporate e

ReputatiReputation on

Quotient Quotient applicatiapplicati

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. “

Consumers - "Just don't do it."

CorporatCorporate e

• 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

CorporatCorporate e

• 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

CorporatCorporate e

Kano Kano Model Model

applicatiapplicationon

✴ Active Links✴ Legibility✴ Safety

✴ Storage✴ Upload speed✴ Tag & Search

✴ Photo Editing✴ Community✴ Fun

Photo Photo EditingEditing

““Wow, my photos are

Wow, my photos are

sharpened automatically”

Photo Photo EditingEditing

““Wow, I can add my own

Wow, I can add my own

Text and Stickers”

CommuCommunitynity

““Wow, I can find something

Wow, I can find something

interesting about Hong Kong”

CommuCommunitynity

““Wow, this guy is quite

Wow, this guy is quite

popular here”popular here”

FunFun

““Wow, the way of browsing is

Wow, the way of browsing is

cool”cool”

FunFun

““Wow, I can explore the

Wow, I can explore the

world”world”

FunFun

““Wow, they have widgets can

Wow, they have widgets can

be embedded into other

sites”sites”

Product/Product/Market Market

Grid Grid applicatiapplicati

•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

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

•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.

•2005, JILL STUART•2006, Perfume containing natural fragrances Skin care series featuring natural fruit extracts

Learning Insights

“New Fair Trade” ATOs

Style Business Idealistic

Skills Sales, Marketing Intellectual

Strategy Make money to help Advocacy

Values Commercial but ethical

Non-commercial

Staff Professional Semi-volunteers

System Dependable More ad-hoc

Structure Performance-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

Learning Insights

Learning Insight -- Student residence canteen in Cityu

In previous years, it was owned and manipulated by Women cooperation ( 妇女合作社）

Women cooperation is a sub-organization of Hong Kong Work Association for Women ( 香港妇女劳工协会）， which is a registered non-profit organization. The organization aims at concerning women’s working problem and providing them with working opportunities.

However, at that time, the situation in the residence canteen was:

•The food was not delicious at all.

•The food quality was quite bad.

•The attitude of the staff towards residence students was annoying.

•Residences complained a lot about the residence canteen.

Learning Insight -- Student residence canteen in Cityu

SRO realized this problem, and change the owner from 妇女合作社 to Homey Kitchen.

It is just like the residence canteen move from pure non-profit organization to more customer-focus.

This change was proved quite successful.

Mission of Homey Kitchen:

To provide residents with healthy and delicious food as well as comfortable service.

• Homey Kitchen provides food and drinks with good quality, and staff attitude is very nice.

• Homey Kitchen does quite a number of promotions, here are two examples:

1. EXPRESS Lunch Box: Only $12 can buy you a single entrée and pre-packed lunch box!

2. FREE Drink: Come for a free soothing drink after 9pm (while suppliers last) from 28 April to 18 May 2008!

mky issue 2

productmarket

corporate

student residence

quality gourmet

photo editing

residence

reliable high

fun wow

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