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The Story of Cafédirect Social Enterprise Marketing

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  • 1. The Story of Cafdirect Social Enterprise Marketing

2. Agenda Introduction Social Enterprise Fair Trade Cafdirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 1 3. Agenda Introduction Social Enterprise Fair Trade Cafdirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 2 4. S ocial Enterprise Social enterprises social mission driven organizations which trade in goods or services for a social purpose.3 Social Enterprise Commercial business To generate profit to further their social and environmental goals To maximize shareholder value e.g. Cafdirect e.g. The Body Shop 5. S ocial Enterprise 4 6. What isCafdirect ? Cafdirect is a UK-based alternative trading organization and it is currently one of the largestfair tradehot drinks companies in the world. 5

  • 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 byalternative trading organization(ATOs), which have often been founded particularly for the purpose of fair trade

7. Sources: see Littrell and Dickson, 1999; Mayoux,2001; Tallontire, 2001a 6 How fair trade work? Aminimum price , which always be paid even if the world market price falls below this point. Aprice premiumof a given percentage, which is paid when the world market price rises beyond the minimum price. Pre-financingof 60% of the total order to allow smallholders to buy raw materials. Trainingin quality control and marketing know-how to build the capacity to also trade on the world market independently of fair trade. 8. C afedirect

  • 1989
  • Collapse of the International Coffee Agreement
  • 1991
  • Cafdirect was born
  • 2004
  • Cafdirect become a publicly listed company
  • 2007
  • Cafdirect was voted as the most recommended brand in the nation in a survey of 2,000 companies

The History of Cafdirect

  • 1994
  • Sales of Cafdirect start increasing dramatically

7 9.

  • Cafdirect 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) 8 10. Timeline (1989-1993) Increase of products qualityAt 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 companys MD, she accelerated the organizations shift from charity spin-off to ethical business venture, by pushing for more customer focus and repositioning Cafdirect as a high quality coffee brand. 9 11. Sales Growth (1992-2000) 10 12. Timeline (1995-present) The success of Cafdirect Changes of communication approach 11 Oldcommunication approach:

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

13. C afedirect Newcommunication 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 1999-2001 The picture of a smiling Machu Picchu conveyed products qualities-its smell, its freshness, and its exotic origin.12 14. C afedirect Original Oxfams over 600 shopsTraidcrafts mail-order catalogue Increase of distribution channels 13 In 1993, Gained national distribution in the Co-op and other supermarkets. Later stages, Offering its products through vending machines Expanding its products distribution channels to overseas 15. 14 Source: Marketing Relationship, Helen Peck, Chartered institution of Marketing 16. C afedirect Increase of products varieties 15 17. C afedirect

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

Today -- 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, Cafdirect is the 5th largest coffee brand and 7th largest tea brand in the UK. [ 16 18. C afedirect 17 19. Agenda Introduction Social Enterprise Fair Trade Cafdirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 18 20. Corporate Reputation Quotient Theory 1

  • Six drivers of the corporate reputation quotient

Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations 19 21. Corporate Reputation Quotient

  • Products and Services
  • To guarantee high quality
    • Cafdirect controlled the products delivered
    • It also invested heavily in training producers on the ground
  • Key achievements in 2000 demonstrated Cafdirects success in attaining high quality
    • Best coffee by Best magazine, awarded 5 stars by Prima magazine
    • Voted favorite coffee by the UKs 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 20 22. Corporate Reputation Quotient

  • Vision and leadership
  • Ian Lepper: Cafdirects first CEO .
    • After he left, Cafdirect 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 Cafdirect from charity spin-off to ethical business venture
    • New vision: reposition Cafdirect as a high quality coffee brand
  • Anne MacCaig: Cafdirects 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 21 23. Corporate Reputation Quotient

  • Workplace environment:
  • For Cafdirect, employees are their producers (small-holders in the third world)
  • Several benefits are provided to its producers (this is also howfair tradeworks)
    • 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 22 24. Corporate Reputation Quotient

  • Social responsibility:
  • Cafdirects mission statement:
    • At Cafdirect 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 23 25. Kano Model Theory 2 Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-48 24 26. Kano Model

  • 3 categories of quality attributes influence customer satisfaction:
  • Basic Factors
  • Dissatisfier , Must bes ,Cost of Entry, Basic needs
  • Performance Factors
  • Satisfier, More is better, Competitive, Performance
  • Excitement Factors
  • Delighter ,Latent Need, Differentiator,Surprise

Theory 2 25 27. Kano Model Theory 2 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.39-48 26 Factors KANO Category How to do better Sanitation & Safety Basic Needs Have to keep the customers above the average satisfaction level Quality Basic Needs Taste Performance Sustaining improve on to gain more return Package Performance Distribution Performance Sales Promotion Surprise Dig and focus on Brand Surprise 28. Kano Model Theory 2 Quality - Clients were usually concerned citizens for whom the charity aspect of fair trade prevailed over product quality. - Penny Newman-reposition Cafdirect 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 Cafdirect 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 27 29. Kano Model Theory 2 Performance factors

  • Distribution
  • - Charity, Church & Fair-trade world shops
  • - Target the mainstream distribution channels such as supermarkets, catering, and coffee bars
  • Taste
  • "Somebatches tasted very good and others tasted very poor. That generated a lot of negative reaction in the UK to Cafdirect in the first years." (Hudghton, 2002, interview)
  • - Cafdirect's Gold Standard Programme - Train growers to professionally taste their own products, helping them to improve quality and understand market value

28 30. Kano Model Theory 2 Performance factors Package - Pure for charity (poor people & slogan for sympathy) - Cafdirect undertook a major brand relaunch in 2006 to help unify the brand look and aid it competitiveness 29 31. Kano Model Theory 2 Excitement factors Brand- 8 Awards in 2008 - August 2008: Cafdirect triumphs in Great Taste Awards- In a survey of 2,000 global brands Cafdirect ranks No. 1 as the most recommended brand Social Enterprise concept - Combining taste, price, ethics, and availability -(ethical consumerism) 30 32. Product/Market Grid Theory 3 Source: Cafdirect annual report 2006-2007 31 33. Product/Market Grid Theory 3 Ansoff Matrix Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124 32 34. Product/Market Grid Theory 3 Cafdirect use 3 major approach

  • Encourage current customers to buy more
  • Attract competitors customers
  • Try to change incidental clients to regular clients

Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124 33 35. Product/Market Grid Theory 3

  • Tesco increased its Cafdirect offering by another five products in 2006
  • Morrisons expanded Cafdirect 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 Cafdirets products. They have agreed a strategy to encourage customers to buy more Cafdirect products this year. (annual report 2007 p.21)
  • Costa coffee shops decided to sell Cafdirects products.
  • Keephigh quality products
  • Emotional approach

34 36. Product/Market Grid Theory 3 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. Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124 35 37. Product/Market Grid Theory 3 Cafdirect Annual report 2005-06

  • Cafdirect introduce existing products in foreign market
  • Hong Kong
  • Listing with a major supermarket chain Parknshop (50 stores)
  • Ireland
  • Now available in all their major supermarket and many independent stores
  • Sales increased by 19% in 2005
  • Singapore

36 38. Source: Cafdirect annual report 2006-2007 37 39. Product/Market Grid Theory 3 Cafdirect Annual report 2005-07 38 40. Product/Market Grid Theory 3 Originally, coffee, later, hot chocolate When 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. Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124 39 41. Product/Market Grid Theory 3 Cafdirect Annual report 2005-06 40 42. Agenda Introduction Social Enterprise Fair Trade Cafdirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 41 43. Nike vs. child labor in the 90s Corporate Reputation Quotient application Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations 42 44.

  • People criticizes:
  • Nikes 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$79.51
  • 1993, Sep. US$ 41.98
  • reduced 47.2%

Corporate Reputation Quotient application 43 45.

  • Nikes 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

Corporate Reputation Quotient application 44 46.

  • Nikes 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

Corporate Reputation Quotient application 45 47. Kano Model application 46 48.

  • Active Links
  • Legibility
  • Safety

Kano Model application 47 49.

  • Storage
  • Upload speed
  • Tag & Search

Kano Model application 48 50.

  • Photo Editing
  • Community
  • Fun

Kano Model application 49 51. Photo Editing Wow, my photos are sharpened automatically 50 52. Photo Editing Wow, I can add my own Text and Stickers 51 53. Community Wow, I can find something interesting about Hong Kong 52 54. Community Wow, this guy is quite popular here 53 55. Fun Wow, the way of browsing is cool 54 56. Fun Wow, I can explore the world 55 57. Fun Wow, they have widgets can be embedded into other sites 56 58. Product/Market Grid application

  • Aggressively expanding the number of stores in Japan
  • Strengthening the groups core brands and maintaining flexibility with regard to distribution channels and retailing formats

57 59. Product/Market Grid application The result was a 2.2% increase in net sales to 136,312 million yen 58 60. Product/Market Grid application 59

  • 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.

61. Product/Market Grid application

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

60 62. Agenda Introduction Social Enterprise Fair Trade Cafdirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 61 63. Learning Insights From Cafdirects case, we learn that 1. SE should keep long-term relationships with small-holders and set high standard of quality 2. SE should market itself just like commercial organizations 3. Guarantee basic factors, improve performance factors and make Social Enterprise identity as the excitement factor 4. Expand to mass market by increasing distribution channels 62 New Cafdirect Old CafdirectStyle Business Idealistic Skills Sales, Marketing Intellectual Values Commercial but ethical Non-commercial Staff Professional Semi-volunteers Structure Performance-based, clear responsibilities Democratic, Political 64. 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.

63 Learning Insights 65.

  • Go for mainstream market
  • In 1997, the cocoa farmers decided t o invest in a chocolate bar of their own . They decided to producea mainstreamchocolate bar tocompete with other major brands in UK.
  • Product innovation and good quality
  • In October1998, Divine Fairtrade milk chocolate , made from its ownbest of the best fairly traded cocoa beanswas launched and by Christmas, had made it onto thesupermarketshelves .
  • Continuous quality improvement/control and innovation had made Divine successfully enter the mainstream market.

The Divine Chocolate 64 Learning Insights 66.

  • Good quality/ Good company image
  • Beans mean Business In aferociously competitive chocolate market worth almost 4 billion in the UKalone, as so many people adore delicious chocolate, the potential for Divine's success is huge.
  • Divine has been developed toappeal to the British public's palate , and ittests 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.

The Divine Chocolate 65 Learning Insights 67.

  • Profit goes back to the farmers(i.ethe smallholders) In 2006, one of the organizations 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.

66 Learning Insights The Divine Chocolate 68. 67 Learning Insights The Divine Chocolate 69. Divine Partners (Smallholders in South African) 68 Learning Insights The Divine Chocolate 70. Q&A 71. Backup 72. F air Trade Global Fair trade Sales 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