starbucks instant coffee in malaysia : marketing plan
TRANSCRIPT
Malaysia Campus
Nottingham University Business School
MBA Programme
Course : Marketing
Course Code : N1DM04
Module Convenors : Nelson Oly Ndubisi
Assignment Title:
Exam Coursework : Marketing Plan For Starbucks VIA In Malaysia
ZHIJING, EU (UNIMKL-004151)
Date: 14 th January 2010
COPY I
[Word Count : 2522 Words – Excluding Abstract , Section Headings , Table Headings and Appendices]
1
Abstract
The instant coffee market within Malaysia is an attractive market to enter given the growing
coffee culture locally. The market is currently dominated by Nescafe and a few other
domestic brands with specific localised products. Starbucks has an opportunity to introduce
a new instant coffee product that is uniquely positioned against it’s competitors. However
the key risk that needs to be managed within the market mix is the dilution of the brand
identity as Starbucks has always been associated with premium coffee and this is in contrast
to the instant coffee market which has traditionally been viewed as “down-market” of the
gourmet segment. Key areas of attention within the marketing plan to ensure success would
be the consistency in the promotional messaging strategy and a development of
appropriate distribution channels as Starbucks will be entering a mature market as a late-
comer.
[141 words]
2
Contents
1.Introduction........................................................................................................................................4
2.Market Evaluation..............................................................................................................................5
2.1 Market Environment Analysis......................................................................................................5
2.2 Competitive Landscape For Instant Coffee..................................................................................7
2.3 Market Trends.............................................................................................................................8
2.4 SWOT Analysis.............................................................................................................................9
2.4.1Strengths...............................................................................................................................9
2.4.2Weaknesses.........................................................................................................................10
2.4.3Opportunities.......................................................................................................................10
2.4.4 Threats................................................................................................................................10
3.Marketing Strategy...........................................................................................................................12
3.1Brand Positioning........................................................................................................................12
3.2 Target Marketing.......................................................................................................................12
3.3 Marketing Mix...........................................................................................................................12
3.3.1 Product...............................................................................................................................12
3.3. 2 Place/Channel....................................................................................................................13
3.3.3 Promotion...........................................................................................................................13
3.3.4 Price....................................................................................................................................14
3.4 Implementation of The Marketing Plan.....................................................................................15
4.Conclusion........................................................................................................................................17
5. References.......................................................................................................................................18
6. Bibilography.....................................................................................................................................19
List Of Figures & Tables
Figure 1. Mean Frequency of Beverages Consumed Daily By Population ( Norimah et al 2008) 5
Figure 2. Coffee Consumption Relationship To Purchasing Power (Kendrik 2008) 5
Figure 3. Malaysia Coffee and Tea Markets 2005-2013 (BMI 2009) 6
Figure 4. Five Forces Analysis On Instant Coffee Competitive Landscape 7
Figure 5. SWOT Analysis On Starbucks For Instant Coffee Market 9
Table 1. Marketing Plan Implementation Strategy Over Time 16
3
1.Introduction
Starbucks in Malaysia is jointly owned by Berjaya Corporation and Starbucks Coffee
International and has enjoyed a healthy growth within the Malaysian market since it’s first
outlet opened in 1998. At present, there are 119 stores thru out Malaysia (Starbucks
Malaysia Website 2010). In Berjaya corporation’s most recent 2009 Annual Report, it was
stated that there was a 14% increase in revenue from previous year due to the continued
growing acceptance of the brand and products as well as new outlet openings.
This paper outlines the current state of the instant coffee within Malaysia in context of a
planned launch of “VIA”, Starbucks’s new line of instant coffee thru the analysis of the
potential market size, consumer preferences, market segmentation and growth areas for
the soluble coffee market within Malaysia. The paper also analyses the local competition
scenario within the instant coffee market and recommends a marketing plan to successfully
launch and sustain the growth of VIA.
4
2.Market Evaluation
2.1Market Environment Analysis
Malaysia has a strong hot drinks culture. A survey (Norimah et al 2008) that showed that the
average Malaysian drinks 1.58 cups of coffee daily.
Figure 1. Mean Frequency of Beverages Consumed Daily By Population ( Norimah et al 2008)
Coffee drinking culture has been cultivated by the continued expansion of retail cafe
businesses of both international brands such as Starbucks , Coffee Bean & Tea Leaf that
bring in the “cafe culture” from the West and other domestic brands such as Old Town
White Coffee that build on the local “coffee-shop culture” (Euromonitor 2008).
Further research (Kendrik 2008) shows a positive correlation between the GDP per capita
and the amount of coffee consumed. This means that as the economy of Malaysia grows,
the market will begin to “thirst” for more coffee products.
5
Figure 2. Coffee Consumption Relationship To Purchasing Power (Kendrik 2008)
The coffee market is a sub-set of the “Hot Drinks” market sector which can be further
categorised into instant coffee and ground coffee. According to a industry report (BMI
2009), total coffee sales in Malaysia total to approximately 61 Mil USD in 2008 and is set to
be a growth market as seen in Figure 1
Figure 3. Malaysia Coffee and Tea Markets 2005-2013 (BMI 2009)
6
2.2Competitive Landscape For Instant Coffee
Figure 4. Five Forces Analysis On Instant Coffee Competitive Landscape
Based on Porter’s Five Forces Analysis, the threat of substitutes is high in the Malaysian
market given the propensity of Malaysian drinkers to prefer tea (Norimah et al 2008) and
the wide alternatives available in the form of malt or soy based drinks.
As the coffee bean commodity market is an mature open market, the bargaining power of
suppliers is low.
The threat of new entrants is high given that in the past few years, many domestic players
have entered into the instant coffee market. Affordable pricing and localised products were
identified by one industry report (Euromonitor 2008) as key drivers for the increased
prominence of the domestic coffee brands.
Industry rivalry is medium. Nescafe stands out as one of the major competitors and is
purported to currently command up to 70% of the local Malaysian market share in the
7
coffee segment (Adam 2009) and the instant coffee market players have developed quite
specific value offerings based on the additional ingredients or style of coffee preparation.
The bargaining power of consumers is high given that instant coffee is readily available thru
various distribution channels and both private individual consumers and large wholesale
buyers (E.g Food & Beverage Outlets) have a very wide range of brands to choose from and
will make comparisons.
2.3Market Trends
The coffee market can be divided into consumers segment by where the coffee is drunk , In-
Home vs Out of Home ; and type of product , Soluble (Instant) vs Ground coffee.
Three market trends worth noting are firstly the anticipated growth of the out of home
segment based on a recent study by Nestle (As reported in Bernama Press 2009), where
Malaysians currently spend 35 per cent of their total food and beverage expenses out-of-
home.
Secondly, instant coffee market caters quite specifically to local tastes. This can be
witnessed by the behaviour of Nestle , the market leader, who in 2009 (Chan 2009) also
introduced a range of instant hot drinks targeted at local tastes to compete directly with
other domestic brands who have specialised in domestic flavours such as “White Coffee” or
“Kopi-O”.
Thirdly, “health branding” is a prevalent in the sector. For example, the anti-oxidant benefits
of coffee have been actively promoted (Nescafe Professional Website 2009) and other
brands have also incorporated herbal additives such as longifolia (Tongkat Ali) or healthier
sweeteners such as oligofructose.
8
2.4SWOT Analysis
Figure 5. SWOT Analysis On Starbucks For Instant Coffee Market
2.4.1Strengths
Starbucks is the market leader in Malaysia. The brand equity of Starbucks is high as it is
perceived a premium quality brand and therefore this should translate into a positive
association with any product extensions such as VIA.
The core strength of Starbucks has been it’s ability to create a relationship with the
customer by marketing the “consumption experience”. As quoted by the Howard Schultz,
the CEO, Starbucks is not in the coffee business serving people but in the people business
serving coffee (Sellers 2005). The challenge with VIA is whether the coffee “experience” can
be mapped onto a product which traditionally has been a low involvement product for most
consumers.
Starbucks also has upstream supply chain management expertise in sourcing high quality
raw ingredients from it's retail activities and enjoys a strong corporate image due to it’s
efforts in ethical sourcing, environmental stewardship and community event involvement.
9
2.4.2Weaknesses
Starbucks is a late entrant into the soluble coffee market as this is a crowded brandscape
where there are many other brands in the market both from international competitors such
as Nescafe and also domestic firms such as Old Town Coffee.
Starbucks is also disadvantaged by it’s lack of direct experience in managing the supply
chain for instant coffee distribution. At the moment it only markets roast coffee beans via
it’s retail outlets.
The premium image of the Starbucks brand could also be a weakness as price sensitivity in
the instant coffee market is higher when compared to the retail brewed coffee market and
Starbucks may be perceived as a highly priced brand compared to other local brands.
2.4.3Opportunities
The economic slowdown has not left Malaysia unaffected. Store on store sales growth for
Starbucks retail outlets were reportedly lower for the year 2009 and this trend is expected
to be similar for the 2010 period (Berjaya Corporation Annual Report 2009). Therefore the
sale of instant coffee as an alternative source of revenue for Starbucks can be viewed as an
opportunity for the firm to weather the crisis and at the same time extend the product line.
The VIA brand positioning as an equivalent substitute for gourmet coffee also potentially
opens up new market segments. For example, price conscious consumers may experiment
with VIA and decide that they would like to switch to gourmet retail brew. VIA could also
spread brand awareness quicker and grow demand in areas with a lower concentration of
Starbucks retail outlets.
2.4.4 Threats
The launch of VIA carries the risk of jeopardizing the brand equity of the core Starbucks
brand as the growth of the soluble coffee market could potentially cannibalise sales from
Starbuck’s retail outlets who then go on to switch to competitor instant coffee brands.
The extension of the product line into a new market may also cause a loss of focus on the
core business of retail brewed coffee if resources are not balanced. This can be exemplified
by the McDonald’s “McCafe” concept store which has already been launched elsewhere in
the Asia Pacific region.
10
Furthermore , Nestle also stands out as a clear “global” competitor who already has
experience in other markets overseas in counter competing with Starbucks (Andrejczak
2009 and Roe 2009) and may have a retaliatory strategy ready.
11
3.Marketing Strategy
3.1Brand Positioning
The launch of VIA will need to be consistent with the brand positioning objective to market
it as a new and exciting innovative product that is an equivalent substitute for freshly
brewed gourmet coffee for people on the move or working in locations remote from
Starbucks retail outlets.
3.2 Target Marketing
The initial target market sector for VIA will be the existing clientele of the retail Starbuck
outlets – middle to high income urbanites who place an importance on taste, quality,
ambience and the consumption experience.Therefore VIA will focus on “creating” new
demand from these existing consumers who up till this point may not have tried “gourmet”
instant coffee.
3.3 Marketing Mix
3.3.1 Product
The taste and convenience aspects of the product will be critical.Research should be
conducted in the trial phase to understand what features consumers would value. For
example, would solubility in cold water be important and what packaging would be the
most convenient (E.g. Fits neatly in shirt pockets)
The level of product information will also be reduced from usual Starbucks packaged coffee
beans as typically less is said about ingredient origins for instant coffee. The packaging
should also highlight the innovative microground process.
Sizing should be via an easy to tear “stick” sachet with multi-packs sized for travel. It will be
unlikely that VIA will be offered in loose power “jar” packaging as this does not fit the “on
the move” image.
Given that the only flavours available are Italian Roast and Colombia there is a temptation to
extend the flavours offered but a counter positioning of simplicty in offerings could be used
to address this issue.
12
3.3. 2 Place/Channel
Within Starbucks Malaysia, there is no direct merchandising or distribution experience
outside of the retail outlets .However Berjaya Corporation ,a major shareholder in Starbucks
Malaysia franchise, should be able to leverage on it’s extensive businesses experience
elsewhere within the food and beverage sector to make headway into new distribution
channels.
VIA should adopt an exclusive distribution strategy thru the Starbucks retail outlets. This
allows for a very strong level of control and flexibility during the initial launch of the
product. A complementary tactic would be to market VIA thru channels that fit with the on
the move image such as airlines or trains. For example in the US, VIA was marketed on
United Airline flights and in the UK, thru EasyJet.
Later in the growth stages, Starbucks may wish to consider partnering with a premium
supermarket chains or grocery stores who have a complementary brand image of fresh
foods to allow the sale of VIA at their outlets.
3.3.3 Promotion
Initially, during the launch stage, secrecy and speed will be key to success to avoid pre-
emptive moves by other brands such as Nestle who would already have developed
retaliatory strategies elsewhere.
Instant coffee can be considered as a reasonably passive product in contrast to the
Starbucks brewed coffee which has a very strong service element associated with
it.Therefore an integrated marketing campaign needs to be implemented to ensure a
“customer relationship” can be built via the use of online communities in the existing
Facebook and Twitter social networking sites.In addition to this, other strategies used in the
US market (Shah 2009) to achieve this sense of coffee experience has been the taste test
and free samples.
Message consistency will be very important as VIA has to balance the message that it is just
as good as brewed coffee against the fact that Starbucks still wants VIA consumers to
frequent the retail outlets.
13
Further down the road, there is also a chance for Starbucks to leverage on it’s corporate
identity by integrating VIA into it’s larger scope of environmental stewardship by creating a
recycling campaign around the product.
3.3.4 Price
At present, there are no equivalent premium instant coffee products at which to benchmark
a suitable price for Via. A cursory survey of prices at local supermarkets seems to indicate
that premium coffee tends to be of the “roast and ground” variety.
The pricing strategy is a clearly a price skimming strategy with an emphasis on setting a price
that is high enough such it complements the high quality. Therefore a skim pricing strategy
could work as there is currently no true “premium style” instant coffee product within the
market other than Nescafe’s Gold Blend . This product which currently retails at RM12.95
for 20 sachets of 20g ,could serve as a reference marker for the initial price setting.
A pricing strategy that offers rewards for loyal Starbucks customers would work well to
cement the relationship between the instant coffee and retail brew sectors. This could be a
simple modification of the loyalty card system that is already in place at the retail outlets or
this could work in reverse where customers are offered complimentary drinks if they collect
enough VIA wrappers.
14
3.4 Implementation of The Marketing Plan
The marketing plan is outlined briefly in the Table 1 below.
Stage Trial (0-3 mths) Launch (3-6 mths) Growth (6-12mths) Sustain & Defend (12mths onwards)
Product
• Conduct initial surveys based on focus groups from existing Starbucks clientele on most valued features
• Emphasise the quality aspects and the innovation in product development
• Maintain the quality • Introduce new flavours • Reinvent the packaging
Price
• Survey the market to identify the price ranges within the instant coffee market
• Price skimming - Premium pricing that will set it apart from other economy pack brands
• Price skimming with potential for discounts related to purchase of main Starbucks products
• Maintain the price skimming strategy with flexibility for price changes depending on competitor reactions
Promotion
• Maintain secrecy and speed of the implementation to avoid retaliatory attacks
• Free samples in stores• Taste tests• Leverage on the online community presence
• Consistency in messages and monitoring impact on retail stores
• Integrate the brand image of VIA with the parent brand in terms of CSR activities
Place/Channel
• Explore and develop distribution channels available to the Berjaya parent company
• Exclusive Distribution - Offer VIA exclusively at Starbucks retail outlets • Other channels should match the "on the move" element
• Selective Distribution - Offer at "premium" supermarkets
• Maintain Selective Distribution
Focus KPI-s • Time To Market • Actual vs. Plan Pilot Trial Costs
• Product Awareness • Positive Consumer Online Feedback
• Sales Growth • Market Share • Sustained Sales • New Product Innovation
Table 1. Marketing Plan Implementation Strategy Over Time
15
The implementation of the plan relies heavily on the appropriate allocation of resources , monitoring of progress and ensuring that there is
sufficient flexibility to cope with the anticipated competitor reactions against the introduction of VIA by either emphasing their lower prices ,
discrediting Starbuck’s claim of equivalent quality or promoting their larger product flavour range.
16
4.Conclusion
The instant coffee market within Malaysia is an attractive area for Starbucks to enter into.
However the key risk that needs to be managed within the market mix is the dilution of the
brand identity as Starbucks has always been associated with premium coffee and this is in
contrast to the instant coffee market which has traditionally been viewed as “down-market”
of the gourmet market.
This issue extends to the issues of brand positioning and distribution channels where
Starbucks will be entering a mature market as a late-comer whereas most of their
competitors in th instant coffee sector have already established their brand identity.
This move would develop the demand for gourmet coffee and capture the instant coffee
drinker market as well as serve as a revenue buffer for the core business of retail brewed
coffee. With the right marketing strategy, there is the potential to capitalise on Starbuck’s
brand equity to extend the product successfully.
17
5.References
Adam ZR 2009, 18th June, Nestle: Coffee is good, thanks to the antioxidants, Available From <http://www.btimes.com.my/Current_News/BTIMES/articles/nescdf/Article/index_html> [ Accessed 13th January 2009]
Andrejczak A 2009, 18th November , Instant-coffee war: Nestlé takes aim at Starbucks, Available From <http://www.marketwatch.com/story/instant-coffee-war-brewing-nestle-vs-starbucks-2009-11-18> [ Accessed 13th January 2009]
Berjaya Corporation , Annual Report 2009 , Available From <http://www.berjaya.com/annual2009.htm> [ Accessed 13th January 2009]
Bernama Press 2009, 13th October, Nestle Seeks To Double Share In Out-Of-Home Market , Available From <http://www.bernama.com/bernama/v5/newsbusiness.php?id=446642> [ Accessed 13th January 2009]
Business Monitor International 2009 , Malaysia Food & Drink Report Q4 2009, Available From <http://digitalibrary.mida.gov.my/equip-mida/custom/indReports/agro/2009/FoodDrinkReportQ42009.pdf> [ Accessed 13th January 2009]
Chan J 2009, 19th November, New range of Malaysian-style coffee launched , Available From <http://thestar.com.my/metro/story.asp?file=/2009/11/14/central/5102621&sec=central> [ Accessed 13th January 2009]
Euromonitor 2009 , Hot Drinks in Malaysia 2009 : Executive Summary , Published May 2009 , Available From <http://www.euromonitor.com/Hot_Drinks_in_Malaysia?print=true> [Accessed 13th January 2010]
Kendrik F 2008,Nescafe Presentation To Investors, Available From <http://www.nestle.com/Resource.axd?Id=B65395A2-C76C-42B2-A7D6-6648A3A66BF5> [Accessed 13th January 2010]
Nestle Professional Website : Health & Nutrition : Antioxidants, Available From <http://www.nestleprofessional.com/Australia/en/Insights/HealthandWellness/Pages/Antioxidants.aspx> [ Accessed 13th January 2009]
Norimah AK et al 2008 , Food Consumption Patterns: Findings from the Malaysian Adult Nutrition Survey(MANS), Mal J Nutr 14 (1): 25 - 39, 2008, Available From: <http://www.nutriweb.org.my/publications/mjn0014_1/mjn14n1_art2.pdf> [Accessed 13th January 2010]
Roe A. 2009, Jun 8 , Starbucks and Nestlé become instant enemies , Available From <http://www.komonews.com/economy/47066722.html> [ Accessed 13th January 2009]
Sellers P 2005 , “Starbucks , the next generation” Fortune 4/4/2005, Vol 151, Issue 6 p20 Shah A, 2009 , Inside The Mix - Starbucks strives for instant gratification with Via launch,
Available From <http://www.allbusiness.com/marketing-advertising/marketing-advertising-channels/13550953-1.html> [ Accessed 13th January 2009]
Starbucks Website 2010 , Starbucks In Malaysia , Available From <http://starbucks.com.my/en-US/_About+Starbucks/Starbucks+in+%28your+country%29.htm> [ Accessed 13th January 2009]
18
6. Bibilography
Ching LH (1990), Coffee Products Sdn Bhd in JA Quelch, SM Leong, SH Ang and CT Tan (1996)
Cases in Marketing Management and Strategy- An Asian Perspective , Prentice Hall Singapore
Gbadamosi A. 2009, Low-income consumers’ reactions to low-involvement products, Marketing
Intelligence & Planning Vol. 27 No. 7, 2009 pp. 882-899
19