Kool Beans and Brew

German Market Entry

Team Members:Jillian FowlerDaniela KrajacicCrystal KappelRozel BepariRichard Nodal

Country Information Capital of Germany is Berlin. Population is approx. 81 million. Ethnic Germans compose 91.5% German is the official language. Current economy is the 5th largest in the world. Primary Natural Resources : coal, gas, lignite, natural gas,

iron ore, copper, nickel, uranium, potash, salt, construction materials, timber, and arable land.

“Germany has one of the world's most technologically advanced telecommunications systems; as a result of intensive capital expenditures since reunification, the formerly backward system of the eastern part of the country, dating back to World War II, has been modernized and integrated with that of the western part” (CIA World Factbook, 2012).

Industry Information Global cafés/bars in Western Europe account

for 40% of global value sales in 2010. In the Café/Bar Industry 4 types exist: Cafes,

Bars/Pubs, Juice/Smoothie Bars, and specialist coffee shops.

“For cafés/bars, the key advantage relative to other operators will remain its status as a bastion of local drinking culture, offering a social component unmatched in any other category” Euromonitor, 2011).

Current Competitors in Local Market

95 competitors in the Local Market The TOP 3 in the local market: Balzac is in the middle of city life you

can read and do your academic studies. They offer macchiatos, coffee, banana bread, and lunch bread products.

Manalo is a coffee spot with a dinner/restaurant feel. They offer coffee, teas, chocolates, salads, breads, and pies.

Starbucks is an American coffee chain that is filled with tourists and working people, but not very comfortable and individual. They offer sweet muffins, nibbles, and bagels.

Comparative Product Analysis In Western Europe $175 Million vs. the US

is $450 billion. Globally coffee culture is increasing. 40% of

Café/Bars are located in Western Europe. “Rising competition has dramatically

increased the number of operators offering the types of products other cafés/bars specialize in - coffee/tea, alcoholic drinks, and experience - placing severe pressure on what are often small, independent operators, forcing many to close their doors” (Euromonitor, 2011).

Government Subsidies/Interventions

Very difficult for a foreigner to qualify for government subsidies.

A business plan is needed in order for the government to review.

Subsidies up $150,000 from the German government.

A health and food inspection is also required before permits are granted for food to be served on premises.

Growth Risks and Challenges

Trend indicates that chained brands are becoming popular among German consumers.

If this continues, consumers will less likely consider independent alternatives.

One of the largest threats in Germany is from large chained shops like Starbucks.

They will be expanding their presence into untapped markets.

Current Consumption/Future Demand

German consumer trends have changed rapidly with large and independent coffee shops emerging in the market.

The current trend among consumers is now trendy and flavored coffees.

Future demand will consist of anything in the market which differentiates itself from the rest.

Consumer Needs The local demand of a Café/Bar is a very

profitable market to enter in Berlin, Germany. “Coffee consumption has been traditionally high amongst German consumers, with per capita consumption of 150 litres per year and 70% of consumers drinking coffee regularly, according to figures by the European Coffee Federation (Euromonitor, 2012).

Germany is a coffee dominated industry. Consumers are also looking for a pleasant place

to consume coffee in. Consumers also need modern technology and

conveniences like Wifi as they consume their coffee.

Survey Research Specialty coffee and tea drinks are preferred by young

adults Coffee variants like lattes and cappuccinos & tea

variants like chai latte Drinking coffee is a cultural experience Consumers value nice coffee shop atmosphere and

socializing with friends and family Preference for gourmet coffee, fair trade certified, freshly

locally roasted Preference for health conscious snack/food menu

including ingredients that are organic and/or locally sourced, sustainable and otherwise eco-friendly

Drinking coffee - affordable indulgence, part of lifestyle Prefer “to go” option when needed In-store entertainment: added benefits - live music at

night, beer Favorable attributes: Wi-Fi, mounted iPads, Mobile pay

App, Reward Stars

Existing and Emerging Segments Concept of Gemütlichkeit (“akin to

cosiness”) increasingly present in Berlin’s cafés

‘Third Wave’ artisan espresso bars reflect the demands of an increasingly international population: café becomes the office

The “third place” concept encourages longer stays and more frequent visits

A typical customer is: “young, trendy, discriminating”

Berliners “a professional, a creative, a world

citizen…cosmopolitan, often multilingual, aware of food, music, and fashion; friendly and open”

Macro-Segmentation Variables

In 2010, , Germany held the largest total annual disposable income in Western Europe, as well as one of the largest in the world (US$2.1 trill).

Income inequality is low and between 2010 and 2020, it will only rise moderately.

The middle class is large - 31.5% of all households in 2010. High savings rates, but real per capita consumer

expenditure will increase only by 9.5% over 2010-2020. Germany had the most foreign citizens in Europe in 2011

(7.2 million). Economic immigrants bring a young and dynamic

workforce, which is providing commercial opportunities and offsetting the country’s rapidly ageing population.

Berlin has the highest urban population in Germany. Berlin urban population has been steadily increasing. Thus, Berlin is a very suitable central location for

opening of a first Kool Beans & Brew café/bar.

Other Variables Affecting the Success of Kool Beans & Brew

Private consumption will increase from 1.4 % in 2011 to 1.7 % in 2013.

Activity will further increase as confidence improves and domestic demand strengthens.

The positive rebound in private consumption will be enticed by strong labor market performance, low deleveraging needs and favorable financing conditions.

Business confidence should be further boosted by the expected recovery of world trade and the rest of the euro area.

Café/bars and specialist coffee shops appeal to different type of customers - either youngish or elderly consumers: Kool Beans & Brew will position its outlet to appeal to a younger

target group, including students and young professionals. The positive development of café/bars market is greatly due to the

economic recovery in 2010 and 2011. The proportion of food in cafés/bars total foodservice sales has

increased from year 2006 to 2011: Due to extended food offering and a wider selection of products Kool Beans & Brew featuring a limited health conscious food

menu.

Team Objective Open Kool Beans & Brew In Berlin,

Germany. 95 different competitors that sells Coffee. Many indirect competitors. Team is betting on the differentiation. Promoting the predominately through

social media. Kool Beans & Brews mission is to provide

highest possible quality coffee, food, beers, service and espresso using the state of art technologies, and provide a place to relax, socialize and have access to communication and related technologies.

Target Market

Kool Beans & Brews will focus on working professional and students between the ages of 20-35

Focus will be given to health conscious consumers

Foreign Market Entry

Licensing Agreements Bonanza Coffee Roasters Neumann Kaffee Gruppe Berliner Bürgerbräu

Differentiation strategy Cater to Berliner’s by appealing to their

“lingering” coffee shop culture Kool Beans & Brew brings an innovative café

design that combines a relaxed atmosphere with an interactive technology setting

Product/Service InformationKool Bean & Brew ProductsCoffee locally roasted by Bonanza Coffee RoastersEspresso will be produced through specialized espresso makerLimited menu with pastries, croissants, scones, muffins, sandwichesTeas such as Yerba Mate and Rooibos, and tea drinks such as Chai Soy Latte and Matcha Green Tea Gluten free option for customers with celiac disease and gluten free life styleSugar free products for diabetic customersBeer from local brew house and Omission Beer for customers with celiac disease and gluten free life styleOrganic and Eco Friendly Ingredients and Fair Trade Certified CoffeeIceKool© Blended Coffee Drinks (Similar to Frappuccino®)

Product/Service InformationKool Bean & Brew ServicesExtended hours between 8 AM – 2 AMIn store Entertainment to enhance customers experience likely to increase revenue Place for relaxation, social hour, and leisure with an at home feeling will help create loyal customersWi-Fi service as well as mounted iPads for work, and study. Absolutely the best possible customer service.

Product Positioning and Brand Image

We will adapt our product to the target market by consumer and brand ourselves within the market in Germany by 5 ways: Online Marketing as the future of food service

branding Focus on the dining experience High-margin items in the spotlight Health and wellness Spicy International flavors Absolutely the best possible customer service.

German Café Culture will be integrated.

Pricing Strategy Annual disposable income in Germany is

forecasted to increase over the next several years.

Kool Beans & Brew will adopt the following pricing tactics: Short-term pricing tactic – Kool Beans & Brew

will adopt a competitive pricing strategy in the short term.

Long-term pricing strategy – Kool Beans & Brew will adopt a diversification strategy which allows our menu to have pricing variety.

Diversified Menu will help drive profitability Profit margin expectation is 15%

Location and Promotion Strategy

Single location in a central city area - Kreuzberg quarter of Berlin.

Café will cater to German’s “lingering” coffee shop culture

Primary Promotion Strategy: On-line advertising and social media.

Internet is available to most Germans, with 67% of people using the internet in 2009.

Introduction of the Kool Beans & Brew App