Starbucks and Coffee Bean are only two of the many coffee chill-out places in Kuala Lumpur and many more are coming up. This shows Malaysia is definitely a coffee drinking country and the coffee industry is reaping the rewards.
3.1 Future outlook and trends
The coffee industry in Malaysia is still growing and there is still room for more. But for how long? The trend of sitting down in a café while sipping a cup of espresso and enjoying the environment was brought to Malaysia by franchises like Starbucks and Coffee Bean ten years ago. Those same customers who helped push Starbucks to $2.2 billion in global sales are now rushing kids to extra classes, basketball games, running to the grocery and trying to get to work on time and back home in time for dinner. In today’s fast paced environment, people do not have the luxury of time to sit and sip a cup of coffee but they still have the desire for that refreshing, specially blended coffee each morning.
Coffee drinker are ready for the introduction of a company that offers a variety of freshly brewed coffee in a convenient, drive-thru environment at a price that is competitive to the coffee chains and cafes in town. Freshly Brewed intends to do just that.
3.2 Analysis of Competition
There is only one direct competitor in Freshly Brewed's drive-thru market which is McDonald, the fast food chain franchise in Malaysia. McDonald pioneered the drive-thru service in Malaysia and it has provided MCD a strong competitive advantage over other fast food companies in Malaysia. Why is a fast company the direct competitor for Freshly Brewed? The reason is McDonald added coffee on their menu about a year back and have since been selling freshly brewed coffee to its customers through its drive-thrus.
Freshly Brewed indirect competitors are Kuala Lumpur’s specialty beverage chains, such as Starbucks, Coffee Bean, San Francisco Coffee, Dome Café, Old White Town Coffee and all other coffee houses or cafes.
However, the indirect competitors will not affect Freshly Brewed business unless these competitors start their own drive-thru services. Basically the target group of Freshly Brewed does not match with the indirect competitors. Customers to a Starbucks, or to one of the local cafes, go there for the environment, the ability to "design" their coffee, smell the fresh pastry, listen to the soothing music, and read the local paper or visit a friend. It is a relaxing, slow paced environment. On the contrary, Freshly Brewed Customers are those working individuals who are always in a rush. These people have no time for idle chatter and are willing to over-pay for a cup of coffee on the way to the office, as long as it's quick.
Freshly Brewed believes it can gain a significant competitive advantage over its indirect competitors through its drive-thru services, warm and friendly customer service and making available a variety in coffee selection.
3.3 Market segmentation
Freshly Brewed target market are the working individual who have more money than time, and excellent taste in a choice of beverage, but no time to linger in a cafe. By locating the drive-thrus in high traffic/high visibility areas, this unique--and abundant--consumer will seek Freshly Brewed out and become a regular guest. Freshly Brewed will place its kiosk in the Kuala Lumpur golden triangle which is surrounded by business centres to attract customers heading to or from work, or those out on their lunch break.
3.4 Industry Forecast
Business Monitor International LTD (BMI) did a research on Malaysia’s food and drinks and prepared a report in 2009 which shows the growth of the coffee market in Malaysia since 2005. BMI is forecasting reasonably strong and steady growth in Malaysia’s hot drinks sub-sectors, namely coffee and tea. Coffee sales will reach US$22.2 million in 2013.
Source:
4.0 Description of Venture
Freshly Brewed provides its customers a range of fresh, quality, hot and cold coffee to help boost up customers for the day.
4.1 Product Description
The menu of Freshly Brewed will be built around espresso-based coffee drinks such as lattes, mochas and cappuccinos. Each of the espresso-based drinks will be offered with whole, skimmed, or soy milk. Each of this coffee drink is based on a shot of espresso, which is prepared in the espresso machine by forcing heated water through ground coffee at high pressure. Such espresso shots are combined with steamed milk and/or other additives like cocoa or caramel to prepare the espresso-based drink. Proper preparation techniques are important for such drinks.
4.2 Services
Freshly Brewed provides its customers the ability to custom order a coffee beverage that will be blended to their exact specifications. Each of Freshly Brewed baristas will be trained in the fine art of brewing, blending, and serving quality hot and cold coffee, with exceptional attention to detail. A minor deviation from the amount of coffee in the shot, the size of the coffee particles or the temperature of milk can negatively affect the quality of the prepared coffee. Therefore, skilled baristas are a must for Fresh Brewed Kiosk.
4.3 Value Proposition
The drive-thru facilities provide a substantial value proposition in that the customer does not have to find a parking place, exit the vehicle, stand in line to order, wait for the coffee ahead of him to be produced, pay a premium price for average product, find a place to sit, and then enjoy their coffee assuming they have sufficient time to linger over the cup.
Freshly Brewed concept is that the customer drives up, places the order, receives his cup of freshly brewed coffee at a competitive price, and drives away, having wasted little time in the process.
4.4 Technology
Freshly Brewed delivery system is based on its technology. Freshly Brewed will use state-of-the-art, two-sided, drive-thru facilities to provide convenience and efficiency for its customers.
4.5 Size of business
Freshly Brewed will operate through kiosk in petrol stations around the city area. The size kiosk would be approximately around the size of 2 parking spaces. Freshly Brewed plans to start off with three kiosk in the Kuala Lumpur golden triangle area.
- Marketing plan
Freshly Brewed has identified its market as busy, working individuals who are always on the ego, but desire a refreshing cup of coffee on the way to or back from work each day.
Location is the key for success in the drive-thru business. Therefore, Freshly Brewed will be placing its drive-thru facilities in petrol stations with a high signage to show high visibility and great ease of access. The drive-thrus will be very unique and eye-catching, which will be a branding feature of its own.
- Pricing
Freshly Brewed coffee pricing will be comparable to the competition, but with the value-added feature of immediate, drive-thru service and convenience. On average a medium cup of coffee will cost RM 4.50 each.
- Distribution
Freshly Brewed will locate drive-thru facilities in petrol stations in high traffic areas of the city starting with the Kuala Lumpur golden triangle area which is surrounded by offices and business centres.
- Promotions
The long-range goal is to gain enough visibility to leverage the coffee line into other regions and generate inquiries from potential customers. To do that, Freshly Brewed needs:
- Public relations services at RM 1,500 per month for the next year intended to generate awareness of editors and product information insertions and reviews.
- Advertising at RM 2,000 per month concentrating on Kuala Lumpur radio stations. Freshly Brewed will experiment with different stations, keeping careful track of results. Freshly Brewed feels radio station advertising is the best way to reach their target customers as most working individuals listens to the radio on the way to and back from work.
5.4 Marketing Programs
Freshly Brewed needs a distinctive logo to represent itself. The sun is one of infinite mental pictures. The sun touches every human being every day. Obviously, Freshly Brewed wants to touch every customer every day. That is why the use of the sun lends itself to being the corporate identifier. Freshly Brewed is using diner style buildings for its Drive-thru facilities. TDP has worked closely with the manufacturer to make the building distinctive, so that it is easy to recognize, and functional.
In the first year, Freshly Brewed plans to spend moderately on advertising and promotion, with the program beginning in June 2010, after the opening of the first three drive-thru. This would not be considered a serious advertising budget for any business, but Freshly Brewed feels the exposure will come from publicity and promotion, so most of the funds will be spent on a good publicist.
- Sales forecast
In the first year, Freshly Brewed plans to have three drive-thru locations in operation. The three locations will be fully operational beginning on the 1st day of June 2010. Assuming the each kiosk sells 100 cups of coffee a day that would make 36,500 cups of coffee a year per kiosk. So, in total Freshly Brewed would sell approximately 109,500 cups of coffee in the first year of operation.
Freshly Brewed will add five kiosks in June 2011 and another 5 by end of 2012. The addition of these facilities will increase the revenue from drive-thrus with a total of over 292,000 cups in the second year and 474,500 cups in the third. The average price of a medium cup of coffee would be RM 4.50
Total first year coffee sales should reach RM 492,750. In the second year Freshly Brewed will see coffee sales increase to RM 1,314,000. The third year, with a total number of 13 kiosks, sales forecast is accepted to increase to RM 2,135,250.
- Organization Plan
Freshly Brewed, is a relatively flat organization to maximize profit and avoid complicating the decision making process. Overhead for management will be kept to a minimum and all senior managers will be hands-on workers.
In the course of the three year plan, there will be four executive positions namely chief operating officer, chief financial officer, chief information officer, and director of marketing. There will be a few mid-management positions, such as operating managers for every four drive-thrus and a facilities manager to oversee the maintenance and stocking in the drive-thru facilities.
Management Team
Mr. Eric will be the chief operating officer. Eric has a highly entrepreneurial spirit and has the 5 years experience as a COF of a well known food franchise in Malaysia.
Ms. Jenny has been selected to fulfill the position of the entire paperwork and office manager. Mary has worked as a business administrator for the past 6 years and has written numerous corporate policies and directed the financial reporting and reconciliation.
Mr. Cheah has been appointed to fulfill the position of facilities manager and will be in charge of maintenance and stocking of the drive thrus. Chuck has been working for in coffee franchise as the café manager for over 5 years. Mr. Cheah will use his expertise and experience in ensuring a smooth flow of business in the kiosks.
Organizational Structure
The organization structure would be a horizontal structure to ease decision making and promote team work within the company. This structure is also suitable due to the low head count in the management team. There are three functioning groups within Freshly Brewed namely production, sales and marketing, and general and administrative. Production involves the Baristas or the kiosk tenders who will be manning the drive-thrus and blending the beverages for the customers. Sales and Marketing will handle promotions, General and Administrative manage the facilities, equipment, inventory, payroll, and other basic, operational processes.
7.0 Assessment of risk
The purpose of risk assessment is to identify the inherent risk of performing various business functions, strategies or plans. Once possible risks to a business are identified, management can gauge their extent and plan the type of controls required to mitigate the risks. Thus, business risk assessment is needed to ensure the success of Freshly Brewed.
It will help Freshly Brewed plan for extreme events by bringing forth possible risks.
it also helps focus resources to manage probable risks. This will then helps control business cost and strengthen business management. Once the risks are determined, multiple processes can be implemented to reduce the probability of the risks affecting the business.
Conducting business risk assessment will also help Freshly Brewed develop the edge against competitor, apart from enabling Freshly Brewed to improve its brand presence in the market.
To identify Freshly Brewed weaknesses, a SWOT analysis in carried out. Management teams use SWOT analysis to consolidate information regarding a company’s internal strength and weaknesses, and external opportunities and threats.
Freshly Brewed SWOT analysis is as below:
Strengths
- Small start- up compared to dine-in coffee outlets in town.
- Management consist of a small no of people working together as a team
- Since, Freshly Brewed is the first specifically Coffee drive-thru business in Kuala Lumpur, it will have the advantage to choose the best suitable locations for its kiosks.
- Its horizontal organizational structure makes it easier in decision making.
Weaknesses
- Brand name not established in Kuala Lumpur. Freshly Brewed coffee is new brand and is new to the targeted customers. It may take time for potential customers to come to know of Freshly Brewed.
- Since Freshly Brewed is a new start up business, financing may be limited
- Freshly Brewed is new in the coffee business and may not be able to anticipate the traffic of their business correctly.
Opportunities
- Freshly Brewed is un-tapping the drive-thru Coffee service market in Malaysia. No other specialized drive thru coffee outlets is in the market as yet.
- Freshly Brewed gets the opportunity to build a large customer base of coffee drinkers and long term relationship with them before other drive-thrus come along.
Threats
- The now indirect competitors namely the coffee shops, cafes and coffee chain will not take long to come up with drive thru services.
- The coffee market is always coming up with some new products. Freshly Brewed being a small business will not be able to compete head on with other competitors that have established for years.
- Shortage of local baristas wanting to work in a small kiosk can affect the daily operations of the business.
Taking into accounts the results of the above analysis, Freshly Brewed uses a SWOT matrix to develop WO strategies to take advantage of the opportunities available to overcome its weaknesses. The strategy the Company came up with are as below:
To make Freshly Brewed a in-house franchise by opening up the business for franchising all over Malaysia. This way, Freshly Brewed can penetrate the entire market
- Financial plan
Freshly Brewed is operating a cash business therefore the initial cost is significantly less than many start-ups these days. The process is labor intensive and Freshly Brewed recognizes that a higher level of talent is required. The financial investment in its employees will be one of the greatest differentiators between it and its competition.
Freshly Brewed anticipates the initial combination of investments and long-term financing to carry it without the need for any additional equity or debt investment, beyond the purchase of equipment or facilities. This will mean growing a bit more slowly than might be otherwise possible, but it will be a solid, financially sound growth based on customer request and product demand.
8.1 Important Assumptions
The financial plan is based on important assumptions below:
- Freshly Brewed assumes a steady growth economy.
- Freshly Brewed assumes that there are no unforeseen changes in public health perceptions of coffee consumptions.
- Freshly Brewed assumes access to equity capital and financing sufficient to maintain its financial plan
- Freshly Brewed assumes the business plan in a 3 year plan with current interest rate of 10% p.a
- Freshly Brewed assumes there is no tax. Tax rate is 0%.
8.2 Pro forma Profit and Loss
* Imaginary figures used.
8.3 Cash flow
Cash flow will have to be carefully monitored, as in any business, but Freshly Brewed is also the beneficiary of operating a cash business. After the initial investment and start-up costs are covered, the business will become relatively self-sustaining. Assuming an initial investment and financing, which would include operating capital, Freshly Brewed anticipates no cash flow shortfalls for the first year or beyond.
*Imaginary figures used.
8.4 Projected balance sheet
There are three exit scenarios of what could happen to Freshly Brewed in the future.
Scenario one:
Freshly Brewed becomes extremely successful and has requests from other communities for Freshly Brewed operations to be opened there. This opens the door for franchising opportunity. When one looks at the wealth that has been created by the likes of McDonald's, Wendy's, Kentucky Fried Chicken and Burger King, the value of franchising a great idea cannot be dismissed. However, developing a franchise can be extremely costly, take years to develop, and be destroyed by one or two franchisees who fail to deliver the consistency or value on which the founding company had built its reputation.
Scenario Two:
Freshly Brewed chooses to become the drive-thru version of Starbucks, obtaining several million dollars through an initial public or private offering that would allow the company to open twenty to thirty facilities per year in the region of the country. This is the preferred Exit Strategy of the Management Team. The danger in this is that competitors would rise up and establish a foothold on a community before or in the midst of the arrival of Freshly Brewed causing a potential for a drain on revenues and a dramatic increase in advertising expenditures to maintain market share. Knowing these risks and planning for them gives Freshly Brewed the edge needed to make this scenario work.
Scenario Three:
By the third year, the growth for Freshly Brewed will have made the news around the country. It can be assumed that competitors, such as Starbucks will have seen the press and realized the value proposition in Freshly Brewed business plan. This will make Freshly Brewed an attractive target for buyout. The company could be purchased by a much larger competitive concern by the end of the third year.
- References
- Modern Management, by Samuel C Certo
- Management, by Kathryn M. Bartol & David C. Martin
- Strategic Management, by Philip Sadler, James C. Craig
- How to write a Business Plan, by Mike McKeever
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Business Monitor International LTD ()
