Café Co is one of the five main players in the ‘coffee house’ industry, which now has more than 6000 stores across the globe, 500 of which are in the UK and Ireland. They employ 7000 staff in the UK alone and serve 35 million customers in their stores across the globe each week.
The coffee industry is particularly robust, with coffee being the second most valuable commodity in the world after oil, with global retail sales estimated to be £39.2 billion. A total of 6.7 million tonnes of coffee were produced annually in 1998-2000, which is forecast to rise to 7 million tonnes by 2010.
The number of coffee bars in the high street has increased considerably in recent years, with the market being dominated by five main players. The ‘coffee house’ business therefore, is very competitive with coffee chains constantly looking for innovative ways of achieving sustainable competitive advantage, to remain ahead of their rivals.
Café Co had enjoyed first mover advantage in the marketplace and had rapidly grown to number three position, which they had retained for 15 years. In recent years, however, they have lost market share to rival competitors who have copied Café Co’s business model and poached key staff to deliver it and subsequently customers had followed. This had resulted in Café Co slipping to the number five position. This loss of market share had forced them to rethink their strategy and a new charismatic chief executive, Ben Thomson, had been appointed in 2005 to turn the business around.
In reviewing Café Co’s current strategy Ben Thomson embarked on an international fact finding tour of their coffee bars to meet staff and customers and get a feel for the nature of the business, together with rival coffee houses to gain an understanding of their source of competitive advantage. He wanted to return Café Co to the number one position in the marketplace. His review identified customers who were loyal to the brand of Café Co but had been enticed away by the experience, the variety of coffee and level of customer service offered by their competitors. His review of human resources found a high level of staff turnover, due to the minimum wage offered and the high percentage of international employees who tended to be employed on short-term contracts. The recent loss of market share and high employee turnover had led to low morale amongst remaining staff, as they felt Café Co’s bars were dated and the range of coffees limited. Ben Thomson’s review of the competitors supported this, as he identified the significance of the ‘coffee drinking experience’ which was delivered through appropriate décor, ambience, variety in the range of products and most importantly of all, the barista or ‘coffee seller’. He identified these as key sources of added value and competitive advantage.
Ben Thomson decided to relaunch Café Co’s business strategy with a new vision: ‘To be the number one coffee house of choice across the globe’ and identified the following mission: Experience Café Co, we don’t just sell coffee we provide customers with an unforgettable experience. This was encapsulated in his value statement: ‘Nowhere else makes you feel this good.’ which he believed should apply to staff as well as customers. He was convinced that the success of coffee bars lay not just in selling coffee as a product, but in selling the ‘coffee house’ experience. To achieve this he felt that Café Co’s human resources would be crucial to the success of his strategy. He recognised that human resources would face a difficult task, as the coffee house industry is traditionally renowned for low pay (minimum wage being the norm) and high employee turnover (50 – 100 per cent being the norm), yet the baristas (coffee sellers) are crucial to the success of the business and the selling of the coffee house experience.
He identified the following priorities:
• To be the number one coffee house across the globe.
• To attract new