Coffee Consumption Trends in London

Adnan ul Haque

Table of contents

1 Executive Summary .........................................................................................................3

2 Introduction.......................................................................................................................5
3 Research objectives...........................................................................................................9
4 Research Methodology ..................................................................................................10
5 Assumptions and Constraints .........................................................................................19
6 Research Hypotheses......................................................................................................20
7 Sampling Approach........................................................................................................21
8 Tabulated Results and Graphs........................................................................................28
9 Hypothesis Tests and Analysis.......................................................................................38
10 Conclusions ..................................................................................................................44
Appendix I - Coffee Drink Types - how do you drink yours?” ........................................45
Appendix II–Questionnaire................................................................................................46
Appendix IV – Statistical Concepts...................................................................................50
12 Bibliography.................................................................................................................52

2
 Adnan ul Haque

1 Executive Summary

According to BBC survey, in last half a decade more than 20 different company’s outlets
of coffee shop have commence operations in the United Kingdom’s biggest metropolitan-
multi cultural city, London. Furthermore, several renowned international brands are
conducting market feasibility analysis studies to enter the United Kingdom market. The
spotlight of these prospect review exercises has been searching in depth the coffee
consumer preferences of the United Kingdom consumer. These companies are primarily
considering metros like London, Leeds and Manchester. The observance of the Analysts
and economic observers reveals that in the last 7 years coffee consumption is one of the
signs of the economic success and accelerated growth.

However, a very little is known about the reasons for popularity of these coffee shops
among the resides of London and their coffee consumption preferences. One of the major
questions that is the purpose of the study is what are the trends and the unexplored
reasons of the popularity of the gourmet coffee shops in London high streets. The
investigation explained below the purposes to provide a print of coffee consumption
trends and explores the underlying reasons of the popularity of gourmet coffee shops in
London. The longer term target of my study investigation is to conduct wide-ranging
market entry feasibility for an international coffee brand looking to enter United
Kingdom. The study has been conducted as a compulsory part of the module of “ATHE
level 7” for the post graduate student program at Stanford College UK, London.

Purpose of the Research

The main and the most primary objective of this research study are to comprehend coffee
consumption trends and preferences in Middlesex, London and to find out the causes of
the rapid growth in the popularity of coffee shops in the Hounslow Area.

The most significant and vital questions of my research study are as following:

• What are the underlying reasons for the popularity of gourmet coffee shops in
London?
• What are the significant consumer preferences of coffee consumers in London?

But the research is not just limited to these prime aims of my research. In addition to the
above two primary research objectives, another auxiliary target of this distinguish
analysis is to gain firsthand experience of business research and apply the concepts in a
practical dimension.

Key findings

During this research a sample was drown from the population of coffee shops on the
basis of the convenience. While conducting a research a study of a representative sample
of the coffee consumers and coffee shop visitors has revealed the following key findings:

3
 Adnan ul Haque

1. There has been a clear raise in the consumption of coffee by the well-off class of
United Kingdom. Apart from the fact that consumers of coffee drinking are
increasing but the daily coffee consumption remains fairly low.

2. Many consumers are consuming coffee only at the coffee shops in London. It
would not be wrong to say that every 3 out of 5 coffee consumer drinks coffee
outside home. It has also been observed during the study investigation that coffee
shop visitors generally have only one cup of coffee during each visit.

3. It has been observed too that quite a significant number of visitors at a coffee
shop are only there for the consumption of non-coffee items such as sandwiches,
refreshments, desserts, etc available at coffee shop.

4. One of the key findings is that a significant number of the people visiting at the
coffee shop are there to get socialize or just to hangout for a while with friends or
alone.

5. It is also a significant point that has been noticed that the environment and food
quality are the two most essential and primary factors that the coffee shop visitors
do consider while opting to visit to a coffee shop.

6. In order to succeed and compete with the full flash approach, the presence of
international and brands with strong reputations are the most critical one for the
gourmet coffee shops and it is also significant in the smooth operating new
ventures in the gourmet coffee shop segment.

7. The word of mouth is considered as the most effective means for the promotion of
a coffee shop.

8. Consumers think that a new coffee shop venture is likely to succeed in the posh
localities in London.

4
 Adnan ul Haque

2 Introduction

According to a coffee history legend, an Arabian shepherd named Kaldi found his goats
dancing joyously around a dark green leafed shrub with bright red cherries in the
southern tip of the Arabian Peninsula. Kaldi soon determined that it was the bright red
cherries on the shrub that were causing the peculiar euphoria, and after trying the cherries
himself, discovered their powerful effect. (According to the www.coffeeresearch.org),
Monks are regarded as the exploiters of the stimulating affect of the coffee by consuming
it at a local monastery so that they can stay awake for a longer session of hours in order
to pray. Not only this, but they also distributed those beans to the rest of the monasteries
arrount the globe. That is how coffee got conceived.

Despite the appeal of such a legend, recent botanical evidence suggests a different origin
of the coffee bean. Evidence indicates that the coffee bean originated on the plateaus of
central Ethiopia. Later, it was brought to Yemen where it was cultivated since the 6th
century. Upon introduction of the first coffee houses in Cairo and Mecca, coffee became
a passion rather than just a stimulant.

2.1 Coffee Culture in Asia

Consumers in Asia have historically preferred tea but the advent of chains like Dunkin
Donuts, Costa Coffee and Starbucks, has resulted in immense growth in the popularity of
coffee in Asia. The coffee drinking habit is seen as a sophisticated one and carries a
perception of the west. Over half of Asian coffee drinkers surveyed in Hong Kong felt
that the flavor of the large international chains products was better than that of the
independent small businesses. In other countries surveyed there was tension between the
global company’s product and the local business. In the United States, for example, only
14% of those surveyed picked the global company’s products over local businesses.

According to a famous website on the coffee that gives huge details on the coffee
(www.talkaboutcoffee) states that in Asia coffee is getting its popularity day by day.
Almost one third of the Chinese now consume coffee outside their home. The preference
in Asian markets is that of a lighter, sweeter coffee, unlike that in many of the Western
countries. The favorite coffee in Hong Kong, for example, is Cappuccino, preferred by
about 30 % of those who purchase ready to drink coffee outside the home. In second
place is Mocha, another sweeter coffee variant preferred by 25% of the coffee drinkers at
coffee shops. Regular coffee is at third place with a preference of 17%.

The survey of (talkaboutcoffee.com) the culture of consuming the coffee in Asia is

generally rewarded to those young ones who have returned to their homeland from the
United States or Europe after their studies. Most of the young professionals returning to
cities like Shanghais, Beijing , Guangzhou has carried their habit of consuming tea
especially as a light breakfast is the continue chain of international coffee shop deals
offered by Starbucks. Starbucks and Nestle are two of the major U.S. companies with
growing presence in Asia.

5
 Adnan ul Haque

Many Asians choose instant coffee at home. Coffee shops are opening rapidly, but many
cannot afford the large brewing equipment needed for commercial sales. Some of the
roasters are making the brewing equipment available to the specialty houses in return for
agreeing to purchase a certain number of pounds each year. Few Chinese households own
a coffeemaker.

In Asia, the strong demand and clearly established coffee culture is in Indonesia, it is
therefore one of the major contender for the export of the coffee (arabnews.com). Most of
the fresh coffee is consumed by the older generation which has grown up using the
product and enjoys the taste. Instant coffee is having an advantage of keeping one stay
alert and therefore it is usually preferred by the teenage segment (talkabout.com). The
younger generation typically uses instant coffee for its benefits in helping one stay alert
(talkabout.com). The older generation has been attracted by the fortified coffee due to the
ginger and ginseng in a coffee which has added this segment of demography in the coffee
culture, not only this but for the health benefit with less preferred taste also encourages
the seniors to consume coffee (talkabout.com).

2.2 Coffee in United Kingdom

In the United Kingdom, tea was once the beverage of choice. India and United Kingdom
have inherited this culture from their colonial ancestors.

Having always been perceived as places where groups of people get together for light,
intelligent conversations, coffee houses or cafés have been vehicles through which local
cultures in different parts of the world experienced an evolution.

The growth of coffee houses in any area is considered a positive sign and the local
mushroom growth of cafés (as opposed to tea houses) in the major cities of the country,
London and Leeds, is often quoted in foreign publications as signifying the advent of a
‘multicultural’ United Kingdom.

When it comes to our local cafe` culture, although it still hasn’t reached such an advanced
stage, there is no denying that with the growing popularity of local cafés, we are on the
journey of cultural evolution.

2.3 Why Coffee Shops?

To ensure a manageable research scope with limited resources and stiff timelines, we
needed to select a domain in which all group members had deep subject matter
knowledge and an extensive, specialized literature review to explore research attributes
and direction could be avoided. Further, there was a need to ensure selection of a popular
business segment and a highly accessible consumer segment to facilitate research.

Based on these factors, an initial brainstorming session resulted in the short-listing of the
following concepts:

6
 Adnan ul Haque

1. Emerging Coffee Culture

2. Beverages - Pepsi
3. Growing Media Importance

The Emerging Coffee Culture

The research on this topic was preferred over the next two topics due to the following
reasons:

• New idea - no one has ever touched upon this subject previously.

• Exciting subject - an exciting and profitable business proposition with lucrative

margins.

• Accessibility - reaching these coffee shops, their managers and representative

demographic samples was relatively easier than those of Pepsi and Mountain
Due.

• Motivation - being one of the latest places for youth to hang out and socialize,
the research involved our personal interest.

• Niche market - the scope was restricted and sampling could be done is easily.

• Good subject matter knowledge - being aware of the market and as ardent
coffee consumers, there was good subject matter knowledge available on the
topic e.g. major coffee shops, peak timings, preferences, target customers and
their demographics etc.

Pepsi

Being the favourite beverage of United Kingdom with a large consumer base, Pepsi was
our second research option. To differentiate from conventional researches on Pepsi, an
appealing idea short-listed was "Did the initial launch of Pepsi Twist fail? If so, why?"

After initial research and a meeting with one of the members of the Pepsi Twist Project
team, the following information was extracted:

Pepsi Twist was launched in September – 06 with the intent of creating product news. It
was planned as an “In & Out” – a Pepsi Term – where a product is introduced in the
market for a period of 3 – 4 months and than pulled out. The premise of the launch was
that their had been no significant news on Brand Pepsi [in terms of product change or
packaging change] for over four years and the brand was becoming rusted in the
consumer minds.

7
 Adnan ul Haque

The idea behind an “In & Out” is to create news / excitement about the mother brand by
introducing a short-term innovation which is supported by extensive marketing
campaigns (media, outdoor, POS). While the innovation is offered for a limited time
period, its impact stays in the consumers mind and effects rub-off in the form of higher
top-of-mind for the Mother brand (in this case, Pepsi).

A number of Pepsi innovation options, available in the region, were analyzed (including
Pepsi Chill, Pepsi Max, Pepsi Blue etc.) Pepsi Twist was ultimately chosen since
consumers in Southeast Asia are a very Lemon-savvy market, add lemon to most of their
foods and cold-drinks and Pepsi with a Lemony taste would hit off.

The Twist launch was NOT by any means a failure, it performed higher than expectations
to the extent that we had to order some excess shipment of concentrate due to high
demand from our bottlers.

Growing Importance of media

The last short-listed topic was news website due to the last year match fixing scandal was
explored and it gain a quick rapid fame and was considered as growing market leader due
to its sells and interest of consumers all across the United Kingdom. This was selected as
the last preference

8
 Adnan ul Haque

3 Research objectives

The goal of our study was to gain an improved understanding of the coffee consumption
trends and preferences and to investigate the causes of the rapid growth in the popularity
of coffee shops in London. Coffee shops have mushroomed across the streets of posh
localities in London but little formal research has been carried out to find out the
fundamental causes of their popularity. Although some work has been carried out to
explore the generic coffee consumption patterns of the United Kingdom consumers by
Nestle which owns brands like Nescafe, the link between coffee shops visitors and coffee
consumption trends has not been examined thoroughly.

The fundamentally important research questions for our research study are:

1. What are the underlying reasons for the popularity of gourmet coffee shops in
London?
2. What are the significant consumer preferences of coffee consumers in United
Kingdom?

In an effort to probe on the research area, this study looks at the following specific areas:

 Best coffee shop in London

 Time consumers spend at a coffee shop during a week in London
 Purpose of coffee shops visits in London
 Offer attributes available at coffee shops in London
 Preferred location of a coffee shop in London
 Promotional methods that have been successful historically in London
 Source of revenue of coffee shops in London

These investigations will identify the real causes in search of what I have conducted my
research. It help in creating a general understanding as well these market insights are
essential for making informed business decisions.

The project gave me an opportunity to get involved in a study that included the phases of
problem definition, research design, field work execution and analysis.

9
 Adnan ul Haque

4 Research Methodology

The research method adopted was a structured process which went through the following
steps, as detailed below:

Step 1 – Brainstorm ideas

As highlighted in the section above, the report started with a brainstorming of the topics
which could potentially define the domain of the research.

Once the domain of research was defined as “The Growing Popularity of Gourmet Coffee
Shops in London”, I conducted another brainstorming session to identify the parameters
of the research within this topic so that I have a clear and precise idea of what I am going
to investigate in my study.

Step 2 – 1st Review Meeting

The first review meeting was then held with the instructor to discuss the topics with him
and to finalize the proposal of coffee shops with his approval.

10
 Adnan ul Haque

Step 3 – Internet Research

After the selection of the topic, I researched articles in News and on the Internet to
identify the various factors which could potentially identify the research attributes.

The literature survey and the subject matter knowledge of the team identified that factors
like setting and quality of food are more important for an upper class customer segment
and price consciousness is not as critical.

Ideally, this step should have been replaced by a qualitative research (e.g. a focus group)
which could invite selected respondents and their ideas could be shared on the subject to
identify the characteristics which are valued by the segment. Once all the characteristics
and attributes had been listed as a result of qualitative research, a quantitative research
could be designed to test population proportions.

Literature survey and brainstorming on the topic while keeping research objectives in
perspective, led to the next step of deciding the research hypothesis for the research
problem.

Step 4 - Research design and medium selection

It was important to select an appropriate research medium to reach the SEC A consumer
community while respecting resource constraints of time and money.

One of the pre-requisites of the report was to design the research in such a way that
questionnaires can easily be used to evaluate consumer responses. Only quantitative
research was designed while qualitative research was substituted by literature survey and
high-level subject matter knowledge.

There were two media used to generate results:

1- Manual, paper-based surveys

2- Internet hosting of the survey

Manual, paper-based surveys

A total of 100 surveys were filled manually on the research topic.

Manual surveys provided a direct approach to access audiences in face-to-face

interactions with people. It was designed as a 3-page instrument which could be easily
filled by the respondent in 5 minutes. Alternatively, the team conducted face-to-face
sessions at coffee shops and other venues to have the questionnaires filled up.

Advantages: The advantage of using manual surveys was the appeal it had as a
traditional survey. The responses would be easier to collect and the identity of
respondents, though not as critical in this study, would be easily ascertained. As a result

11
 Adnan ul Haque

of face-to-face interaction, the respondents were generally more serious in filling up

surveys and did not attempt to deliberately include a bias to the results.

Disadvantages: Disadvantages included the cumbersome, error-prone task of compiling

results using a coding scheme, which had to be specifically designed for manual
questionnaires. Survey IDs had to be manually maintained. Other disadvantages included
incomplete responses or blank/unmarked responses which would not be completed,
especially for sensitive questions e.g. income per month etc.

Internet Survey

A total of 230 questionnaire responses were collected online.

Advantages: The primary advantage of using Internet in this survey was the ease of
access to respondents that make up a population niche. All target respondents in this
survey belong to the higher ends of the SEC A consumer segment and are a part of the
privileged 11% United Kingdom community which has access to the Internet. The
respondents belonging to this niche are well-versed with the use of e-mail and thus, it was
ideal to circulate the Internet survey via email.

The questions in the survey could be configured as mandatory so that user responses
would not be accepted unless they filled up the entire survey. This ensured that
incomplete responses were eliminated.

Other advantages included the convenience for the respondent to respond at his/her own
leisure, low cost, quick response time and online, real-time compilation of results.
Downloads of results could be exported to spreadsheet formats to incorporate in
statistical models.

Disadvantages: The use of the Internet required certain assumptions. This included the
fact that there was no precise control on how many surveys a respondent could fill. With
the ideal level of technology, each respondent should be given a password and should not
be allowed to respond more than once. While we tried to ensure this manually, this was a
shortcoming of the method.

Lack of face-to-face contact implies that some respondents may have been casual and
non-serious about the responses. This may introduce a slight bias in the survey.

Step 5 – Hypothesis Selection and Questionnaire– First Draft

Hypotheses were brainstormed in various areas of the research subject. These included:

 Best coffee shop (international recognition, local, brand loyalty, etc)

 Extent of time consumers spends at a coffee shop during the week to identify how
this culture is acquiring increasing importance in the SEC A consumer segment.
 Purpose of visiting coffee shops

12
 Adnan ul Haque

 Offer attributes and CVP of coffee shops

 Preferred location of a coffee shop
 Promotional methods to be used
 Source of revenue of coffee shops

Based on a thorough evaluation of the topic, the first draft of hypotheses included 22 test
hypotheses.

Based on the hypotheses a first draft of the questionnaire was also created. While drafting
each questionnaire, it was important to identify how each question would contribute
statistically to testing of hypotheses. The question statements had to be precisely worded
to ensure that it was testing the desired hypothesis.

Step 6 – Online Hosting - Selection of an appropriate online hosting website

Most research organizations worldwide provide Internet-based solutions for hosting

research surveys, where the Internet can easily reach respondents.

In this research effort, one of the targets was to select an appropriate web-survey hosting
website which would suit the research needs. Following were the factors which were used
to evaluate three websites, before a final decision could be taken:

- Cost
- Real-time compilation of results
- Flexibility in setting up questionnaire with multiple question formats
- Exportability to a custom statistical model
- Visual appeal
- Control to mark certain questions as mandatory
- Ease of circulation as a URL

Following were the three websites selected for hosting the survey:

Surveymonkey. Com

URL: www.surveymonkey.com

This is a free web-hosting service which only allows limited capabilities in the
questionnaires as part of free access. If paid, this website provides splendid features for
circulation, customization, use of templates, report sharing etc.

13
 Adnan ul Haque

Surveyscholar.com

URL: www.surveyscholar.com

Designed primarily for academic research work, the website offered free, elementary
research features with simple question formats and an extremely simple layout of the
questionnaire. Exportability was available in a flat-file format.

The issues with this website included technical errors and insufficient support. In fact,
due to technical glitches, the survey website had to be shut down and all surveys hosted
on the website had to be shut.

Surveyspro.com

URL: www.surveyspro.com

This website was another free platform which offered the minimal level of features for
research. It provided compilation of results in real-time, no cost, exportability to a
spreadsheet format, ease of circulation via email and limited control and flexibility in the
questions.

14
 Adnan ul Haque

Online survey management portal

15
 Adnan ul Haque

Online Questionnaire

The following provides the comparison of all three websites together:

SurveymonkeySurveyscholar Surveyspro
Cost Y N N
Real-time compilation of Y N Y
results
Flexibility Y Limited Y
Visual appeal Y N Limited
Control Y Y Y
Ease of circulation Y Y Y
Exportability Y Limited Y

Step 7 – 2nd Review Meeting - Endorsement of the first draft

The hypotheses brainstormed thus far were too elaborate for a practical academic
research. As part of the progress review meeting, the team discussed the research
parameters with the instructor and picked up the message that the research needs to be
curtailed in terms of scope to make it more manageable.

Step 8 – Coding Scheme / Statistical Model Development

Based on the questionnaire’s pre-determined MCQ format questions, a coding scheme

was designed to facilitate and ease the data entry process. Coding scheme catered to:

16
 Adnan ul Haque

- the possibility of blank responses on manually filled questionnaires and

- multiple responses filled by respondents

Once the coding scheme was defined, a data collection format was designed which would
enable an easy integration of both data downloaded from the Internet Survey as well as
that entered manually using the coding scheme. Pivot-table analysis and graphs were
generated automatically based on this collated data.

Further, a working statistical model to test each hypothesis was parametrically designed
to ensure that conclusion could be easily drawn from actual survey results based on
questionnaires.

This initial coding of the model also improved technical details within our questionnaire
(e.g. ID assignments etc.) and improved our phraseology to precisely extract results.

Step 9 – Questionnaire Layout / Online Hosting

To optimise the publishing costs of the survey, the questionnaire was redesigned to
ensure that it occupies as less space as is practically possible, while appealing
aesthetically to the user. This also facilitated response with clearly defined answer boxes
and an easy to understand layout.

The survey questionnaire was also uploaded at the same time on the Internet website

www.esurveyspro.com.

The online URL for the survey was:

http://www.eSurveysPro.com/Survey.aspx?id=0f76a4bb-26df-4e55-b01c-d3fafc65d6d0

Step 10 – Pre-test

A pre-test was then conducted to ensure that a typical subset of our sample size interprets
the questionnaire correctly and has the same understanding of questions as the research
team.

The feedback from this step further improved our questionnaire phraseology and
hypotheses.

Step 11 – Model Testing

With the handful of results received from the Pre-test, the coding scheme and statistical
model previously designed were thoroughly tested with the data obtained to ensure that
end results are extracted accordingly.

17
 Adnan ul Haque

After an end-to-end execution of the process, the team was ready to launch the survey.
All that was left after this stage was to collect and enter data in the available template and
the results would be computed automatically.

Step 12 – Launch and Data Collection

The survey was printed and launched in high street Hounslow East where Costa coffee,
McDonalds, Starbucks were nearby to start the collection process. As the sampling
section in this report explains, the sample was primarily a convenience sample due to
resource constraints.

Academic and social networks were used to circulate the link to SEC A consumer
population which typically frequent coffee shops to ensure the sample was representative.

I made field visits to coffee shops and requested consumers to fill up the survey. In
certain cases, interviews had to be conducted face-to-face with respondents and the
questionnaires had to be filled out.

The total sample size, hence, was 330 responses.

Step 13 – Data Collation

Data from online and manual sources were integrated into the model data collation
template. Inconsistencies in format were removed and the coding scheme conversion to
real responses was done as Internet surveys do not provide coding but download the
entire option text in each answer. Thus, consistency was ensured between the two data
formats.

Step 14 – Data Validation

Validation criteria were built into the statistical model. Blank and multiple responses
were ignored for hypothesis calculations as a result of validation rules. Further, where
combinations of questions were used to evaluate hypothesis results, it was ensured that
invalid responses for these questions were not included if considered individually or in
pairs.

Step 15 – Analysis

Graphical analysis and hypothesis results were then calculated based on the responses
received. The details of analysis and tabulation of results follow in subsequent sections.

Step 16 – Results and Conclusions

Conclusions were drawn from the results of the hypotheses and documented.

18
 Adnan ul Haque

5 Assumptions and Constraints

Assumptions

1. It was implicit that the respondents filling up the questionnaires will submit
responses only once. There was no convenient and free survey website that
offered user-friendly pin protection.

2. When carrying out the calculations for options that have brackets defined for
ranges, averages or means have been used. It was assumed that the mean would
be representative of that range.

3. A significance level of 95% would provide the results required with sufficient
accuracy. All calculations are based on this assumption.

4. SEC A consumers is primarily the coffee consumers and coffee shop visitors.

5. The sample was normally distributed. Hence, due to sample sizes of greater than
30 respondents, the z and t tests were used for statistical calculations.

Constraints

1. One of the constraints of the study was that there was no way that we could have
made sure that all respondents knew about all the coffee shops. So the choice of
the best coffee shop, for example, was based on the limited exposure of the
respondents depending on the individual.

2. The percentages used in forming hypothesis and the questions were based on the
brainstorming by the project team and best estimates as agreed between the team
members.

3. Internet based e-surveys come with their own limitations. These include no pin
protection, limited aesthetic appeal etc. Also there is no mechanism of validating
whether the same respondents have not filled the questionnaire more than once.

4. There are certain inherent limitations that are associated with convenience
sampling. Since only personal, professional and academic networks were used to
circulate questionnaire emails, only a certain section of the entire SEC A segment
could be covered. However, to ensure that the sample remained representative,
surveys were conducted at coffee shops.

19
 Adnan ul Haque

6 Research Hypotheses

Hypothesis # 1
Ho : Costa is the most preferred coffee shop in London.
Ha: Costa is not the most preferred coffee shop in London.

Hypothesis # 2
Ho : 5% of SEC A consumers in London spend some time of their week at a coffee shop.
Ha : 5% of SEC A consumers in London do not spend some time of their week at a coffee
shop.

Hypothesis # 3
Ho: 60% of all consumers visit coffee shops to socialize and hang out with friends.
Ha : 60% of all consumers do not visit coffee shops to socialize and hang out with friends.

Hypothesis # 4
Ho: 25% of all consumers consider the quality of food as the most important factor in
selecting a coffee shop
Ha : 25% of all consumers do not consider the quality of food as the most important factor
in selecting a coffee shop

Hypothesis # 5
Ho: 80% of the consumers in a coffee shop drink coffee outside the coffee shop.
Ha: 80% of the consumers in a coffee shop do not drink coffee outside the coffee shop.

Hypothesis # 6
Ho: 20% of the consumers feel that Defence/Clifton is saturated for a new coffee shop
Ha: 20% of the consumers do not feel that Defence/Clifton is saturated for a new coffee
shop

Hypothesis # 7
Ho: 90% of the consumers got to know about their favorite coffee place by word of
mouth.
Ha: 90% of the consumers did not get to know about their favorite coffee place by word
of mouth.

Hypothesis # 8
Ho: 50% of the revenue of a coffee shop is derived from non-coffee items.
Ha: 50% of the revenue of a coffee shop is not derived from non-coffee items.

20
 Adnan ul Haque

7 Sampling Approach

Considering the nature of the product category in focus (coffee), sampling for the
research was tailored to primarily target the segment of London’s population that falls
under the SEC A (SEC - Socio-Economic Classification). Coffee brands and coffee shops
both cater predominantly to the needs of the affluent segments in (Hounslow), London’s
population.

An e-survey was used to leverage available technology for this research. The project team
at the outset conducted a pre-research analysis on the modes of e-survey and the various
alternatives available with a conceptual agreement from the course instructor. One of the
reasons behind the use of e-surveys was that Internet penetration rate in the focus
segment of SEC A is very high and most of the target respondents are Internet savvy.
Around 70% of the surveys filled by the respondents of the study were completed online
which proved to be an extremely cost-effective and time-efficient approach.

Convenience sampling method was used in the research due to resource constraints. The
fact that the project group comprised of three working individuals only rather than the
usual 5 contributed to this decision. Resources, both in terms of time and costs, were
considered when doing the pre-study. Surveys that were conducted in coffee shops
proved to be very expensive as was evidenced by a very high cost per survey calculated
during the initial pre-testing phase. A survey at one of the coffee shops in London
(Starbucks) had a per survey cost of about 33pence per survey.

Even then, the group made a decision to conduct some of the research in coffee shops to
get first-hand consumer insights which were critical to the research. Hence the group
made several visits to coffee shops and got approvals from coffee shop owners to conduct
the surveys. The fieldwork involved taking some respondents through the questionnaire
in person in certain cases where it was required.

The project team used their personal, academic and professional networks for the survey.
The e-mail request to fill up the questionnaire included well-thought through sentences to
create the “snow-balling effect” to get maximum respondents to fill up the
questionnaires. Social networking platforms of Orkut and Facebook were used to
communicate with the respondents. The request emails were sent to all lists and e-groups
of various social networks.

Part of the survey was also conducted on high street of Hounslow. This was very helpful
during the pre-testing phase, in which young consumers were asked to comment on the
questionnaire. Their input was factored in and the questionnaire was adjusted before the
actual rollout of the survey.

21
 Adnan ul Haque

Demographic Analysis of the Sample

Questions at the end of the questionnaire were included in order to get the required
information about the demographics of the respondents. On the basis of those questions,
an overall analysis of the demographics is given below:

22
 Adnan ul Haque

Gender-wise

As the graph below shows, there was fairly equal gender distribution. About 60% of the
respondents were male.

Demographic Distribution - Gender

Blank /
11 Unmarked 7
Female 118
Male 205
11 Total 330

23
 Adnan ul Haque

Age-wise
As the graph below shows, almost half of the respondents were in the age bracket of 25-
34. The population segment that visits coffee shops primarily falls in this age bracket.
Respondents of other relevant age brackets have also been covered appropriately.
Demographic Distribution – Age

Blank / Unmarked 10
Multiple Responses 1
25-34 188
12 18-24 104
35-54 18
<18 7
> 55 2
12 Total 330

24
 Adnan ul Haque

Monthly Income – wise

As the graph below shows, the research was primarily focused on SEC A consumers.
Reasons have been explained earlier in the report. Hence almost all the respondents have
income levels of more than £ 800.
Demographic Distribution - Income Distribution in GBP £ per month

Blank /
13 Unmarked 19
Multiple
Responses 1
>800 53
799-600, 77
599-300 38
299-100 66
99-50 66
=<50 9
13 Total 330

25
 Adnan ul Haque

Area of Residence – wise

As the graph shows below, a large number of respondents reside in posh localities in
London. This was done purposely to get responses from the actual target segment of
coffee shop visitors.
Demographic Distribution - Area of Residence

Blank /
14 Unmarked 11
Multiple
Responses 3
Other 30
Hounslow East 51
Hounslow West 21
Hammersmith 129
Osterley 47
Chiswick 17
South hall 16
Boston Manor 5
14 Total 330

26
 Adnan ul Haque

Status-wise

As the graph shows below, a vast majority of the respondents are salaried individuals.
This is true even for the entire population of London and especially for the target
respondents for this study. Another significant segment is students.
Demographic Distribution - Status

Blank /
15 Unmarked 10
Multiple
Responses 4
Other 3
Student 39
Salaried 111
Business 120
Retired 23
Domestic 19
15 Total 330

27
 Adnan ul Haque

8 Tabulated Results and Graphs

Question 1 – Do you drink coffee?

Q1 - Do you drink coffee?

Yes 294
1
No 36
1 Total 330

28
 Adnan ul Haque

Question 2 - How much coffee do you consume in a week?

Q2 - How much coffee do you consume in a week?

2 1-5 cups 209

None 58
6-15 cups 41
More than 15 cups 16
Blank / Unmarked 5
Multiple Responses 1
2 Total 330

29
 Adnan ul Haque

Question 3 – How frequently do you visit a coffee shop?

Q3 - How frequently do you visit a coffee shop?

At least once a month 84

Blank / Unmarked 3
Less than once a month 111
Between 2-5 times a week 24
3 Haven't been to one till now 15
Once a week 54
Everyday 14
Between two to five times a week
inclusive 25
3 Total 330

30
 Adnan ul Haque

Question 4 - How much coffee do you consume in a coffee shop during each visit?

Q4 - How much coffee do you consume in a coffee shop during each visit?

None 24
1 cup 260
Blank / Unmarked 4
4 2 cups 22
N/A. I don't visit coffee
shops 16
More than 2 cups 4
4 Total 330

31
 Adnan ul Haque

Question 5 - What percentage of your bill in a coffee shop comprises of non-coffee

items (e.g. sandwiches, refreshments, desserts, etc)?

Q5 - What percentage of your bill in a coffee shop comprises of non-coffee items

(e.g. sandwiches, refreshments, desserts, etc)?

Blank / Unmarked 25
50 - 74 % 73
75 – 90 % 22
5 25 – 49 % 63
< 10 % 73
10 – 24 % 57
> 90 % 17
5 Total 330

32
 Adnan ul Haque

Question 6 - Why do you primarily visit a coffee shop?

Q6 - Why do you primarily visit a coffee shop?

Blank / Unmarked 22
Multiple Responses 6
For combined studies / academic
projects 11
6
To socialize / hang out 227
Others (please specify): 17
To dine out 22
For business-related engagements 25
6 Total 330

33
 Adnan ul Haque

Question 7 - Which is the most important factor for you in your selection of a coffee
shop?

Q7 - Which is the most important factor for you in your selection of a coffee shop?

Blank / Unmarked 22
Multiple Responses 10
Ambience 132
7 Quality of food 111
Others (please specify) 8
Location 22
Price 25
7 Total 330

34
 Adnan ul Haque

Question 8 - Which coffee shop in London is the best in your opinion?

Q8 - Which coffee shop in London is the best in your opinion?

Starbucks 27
McDonalds 23
Blank/Unmarked 7
Multiple Responses 14
Cafe` Coffee Day 52
Costa 73
Mochas 12
Barista 46
8
Espresso 19
Dunkin Donuts 16
Hard rock Cafe 9
Roasters 20
Café Nero 4
Chinatown
4
Black Truffles 4
8 Total 330

35
 Adnan ul Haque

Question 9 - How did you get to know about your favourite coffee place?

Q9 - How did you get to know about your favourite coffee place?

Blank / Unmarked 22
Multiple Responses 2
By word of mouth 253
9
Others (please specify): 22
From an advertisement 28
From a sales promotion 3
9 Total 330

36
 Adnan ul Haque

Question 10 - If you had to select a location for a new coffee shop venture, where
would it be?

Q10 - If you had to select a location for a new coffee shop venture, where would it
be?

Blank / Unmarked 21
Multiple Responses 2
Hammersmith 101
Osterley 8
10
West Hounslow 17
South hall 22
Chiswick 16
East Hounslow 143
10 Total 330

37
 Adnan ul Haque

9 Hypothesis Tests and Analysis

Research Hypotheses

Hypothesis # 1
Ho : Costa is the most preferred coffee shop in London.
Ha: Costa is not the most preferred coffee shop in London.

Result: ACCEPTED

Analysis: Based on modal analysis of the data collected for Question 8, Costa turned out
to be the most popular coffee shop with a total of 73 votes out of 330.

Cafe Coffee Day stood 2nd with 52 votes while Espresso was 3rd with 46 votes.

Conclusion: The sample provided sufficient proof to conclude that Costa is the most
preferred coffee shop in London.

Hypothesis # 2
Ho : 5% of SEC A consumers in London spend some time of their week at a coffee shop.
Ha : 5% of SEC A consumers in London do not spend some time of their week at a coffee
shop.

Result: REJECTED

Analysis:

Based on the responses of Q3, the following analysis was conducted:

Test applied: Z-test for one population proportion

Total valid responses 303

(n)(po) 15.15
(n)(1 - po) 287.85
Can the one-population proportion test be applied?YES

Significance
Alpha 0.05 Level 95%
p` 0.307 Critical value 1.96
po 0.05
z 20.521
Test result REJECTED
Actual % 31

38
 Adnan ul Haque

Conclusion:

The sample did not provide sufficient evidence to conclude that 5% of SEC A consumers
in London spend sometime of their week at a coffee shop

Hypothesis # 3
Ho: 60% of all consumers visit coffee shops to socialize and hang out with friends.
Ha : 60% of all consumers do not visit coffee shops to socialize and hang out with friends.

Result: REJECTED

Analysis:

Based on responses to Q6, the following analysis was conducted:

Test applied: Z-test for one population proportion

Total valid responses 302

(n)(po) 181.2
(n)(1 - po) 120.8

Significance
Alpha 0.05 Level 95%
p` 0.752 Critical value 1.96
po 0.6 Actual % 75.2
z 5.380
Test resultREJECTED

Conclusion:

The sample did not provide sufficient evidence to conclude that 60% of all consumers in
London visit coffee shops to socialize and hangout with friends.

Hypothesis # 4
Ho: 25% of all consumers consider the quality of food as the most important factor in
selecting a coffee shop
Ha : 25% of all consumers do not consider the quality of food as the most important factor
in selecting a coffee shop

Result: REJECTED

Based on responses to Q7, the following analysis was conducted:

39
 Adnan ul Haque

Test applied: Z-test for one population proportion

Total valid responses 298
(n)(po) 74.5
(n)(1 - po) 223.5
Can the one-population proportion test
be applied? YES

Significance
Alpha 0.05 Level 95%
p` 0.372 Critical value 1.96
po 0.25 Actual % 37.2
Z 4.883
Test resultREJECTED

Conclusion:

The sample did not provide sufficient evidence to conclude that 25% of all consumers
consider the quality of food as the most important factor in selecting a coffee shop

Hypothesis # 5
Ho: 80% of the consumers in a coffee shop drink coffee outside the coffee shop.
Ha: 80% of the consumers in a coffee shop do not drink coffee outside the coffee shop.

Result: REJECTED

Analysis:

Based on responses to Q2, 3 and 4, the following analysis was conducted:

Test applied: Z-test for one population proportion

All possible combinations of responses to Q2, 3 and 4 were considered to create a master
reference grid which would classify each consumption pattern and highlight as follows:

I – Invalid (based on validation criteria)

E – All consumption of coffee is within coffee shop

G – Total Consumption of the consumer is greater than consumption in coffee

shops.

E 29

40
 Adnan ul Haque

G 218
I 83
Grand Total 330

Total valid responses 247

(n)(po) 197.6
(n)(1 - po) 49.4
Can the one-population proportion test be
applied? Yes

Alpha 0.05 Significance Level 95%

p` 0.883 Critical value 1.96
po 0.8 Actual % 88
z 3.245

Conclusion:

The sample did not provide sufficient evidence to conclude that 80% of the consumers in
a coffee shop drink coffee outside the coffee shop.

Hypothesis # 6
Ho: 20% of the consumers feel that Hammersmith is saturated for a new coffee shop
Ha: 20% of the consumers do not feel that Hammersmith is saturated for a new coffee
shop

Result: REJECTED

Analysis:

Based on responses to Q10, the following analysis was conducted:

Test applied: Z-test for one population proportion

Total valid responses 307

(n)(po) 61.4
(n)(1 - po) 245.6

Can the one-population proportion test be

applied? YES

Significance
Alpha 0.05 Level 95%
p` 0.847 Critical value 1.96
po 0.2 Actual % 46.6

41
 Adnan ul Haque

Z 28.337
Test result REJECTED

Conclusion:
The sample did not provide sufficient evidence to conclude that Hammersmith is
saturated for a new coffee shop

Hypothesis # 7
Ho: 90% of the consumers got to know about their favorite coffee place by word of
mouth.
Ha: 90% of the consumers did not get to know about their favorite coffee place by word
of mouth.

Result: REJECTED

Analysis:

Based on responses to Q9, the following analysis was conducted:

Test applied: Z-test for one population proportion

Total valid responses 306

(n)(po) 275.4
(n)(1 - po) 30.6
Can the one-population proportion test be
applied? YES

Significance
Alpha 0.05 Level 95%
p` 0.827 Critical value 1.96
po 0.9 Actual % 82.7
z -4.268

Conclusion:

The sample did not provide sufficient evidence to conclude that 90% of the consumers
got to know about their favourite coffee place by word of mouth.

Hypothesis # 8
Ho: 50% of the revenue of a coffee shop is derived from non-coffee items.
Ha: 50% of the revenue of a coffee shop is not derived from non-coffee items.

42
 Adnan ul Haque

Result: REJECTED

Analysis:

Based on responses to Q5, the following analysis was conducted:

Test applied: One sample t-test for population mean

f x fxx x - x` (x - x`)2
a < 10 % 73 5 365 -33.42 1116.8
b 10 – 24 % 57 17.5 997.5 -20.92 437.6
c 25 – 49 % 63 37.5 2362.5 -0.92 0.8
d 50 - 74 % 73 62.5 4562.5 24.08 579.9
e 75 – 90 % 22 82.5 1815 44.08 1943.2
f > 90 % 17 95 1615 56.58 3201.5
u Blank / Unmarked 25
Multiple
x Responses 0
Sum (x - x`)2 7279.9
Total valid
responses 305 s.d. 4.89

Alpha 0.1 Significance Level 90%

Sample mean 38.42 Critical value 1.968
Population mean: 50 Actual % 38
Df 304
T -41.33

Conclusion:

The sample did not provide sufficient evidence to conclude that 50% of the revenue of a
coffee shop is derived from non-coffee items.

43
 Adnan ul Haque

10 Conclusions

Since Costa has the pioneer advantage and a strong international brand name, Costa is the
most preferred coffee shop in London. As concluded by the research, International brands
have a strong influence in consumers’ perception which explains second position for Café
Coffee Day.

Due to a dearth of alternate sources of entertainment, SEC A consumers spend a lot of

time weekly in coffee shops primarily for socializing. Coffee [product] constitutes a
major portion of their bills which shows an increasing inclination of consumer preference
from tea to coffee.

Pricing is always important in any marketing strategy. However, in this niche market,
consumers give primary importance to ambience when selecting a coffee shop while the
second most important factor in their selection is the quality of food. Price stands third.

44
 Adnan ul Haque

11 Appendices

Appendix I - Coffee Drink Types - how do you drink yours?”

There are many coffee drink types. Here we look at the most well known types of coffee
drinks, and one or two you may not know about.

Espresso - or Short Black, a 30ml (1 oz.) shot of rich, full bodied dark coffee with a silky
layer of crema.

Espresso Americano - or Long Black, a standard Espresso served on top of hot water,
served in a tall glass or regular sized coffee cup. The coffee is added to the glass of hot
water to help maintain the layer of crema at the top of the glass.

Latte - a standard Espresso with hot milk topped by a small layer of silky milk foam.
Usually served in a glass.

Cappuccino - a standard Espresso with silky foamed milk poured into it, topped with a
dusting of chocolate powder.

Macchiato - a standard Espresso with just a dash of milk added, served in a small
espresso cup.

Ristretto - a half shot of Espresso (15ml or 1/2 oz.)

Doppio - a double Espresso. Two shots of Espresso concentrated into approximately the
same volume as a regular espresso. Caffeine injection anyone???

Flat white - a standard Espresso with hot milk, no foam.

Mocha - a standard Espresso, hot chocolate and hot milk served in a glass.

Cafe Freddo - a standard Espresso, served chilled.

45
 Adnan ul Haque

Appendix II–Questionnaire

The Popularity of Gourmet Coffee Shops in London

Marketing Research Survey

Thank you for taking this survey.

The objective of this research is to investigate the growing

popularity of gourmet coffee shops in London and to explore the
preferences of coffee-shop customers in London. The survey will
take approximately 5 minutes of your time to complete.

For the purpose of clarity, the term “coffee” in this questionnaire means the full family of
coffee-like beverages and includes all coffee variants like plain coffee, espresso, cafe
latte, cappuccino, moccachino, hot chocolate, cold coffee etc.

Your survey responses will be kept strictly confidential and data from this research will
only be reported in the aggregate.

We thank you for being a part of this research and appreciate your valuable time and
support.

1. Do you drink coffee?

Yes No

2. How much coffee do you consume in a week?

None 1 – 5 cups

6 – 15 cups More than 15 cups

3. How frequently do you visit a coffee shop?

Everyday Between 2 –5 times a Once a week

week

At least once a Less than once a month Haven’t been to one till now
month

46
 Adnan ul Haque

4. How much coffee do you consume in a coffee shop during each visit?

N/A. I don’t visit coffee None 1 cup

shops

2 cups More than 2 cups

5. What estimated percentage of your bill in a coffee shop comprises of non-coffee

items (e.g. sandwiches, refreshments, desserts, etc)?

< 10 % 10 – 25 % 25 – 49 %

50 - 75 % 75 – 90 % > 90 %

6. Why do you primarily visit a coffee shop? (Please select one)

For business-related For combined studies /

To socialize / hang out engagements academic projects

Others (please specify):

To dine out
_____________________________

7. Which is the most important factor for you in your selection of a coffee shop?
(Please select one)

Quality of food Price Ambience

Location Others (please specify):

______________________________

8. Which coffee shop in London is the best in your opinion? (Please select one)

Mochas Barista Starbuck Café Coffee Café Nero

Day

Dunkin Donuts Espresso Hard Rock Chinatown Costa

Black Truffles Roasters McDonalds

9. How did you get to know about your favourite coffee place? (Please select one)

47
 Adnan ul Haque

By word of mouth From an advertisement

From a sales promotion Others (please specify):

______________________________

10. If you had to select a location for a new coffee shop venture, where would it be?
(Please select one)

Hammersmith East Hounslow / West South hall

Hounslow

Chiswick Osterley Other:

_______________________

Now please take a moment to answer the following general questions to finish the survey:

Please specify your:

11. Gender:

Male Female

12. Age:

<18 18-24 25-34 35-54 > 55

13. Income in GBP per month:

< 800 799 – 600 599 – 300

299 – 100 99 – 50 =<50

14. Area of Residence:

East Hounslow West Hounslow Hammersmith

Osterley Chiswick South hall

Boston Manor

15. Employment Status:

Salaried Business Student

48
 Adnan ul Haque

Retired Domestic Other

Name: ___________________________ (optional)

Email Address: ___________________________ (optional)

Contact Number: ___________________________ (optional)

Venue: ___________________________

49
 Adnan ul Haque

Appendix IV – Statistical Concepts

One sample t-Test for population mean

Step 0. Conditions for the one-sample t-test to be valid for testing one population mean:
Data follows a normal distribution or the sample size is large.

Step 1. Set up the hypotheses as one of:

One-sided One-sided Two-sided

Step 2. Decide on the significance level,

Step 3. Compute the value of the test statistic with the one sample t-test:

Step 4. Find the appropriate critical values for the tests using the t-table. Write down
clearly the rejection region for the problem. Alternatively, compute the p-value if you are
using the p-value approach.

Step 5. Check to see if the value of the test statistic falls in the rejection region. If it does,
then reject Ho (and conclude Ha). If it does not fall in the rejection region, do not reject
Ho. Alternatively, compare the p-value to α if you are using the p-value approach. If p-
value < = α, reject Ho (and conclude Ha). If the p-value > α, do not reject Ho.

Step 6. State the conclusion in words.

50
 Adnan ul Haque

Z-Test for one population proportion

Using the same concept as above, z-test for one population proportion is applied as
follows:

Null hypothesis: H0: p = p0

Test statistic:

pˆ − p0
z= .
p0 (1 − p0 ) / n

Ha p-value Rejection region

p =! p0 2P(Z >= |z|) |z| >= za/2
p > p0 P(Z >= z) z >= za
p < p0 P(Z <= z) z <= - za

The tests are valid if np0 >= 10 and n( 1- p0) >= 10.

51
 Adnan ul Haque

12 Bibliography

- The British Coffee Association, [Coffee and health], available at:

http://www.britishcoffeeassociation.org/page.aspx?

page=health&m_id=82&p_id=123. Last accessed: 20-05-2011

- Madeeha Syed- Eat, Drink and be Merry, Available at: http://www.

dawn.com/weekly/dmag/archive/070923/dmag3.htm

- The Cappuccino Conquests: A Transnational History of Italian Coffee, Available at:

http://www.consume.bbk.ac.uk/research/morris.html. Last accessed: 18-05-2011

- Coffee Consumption Continues to grow amongst Brits- Rogers Estate Coffees

offers 12 bags for the price of 8 on wholesales, Available at:

http://www.rogersestatecoffees.co.uk/cremapress/2010/04/wholesale-coffee/. Last

accessed: 19-05-2011.

- Mamun Adil (Sep 23, 2007) - Smell the coffee, please, Available at: http://www.

dawn.com/weekly/dmag/archive/070923/dmag5.htm

- Talk About Coffee - Coffee Culture Around the World – Culture in Asia,

Available at: http://www.talkaboutcoffee.com/coffee-culture-in-asia.html

- One-sample hypothesis tests for a population mean , Available at:

http://www.utdallas.edu/~ammann/stat3360/node40.html

- Mintel Oxygen– Coffee UK 2011, Available at:

http://oxygen.mintel.com/sinatra/oxygen/display/id=545333. Last accessed: 20-05-

2011.

52
Adnan ul Haque

53