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International Business Environment

JUAN VALDEZ Caffee Shops in GERMANY

We have chosen a Colombian coffeehouse chain - Juan Valdez Cafe We will show an entry market strategy in Germany. We will open a first coffee shop in Berlin using wholly-owned ownership and we will try in the middle term to expand using the franchise figure. 1 Short company summary of Juan Valdez Caf Juan Valdez Cafe is a multinational coffee house based in Colombia that specializes in coffee retail. It was created by Colombia's National Federation of Coffee Growers through Procafecol S.A. The company exists since 1970. It represents around 500 Colombian coffee growers around the world. Its purpose is to become a member of the worldwide coffee restaurant business, and promote Colombian coffee, which is reputed to be the richest coffee in the world. Juan Valdez is the only international coffeehouse authorized to officially sell Colombian coffee. 2 The German Economic Situation (Macro) According to the outlook for the German economy of Deutsche Bundesbank (German Federal Bank), the recovery of the German economy has evolved into a broad-based upturn. The enterprises are hiring new staff, buying new equipment and building new premises. The private consumption spending is rising and there is a reduction in structural unemployment. Germany is an affluent consumer market, and enjoys a disposable income per capita of EUR 19,523 in 2010. Of this sum, EUR 17,674 was allocated for total private consumption far above the EU average of EUR 13,760 (2009). 3 The Coffee-Sector in Germany (Micro) - GERMAN COFFEE MARKET TRENDS Per capita consumption of coffee increased to 150 litres in total volume terms. By comparison, per capita consumption of tea in Germany reached 84 litres. According to the German Federal Statistics (Statistisches Bundesamt Deutschlands), people in Saarland consume the highest volumes of coffee (four cups per day), followed closely by Schleswig-Holstein and Nordrhein Westfalen. IBID. Germanys food and beverage industry is the fourth largest industry sector in Germany generating production value of EUR 149.5 billion in 2010. 4 SWOT- Market Analysis
Strengths High quality Coffee Different type of product Sustainable vision- CSR concerns Strong Company Image Flexible purchase behaviour: Drink in or Take away Well-known in Columbia and some other countries Opportunity One of biggest European market Average per capita consumption of 6.7 kg, main beverage in Germany Segment Market - Diversity for Coffee lovers. Weakness - Geographical Disadvantage - Limited distribution-Shop only. Not available in supermarket.

Threats Other Big brands in Germany Customer behaviour Trends Favor of home coffee Barriers :

Culture, language, etc. Importing Tariff/ Operation Tax Administration Issues

International Business Environment

JUAN VALDEZ Caffee Shops in GERMANY

Strengths: Through SWOT analysis, Juan Valdez coffees strengths mainly from its company image. By strictly selection process of coffee grower, Juan Valdez ensures the quality of brand coffee. At the same time, Juan Valdez emphasizes the social responsible for environment and local economy. This sustainable vision fits the need of target market in Germany. Weakness: Compared with other European brand in Germany, Juan Valdez, as Latin American producer, has relatively geographical disadvantage when it comes to transportation fee. Besides, Juan Valdez coffee sells coffee in self-owned shops. Customers have less access to Juan Valdez products. Opportunity: France and Germany are main coffee market in Europe. Germany consumed 9,292 thousands 60 kg bags in 2010, which represented 6.8% of total world consumption. German people are also the heavy coffee consumer. A statistic shows that from 2000-2010, German people has average per capita consumption of 6.7 kg. Above factors could indicate Germany is a potential market for people who is in loved with coffee and seeks for diversity choice of coffee. Threats: There are some risks and difficulties in the way of establishing a new brand in Germany for the Juan Valdez Cafe. Although people in Germany are very interested in coffee, they are currently being benefited from a number of very famous and powerful coffee brands like Starbucks, Jacobs, Nescafe, etc. So, one of the most important risks in establishing a new coffee brand in Germany for Juan Valdez would be competing with these big brands. To reduce the risk of getting lost in such a market place, it is suggested to invest a relatively high amount of capital in advertisement. Another risk might be currency issues. The question will be which currency to choose to do all accounting operations with. Whether choose Colombian currency or Euro, or even pick a different currency like Dollar. It will be somehow more complicated to answer to this question and one of the ways would be to investigate the currency stabilities for a period of time in the recent past and also consider the future prediction of the currency value. Next issue might be the operation taxes and importing tariffs of the raw materials to be entered into Germany. If the tariffs are very high, then the process of importing the raw coffee materials into the Germany will be under question of if the process will be beneficiary enough to go through or not. Administrative affairs issue might be another problem. Juan Valdez needs to take it into account and try to get some information about administration in Germany. It also can get benefited from hiring specialists and lawyers. 5. Marketing Strategy (Marketing Mix - 4 Ps) Through our entry strategy we want to emphasize in the added value of the entire products offer by JUAN VALDEZ CAF in order to come up with a non-standard and unique product. We want to keep the actual marketing strategy of this brand which aims to transfer Colombian coffee culture in the new places the open coffee shops: The experience of drinking the best quality coffee, learn about flavors, aromas, beans and taste the artisanal coffee bakery products. We think German people and foreigners living in Germany will be interested because they have a strong coffee culture and they are open to new cultures. What makes JUAN VALDEZ different from bigger coffee shops multinational like Starbucks, Nestle..?

International Business Environment

JUAN VALDEZ Caffee Shops in GERMANY

STRATEGY KEY POINTS: - Establish a Wholly owned subsidiary - Open a first big shop in BERLIN (easy of entry/ cost of entry) - Location: PRENZLAUER BERG - Rent-Renovation (costs) - Target Market: All age, coffee lovers. Products for every kind of taste. Coffee to go or to stay Product: KEEP COLOMBIAN COFFEE EXPERTISE AND QUALITY IN COFFE BEVERAGES, Same retailing formula worldwide: Adapting it to local preferences, Bio and organic certified products: The organic food movement has long since achieved mainstream status in Germany. Organic coffee and organic fruit juices grew by 27 percent reaching EUR 340 million in 2010 (Ethnic foods). With more than EUR 5.8 billion in organic food sales in 2009. Price As a coffee specialist, Juan Valdezs coffee price will be high quality but relatively expansive. Price policy is close to other International companies such as Starbucks, Segafredo, Lavazza and Balzac. There are no big differences between prices of those shops. As a result, brand identity will be an important issue when penetrating the market. Promotion It is very important for Juan Valdez to make a high brand marketing because Juan Valdez is not yet known in Europe but have to deal with strong competitors like Starbucks. We are aware of it that Juan Valdez needs heavy advertisement at the beginning to promote the brand, but we are really sure at Juan Valdez will be as successful as in Colombia. We are going to promote our product with a media selection strategy and therefore we would use channels like magazines, newspapers, flyers, transit advertising (bus). We would arrange an opening day and offer some samples of our products (little coffee cups and cake pieces). Children could get a balloon with our brand on it. Place: For our first shop we have chosen Berlin because it is the capital city and the pulse of Germany. Berlin is very popular for its diversity, internationality and innovations. Through a good word-of-mouth advertising we could improve our recognition and later on concentrate on other cities in Germany.

Sources

www.gtai.com/fileadmin/user_upload/Downloads/Industries/Food_Beverages/1_Englisch/IndustryOve rview_FoodBeverages_July2011_GTAI.pdf www.federacionnacionaldecafeteros.org www.juanvaldez.com www.ico.org.

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