DifferentiateAnalysis Alternatives Implementation Outcomes 1
Café XaraguaRobert CurtisRachelle HincheyAmanda TindyebwaEmma Zaorski
DifferentiateAnalysis Alternatives Implementation Outcomes 2
How can Café Xaragua differentiate itself in the competitive Canadian
coffee industry?
DifferentiateAnalysis Alternatives Implementation Outcomes 3
Strategic prioritiesSocial Responsibility
Quality
Brand image
Differentiation
Gather necessary funding
DifferentiateAnalysis Alternatives Implementation Outcomes
Coffee industry of Canada• Large commercial players• Small independents
High competition
• Ease to start up• Low barriers to entry
High threat of new
entrants• Many different casual beverage
optionsHigh
subsidies
Need to differentiate product from competition and substitutes
DifferentiateAnalysis Alternatives Implementation Outcomes 5
Internal analysis
Rare product sourcingStrong relationships with
contactsCommitted to social
responsibilityHigh quality product
WeaknessesLimited store front
experienceLimited startup capital
Limited product portfolioRelying on others for
baked goods
Leverage core competencies
Strengths
DifferentiateAnalysis Alternatives Implementation Outcomes 6
Customer Profile-Young knowledgeable consumers-Appreciate affiliation with social good-Low uncertainty avoidance-Individualistic-Affluent aging population-Price insensitive-Appreciation for cultural diversity
18-35yrs and 45-60yrs+
DifferentiateAnalysis Alternatives Implementation Outcomes 7
Premium coffee industrySo
cial I
mpa
ct
Brand affiliation
Bridge
Head
GMCR
Starbucks
Xaragua
DifferentiateAnalysis Alternatives Implementation Outcomes 8
Strategic alternatives
Differentiate
License and open store
Store on wheels
Focus on online sales
DifferentiateAnalysis Alternatives Implementation Outcomes 9
1- License and open store
Larger market exposure
Creates synergies
Limited service differentiation
Potential degrading of brand image
Open a store as well as license your product to local cafés with strong brand recognition
that have similar ideals on social responsibility
Differentiate through outlets
DifferentiateAnalysis Alternatives Implementation Outcomes 10
2- Store on wheels
Attract attention and excitement
Create high levels of brand awareness
Time to acquire permits
Cost to modify food truck
Have a temporary store in a mobile food service truck to increase reach and brand
recognitionOpen a store after 4 monthsDifferentiate through reach
DifferentiateAnalysis Alternatives Implementation Outcomes 11
3- Focus on online sales
Lower cost to implement
Already familiar with online sales
Difficult to make partnership with grocery stores
Less reach
Increase online sales and begin selling in grocery stores.
Differentiate on price
DifferentiateAnalysis Alternatives Implementation Outcomes 12
Key decision criteriaCriteria Key performance indicator
Sustainable Profits to fund social and environmental programs in Haiti
Ease of implementation 2 direct customer channels in 1 year
Financially feasible Low initial investment
Reach Access to heavy local and tourist traffic
DifferentiateAnalysis Alternatives Implementation Outcomes 13
Key decision matrixLicense and open store Store on wheels Focus on online
sales
Sustainable 3 2 1
Ease of implementation 2 3 1
Financially feasible 2 1 3
Reach 2 3 1
Total 9 9 6
DifferentiateAnalysis Alternatives Implementation Outcomes 14
Recommendation
Short-term
• Raise awareness with store on wheels
Open store Long-term
• License product to other businesses
DifferentiateAnalysis Alternatives Implementation Outcomes 15
MarketingLogistics& Operation
s
Human Resources Finance
DifferentiateAnalysis Alternatives Implementation Outcomes 16
MarketingMarket research
Large use of social media
Store on wheels
Free mini samples in store
Emphasize Haitian culture and social impact
DifferentiateAnalysis Alternatives Implementation Outcomes 17
Logistics & Operations Lease mobile food trucksEstablish supply contracts
Measure success in trees planted/ year
Train in house roasting to Crave roasting and Bemard Callebaut
DifferentiateAnalysis Alternatives Implementation Outcomes 18
OperationsRent out food trucks on contractual
basisLocate and negotiate rent prices for
brick and mortarEstablish baked and specialty goods
supplierLocate licensees with similar value
proposition
DifferentiateAnalysis Alternatives Implementation Outcomes 19
Human Resources Communicate vision to focus on Haitian
reforestation with quality coffee
Hire and train coffee baristas & license partners
Engage customers' in Haiti reforestation programs
Celebrate and reward social impact
DifferentiateAnalysis Alternatives Implementation Outcomes 20
Projection analysis
Revenue per daySales per day
0 50 100 150 200 250 300
Operating margin
Best case (+10%)
$ -
$ 1,191
$ 2,381
$ 3,572
$ 4,763
$ 5,953
$ 7,144
Base case $ -
$ 984
$ 1,968
$ 2,952
$ 3,936
$ 4,920
$ 5,904
Worst case (-10%)
$ -
$ 797
$ 1,594
$ 2,391
$ 3,188
$ 3,985
$ 4,782
Estimated 200-300 sales per day
DifferentiateAnalysis Alternatives Implementation Outcomes 21
Breakeven analysis
Earnings before income and tax
Sales per day
0.3 10.3 20.3 30.3 40.3 50.3 60.3
Operating margin
Base case (+10%)
$ -212,113
$ -126,387
$ -40,661
$ 45,065
$ 130,791
$ 216,517
$ 302,243
Base case $ -212,544
$ -141,696
$ -70,848
$ -0
$ 70,848
$ 141,696
$ 212,544
Worst case (-10%)
$ -212,934
$ -155,547
$ -98,160
$ -40,773
$ 16,614
$ 74,001
$ 131,388
Sell 30.3 cups a day to breakeven
DifferentiateAnalysis Alternatives Implementation Outcomes 22
FinanceRequest bank loan from local Canadian
banks such as Scotiabank or RBC
Commit to interest coverage ratio (ICR) debentures
Current ICR = 26.1ICR collar = 15
Give bank option to call loan if ICR falls below collar
DifferentiateAnalysis Alternatives Implementation Outcomes 23
Short term timelineOperations
HRR
Marketing
Finance
Monday 1 year +Q1 Q2 Q3
Engage customers
Truck campaign
Communicate
Launch
Hire and train
Social tourism
Bank Loan
Store design
Lease trucks
Establish supply contracts
Locate license
s
DifferentiateAnalysis Alternatives Implementation Outcomes 24
Se
verit
y
Lack of suitable
businesses to
license with
Likelihood
Cannibalization
Shortage of Arabica
grain
Begin due diligence
early
Begin product
expansion
Store excess in case of storm
DifferentiateAnalysis Alternatives Implementation Outcomes 25
Financial outcomes & assumptions
2012 2013 2014 2015 2016 2017 $-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
Licensing agreement will increase operating profit by 5% for the next 5 years
Marketing expense will increase 1% per year for 5 years
$730 thousand Net income in
2017
DifferentiateAnalysis Alternatives Implementation Outcomes 26
Thank you! Questions?
DifferentiateAnalysis Alternatives Implementation Outcomes 27
Constants Shop size 1571
Lease cost per sqft $ 41
$ 45
$ 50
Lease cost $ 63,626
$ 70,695
$ 77,765
Fixed Improvement cost $ 31,500
$ 35,000
$ 38,500
Average Baked good $ 1.13
$ 1.25
$ 1.38
Employee salaries $ 16.00
Benefits package $ 3.20
Hours per week (2 staff) 126
Weekly staffing $ 2,019.20
Part time Manager salary per year 25000Full time Manager salary per year 60000
Incorporation $ 6,000.00 Licenses and permits
Professional certification $ 10,000.00
Lease improvements $ 35,000
Total one-time expense $ 51,000.00
DifferentiateAnalysis Alternatives Implementation Outcomes 28
Column1 2012 2013 2014 2015 2016 2017
Operating Profit $ 1,062,720 $ 1,115,856 $ 1,171,649 $ 1,230,231 $ 1,291,743 $ 1,356,330
Wages $ 32,307 $ 32,630 $ 32,957 $ 33,286 $ 33,619 $ 33,955
Lease expense $ 70,695 $ 70,695 $ 70,695 $ 70,695 $ 70,695 $ 70,695
Manager expense $ 25,000 $ 25,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000
Marketing expense $ 1,000 $ 1,030 $ 1,061 $ 1,093 $ 1,126 $ 1,159
Utilities expense $ 393 $ 393 $ 393 $ 393 $ 393 $ 393
Insurance $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000
Admin expense $ 4,200 $ 4,200 $ 4,200 $ 4,200 $ 4,200 $ 4,200
Maintenance $ 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000 $ 6,000
One-time expenses $ 51,000
Total expenses $ 193,595 $ 142,948 $ 178,305 $ 178,667 $ 179,032 $ 179,402
EBIT $ 869,125 $ 972,908 $ 993,344 $ 1,051,565 $ 1,112,711 $ 1,176,928
Interest expense $ 32,500 $ 32,500 $ 32,500 $ 32,500 $ 32,500 $ 32,500
Tax expense (.35) $ 292,819 $ 329,143 $ 336,295 $ 356,673 $ 378,074 $ 400,550
Net Income $ 543,806 $ 611,265 $ 624,548 $ 662,392 $ 702,137 $ 743,878