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  • 1. The Story of Cafédirect Social Enterprise Marketing
  • 2. Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 1
  • 3. Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 2
  • 4. S ocial Enterprise Social enterprises social mission driven organizations which trade in goods or services for a social purpose. Social Enterprise Commercial business To generate profit to further their To maximize shareholder value social and environmental goals e.g. Cafédirect e.g. The Body Shop 3
  • 5. 4 ocial Enterprise S
  • 6. What is Cafédirect? Cafédirect is a UK-based alternative trading organization and it is currently one of the largest fair trade hot drinks companies in the world. Fair trade? „is a trade partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. „contributes to sustainable development by offering better trading conditions to, and securing the rights of, disadvantaged producers and workers - especially in the South. „is usually conducted by alternative trading organization (ATOs), which have often been founded particularly for the purpose of fair trade 5
  • 7. How fair trade work? A minimum price, which always be paid even if the world market price falls below this point. A price premium of a given percentage, which is paid when the world market price rises beyond the minimum price. Pre-financing of 60% of the total order to allow smallholders to buy raw materials. Training in quality control and marketing know-how to build the capacity to also trade on the world market independently of fair trade. 6 Sources: see Littrell and Dickson, 1999; Mayoux,2001; Tallontire, 2001a
  • 8. C The History of Cafédirect afedirect 2007 „Cafédirect was voted as the most recommended brand in 1994 2004 the nation in a survey of • Sales of • Cafédirect 2,000 companies Cafédirect start become a increasing publicly listed dramatically company 1991 • Cafédirect was born 1989 • Collapse of the International Coffee Agreement 7
  • 9. Timeline (1989-1993) Cafédirect knew that they could not depend upon the fair trade message alone to convince buyers. In order to compete, they would have to deliver real value to the consumers and meet the needs of the supermarket buyer. 8
  • 10. Timeline (1989-1993) Increase of products quality At the very beginning, the company focus purely on charity rather than quality, which led to an dissatisfaction towards its products. After Penny Newman stepped onto the company’s MD, she accelerated the organization’s shift from charity spin-off to ethical business venture, by pushing for more customer focus and repositioning Cafédirect as a high quality coffee brand. 9
  • 11. Sales Growth (1992-2000) 10
  • 12. Timeline (1995-present) The success of Cafédirect Changes of communication approach Old communication approach: Advertising 1993-1995 • focus on the fair-trade message • emphasize on producer advantages. 11
  • 13. New communication approach C Advertising 1996-1998 afedirect • address the quality coffee story • focusing as it does on how to make the perfect cup • the producer still remained the central theme of these campaigns. Advertising 1999-2001 The picture of a smiling Machu Picchu conveyed products qualities-its smell, its freshness, and its exotic origin. 12
  • 14. C afedirect Increase of distribution channels Original Oxfam’s over 600 shops Traidcraft’s mail-order catalogue In 1993, Gained national distribution in the Co-op and other supermarkets. Later stages, Offering its products through vending machines Expanding its products distribution channels to overseas 13
  • 15. Source: Marketing Relationship, Helen Peck, Chartered institution of Marketing 14
  • 16. C afedirect Increase of products varieties 15
  • 17. C Today afedirect – 39 grower organizations across 13 developing countries – 260, 000 farmers and directly improving the lives of more than 1.4 million people -- In 2007, the company's market share for hot drinks equated to 34%, 32%, and 14% respectively of the UK's Fair-trade coffee, tea, and drinking chocolate markets. -- In the overall market, Cafédirect is the 5th largest coffee brand and 7th largest tea brand in the UK.[ 16
  • 18. 17 afedirect C
  • 19. Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 18
  • 20. Theory 1 Corporate Reputation Quotient • Six drivers of the corporate reputation quotient Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations 19
  • 21. Theory 1 Corporate Reputation Quotient Products and Services – To guarantee high quality • Cafédirect controlled the products delivered • It also invested heavily in training producers on the ground – Key achievements in 2000 demonstrated Cafédirect’s success in attaining high quality • “Best coffee” by Best magazine, awarded 5 stars by Prima magazine • Voted “ favorite coffee” by the UK’s leading consumer magazine – Fair trade Direct trade • By providing long-term contracts and producer education, direct trade allows importers to obtain high quality coffee ‟ year in and year out • While most large coffee importers buy coffee beans on the spot market, direct trade has a built-in supply chain for reliable high-quality gourmet coffee. 20
  • 22. Theory 1 Corporate Reputation Quotient Vision and leadership – Ian Lepper: Cafédirect’s first CEO. • After he left, Cafédirect went through some turbulent stages: – The partnership between the four founding ATOs was being stretched. – Overall sales in 1998 increased by only 8%. – Penny Newman: • Bring Cafédirect from charity spin-off to ethical business venture • New vision: reposition Cafédirect as a high quality coffee brand – Anne MacCaig: Cafédirect’s new Chief Executive • She has a wealth of business and marketing experience – She has an economics degree from the University of Birmingham. – In the past 20 years she has worked with major brands here in the UK and abroad, including Persil and Rolls-Royce plc. 21
  • 23. Theory 1 Corporate Reputation Quotient Workplace environment: – For Cafédirect, employees are their producers (small-holders in the third world) – Several benefits are provided to its producers (this is also how fair trade works) • A minimum price, which will always be paid even if the world market price falls below this point. • A price premium of a given percentage, which is paid when the world market price rises beyond the minimum price. • Pre-financing of 60% of the total order to allow small-holders to buy raw materials. • Training in quality control and marketing know-how to build the capacity to also trade on the world market independently of fair trade. 22
  • 24. Theory 1 Corporate Reputation Quotient Social responsibility: – Cafédirect’s mission statement: • At Cafédirect our mission is to change lives and build communities through inspirational, sustainable business. We focus our social and economic impact in the developing world. 23
  • 25. Theory 2 Kano Model Satisfaction “Didn’t know I wanted it but I like it.” Satisfier One Dimensional Desired Quality Delighters Excited Quality Service Service Performance Performance Dissatisfier “Cannot increase Must-be my satisfaction, but Expected Quality can decrease.” Dissatisfaction 24 Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-48
  • 26. Theory 2 Kano Model 3 categories of quality attributes influence customer satisfaction: „ Basic Factors Dissatisfier , Must be’s ,‟Cost of Entry, Basic needs „ Performance Factors Satisfier, More is better, Competitive, Performance „ Excitement Factors Delighter ,‟Latent Need, Differentiator, Surprise 25
  • 27. Theory 2 Kano Model Factors KANO Category How to do better Sanitation & Safety Basic Needs Have to keep the customers above the average Quality Basic Needs satisfaction level Taste Performance Package Performance Sustaining improve on to gain more return Distribution Performance Sales Promotion Surprise Dig and focus on Brand Surprise Kano Model applied to Food&Beverage industry 26 Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-48
  • 28. Theory 2 Kano Model Quality - Clients were usually concerned citizens for whom the charity aspect of fair trade prevailed over product quality. - Penny Newman-reposition Cafédirect as a high quality coffee brand - Direct Trade(long-term contracts and producer education built-in supply chain for reliable high-quality gourmet coffee) Sanitation & Safety - Government report - Product Recall of Cafédirect product (found small pieces of glass) - Hazard Analysis Critical Control Point, or HACCP, is a standard of food safety management system for any food producer wanting to sell into the UK and other European markets. Now it is for all parts of the supply chain Basic factors 27
  • 29. Theory 2 Kano Model Distribution - Charity, Church & Fair-trade world shops - Target the mainstream distribution channels such as supermarkets, catering, and coffee bars Taste -quot;Some batches tasted very good and others tasted very poor. That generated a lot of negative reaction in the UK to Cafédirect in the first years.quot; (Hudghton, 2002, interview) - Cafédirect's Gold Standard Programme - Train growers to professionally taste their own products, helping them to improve quality and understand market value Performance factors 28
  • 30. Theory 2 Kano Model Package - Pure for charity (poor people & slogan for sympathy) - Cafédirect undertook a major brand relaunch in 2006 to help unify the brand look and aid it competitiveness Performance factors 29
  • 31. Theory 2 Kano Model Brand - 8 Awards in 2008 - August 2008: Cafédirect triumphs in Great Taste Awards - In a survey of 2,000 global brands Cafédirect ranks No. 1 as the most recommended brand Social Enterprise concept - Combining taste, price, ethics, and availability - 良心消費主義 (ethical consumerism) Excitement factors 30
  • 32. Theory 3 Product/Market Grid Source: Cafédirect annual report 2006-2007 31
  • 33. Theory 3 Product/Market Grid Ansoff Matrix Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124 32
  • 34. Theory 3 Product/Market Grid Cafédirect use 3 major approach Encourage current customers to  buy more Attract competitor’s customers  Try to change incidental clients  to regular clients Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124 33
  • 35. Theory 3 Product/Market Grid Tesco increased its Cafédirect offering by another five products in 2006  Morrison’s expanded Cafédirect range, adding Medium Blend, Organic  Decaffeinated, Machu Picchu and Palenque Roast etc in 2006 At the beginning of 2007, Co-op increased the number of their stores selling  Cafédiret’s products. They have agreed a strategy to encourage customers to buy more Cafédirect products this year. (annual report 2007 p.21) Costa coffee shops decided to sell Cafédirect’s products.  Keep high quality products  Emotional approach  34
  • 36. Theory 3 Product/Market Grid When the current product is launched in a new market, there are three approaches to develop the market: 1. Expand distribution channels. 2. Sell in new locations. 3. Identify the potential users. Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124 35
  • 37. Theory 3 Product/Market Grid Cafédirect introduce existing products in foreign market Hong Kong Listing with a major supermarket chain “Parknshop” (50 stores) Ireland Now available in all their major supermarket and many independent stores Sales increased by 19% in 2005 Singapore Cafédirect Annual report 2005-06 36
  • 38. Source: Cafédirect annual report 2006-2007 37
  • 39. Theory 3 Product/Market Grid Cafédirect Annual report 2005-07 38
  • 40. Theory 3 Product/Market Grid Originally, coffee, later, hot chocolate When a new product is launched in the current market, the intensive growth strategies could be to: 1. Develop new features. 2. Develop different quality levels. 3. Improve the technology. Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124 39
  • 41. Theory 3 Product/Market Grid Cafédirect Annual report 2005-06 40
  • 42. Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 41
  • 43. Corporate Reputation Nike vs. child labor in the 90s Quotient application Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations 42
  • 44. Corporate Reputation Quotient application People criticizes: •“Nike’s success story is not based on good name and advertising alone but also attached to it is the tears of tortured workers and child labor.” •“Nike has the habit of hiding behind its good public image and its effective means of promotions and advertising. “ Stock price 1992 Nov, US$79.51 1993, Sep. US$ 41.98 reduced 47.2% 43
  • 45. Corporate Reputation Quotient application Nike’s solution – Code of Conduct,1992 – Minimum age for employment, 1998 • Footwear(18), others(16) • Apply Occupational Safety and Health Administration (OSHA) standard – Nike set up a Corporate Responsibility and Compliance Department, 2000 • Join the Global Alliance for workers and communities and Fair Labour Association 44
  • 46. Corporate Reputation Quotient application Nike’s Current Code of Conduct – Prohibition of forced labor – Prohibition of child labor – Compensation:pay at least the minimum total compensation required by local law – Benefits :comply with all provisions for legally mandated benefits – Ensure overtime payment – Ensure a health and safety working environment – Environment: continuous improvement in processes and programs to reduce the impact on the environment – Maintain on file and documentation to demonstrate compliance with this Code of Conduct, and to make these documents available for auditor's inspection upon request 45
  • 47. Kano Model application 46
  • 48. ✴ Active Links Kano Model ✴ Legibility application ✴ Safety 47
  • 49. ✴ Storage Kano Model ✴ Upload speed application ✴ Tag & Search 48
  • 50. ✴ Photo Editing Kano Model ✴ Community application ✴ Fun 49
  • 51. Photo Editing 50
  • 52. Photo Editing 51
  • 53. Community 52
  • 54. Community 53
  • 55. Fun 54
  • 56. Fun 55
  • 57. Fun 56
  • 58. Product/Mar ket Grid application „Aggressively expanding the number of stores in Japan „Strengthening the group’s core brands and maintaining flexibility with regard to distribution channels and retailing formats 57
  • 59. Product/Mar ket Grid The result was a 2.2% increase in net sales to 136,312 million yen application 58
  • 60. Product/Mar ket Grid application „Business Expansion in the Asian and American Markets „Overseas sales increased 17% year on year 2007 due to the business expansion on China, Taiwan and South Korea. 59
  • 61. Product/Mar ket Grid application 2006, Perfume containing natural fragrances Skin care series featuring natural fruit extracts 60
  • 62. Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 61
  • 63. New Cafédirect Old Cafédirect Business Idealistic Style Sales, Marketing Intellectual Skills Commercial but ethical Non-commercial Values Professional Semi-volunteers Staff Performance-based, Democratic, Political Structure clear responsibilities From Cafédirect’s case, we learn that 1. SE should keep long-term relationships with small-holders and set high standard of quality 2. SE should market itself just like commercial organizations 3. Guarantee basic factors, improve performance factors and make Learning “Social Enterprise” identity as the excitement factor 4. Expand to mass market by increasing distribution channels Insights 62
  • 64. The Divine Chocolate • One of the fairtrade organization selling chocolate bar in UK • Owned by South African cocoa farmers co-orpeative • Their chocolate bar was sold through charity and fair- trade channels (e.g Worldshops) before 1997. Learning Insights 63
  • 65. The Divine Chocolate Go for mainstream market • In 1997, the cocoa farmers decided to invest in a chocolate bar of their own. They decided to produce a mainstream chocolate bar to compete with other major brands in UK. Product innovation and good quality In October 1998, Divine Fairtrade milk chocolate, made from its own best of the best fairly traded cocoa beans was launched and by Christmas, had made it onto the supermarket shelves .  Continuous quality improvement/control and innovation had made Divine successfully enter the mainstream market. Learning Insights 64
  • 66. The Divine Chocolate Good quality/ Good company image Beans mean Business In a ferociously competitive chocolate market worth almost £4 billion in the UK alone, as so many people adore delicious chocolate, the potential for Divine's success is huge. Divine has been developed to appeal to the British public's palate, and it tests favorably against all the market leaders. The UK has one of the highest per capita levels of consumption of chocolate in the world and therefore, even capturing a small proportion of this market translates into Learning real benefits for cocoa farmers. Insights 65
  • 67. The Divine Chocolate • Profit goes back to the farmers(i.e the smallholders) In 2006, one of the organization’s founder The Body Shop made the brilliant decision to donate its shares in the Company to the cocoa farmers in South Africa- so now the farmers' cooperative has an even bigger stake in Divine. Learning Insights 66
  • 68. The Divine Chocolate Learning Insights 67
  • 69. The Divine Chocolate Divine Partners (Smallholders in South African) Learning Insights 68
  • 70. Q&A
  • 71. Backup
  • 72. F air Trade Global Fair trade Sales 2007 $2,381,000,000 2006 $1,623,000,000 2005 $1,141,570,191 2004 $831,523,066 2003 $554,766,710 2002 $300,000,000 2001 $248,000,000