The Story of Cafédirect Social Enterprise Marketing
Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 1
Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 2
S ocial Enterprise Social enterprises social mission driven organizations which trade in goods or services for a social purpose. 3 Social Enterprise Commercial business To generate profit to further their social and environmental goals To maximize shareholder value e.g. Cafédirect e.g. The Body Shop
S ocial Enterprise 4
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. 5
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
Sources: see Littrell and Dickson, 1999; Mayoux,2001; Tallontire, 2001a 6 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.
Collapse of the International Coffee Agreement
Cafédirect was born
Cafédirect become a publicly listed company
Cafédirect was voted as the most recommended brand in the nation in a survey of 2,000 companies
The History of Cafédirect
Sales of Cafédirect start increasing dramatically
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.
Timeline (1989-1993) 8
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
Sales Growth (1992-2000) 10
Timeline (1995-present) The success of Cafédirect Changes of communication approach 11 Old communication approach:
focus on the fair-trade message
emphasize on producer advantages.
C afedirect New communication approach
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
C afedirect Original Oxfam’s over 600 shops Traidcraft’s mail-order catalogue Increase of distribution channels 13 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
14 Source: Marketing Relationship, Helen Peck, Chartered institution of Marketing
C afedirect Increase of products varieties 15
39 grower organizations across 13 developing countries
260, 000 farmers and directly improving the lives of more than 1.4 million people
Today -- 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
C afedirect 17
Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 18
Corporate Reputation Quotient Theory 1
Six drivers of the corporate reputation quotient
Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations 19
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.
Theory 1 20
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%.
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.
Theory 1 21
Corporate Reputation Quotient
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.
Theory 1 22
Corporate Reputation Quotient
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.
Theory 1 23
Kano Model Theory 2 Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-48 24
3 categories of quality attributes influence customer satisfaction:
Dissatisfier , Must be’s ,–Cost of Entry, Basic needs
Satisfier, More is better, Competitive, Performance
Delighter ,–Latent Need, Differentiator, Surprise
Theory 2 25
Kano Model Theory 2 Kano Model applied to Food&Beverage industry Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-48 26 Factors KANO Category How to do better Sanitation & Safety Basic Needs Have to keep the customers above the average satisfaction level Quality Basic Needs Taste Performance Sustaining improve on to gain more return Package Performance Distribution Performance Sales Promotion Surprise Dig and focus on Brand Surprise
Kano Model Theory 2 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
Kano Model Theory 2 Performance factors
- Charity, Church & Fair-trade world shops
- Target the mainstream distribution channels such as supermarkets, catering, and coffee bars
"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." (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
Kano Model Theory 2 Performance factors 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 29
Kano Model Theory 2 Excitement factors 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) 30
Product/Market Grid Theory 3 Source: Cafédirect annual report 2006-2007 31
Product/Market Grid Theory 3 Ansoff Matrix Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124 32
Product/Market Grid Theory 3 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
Product/Market Grid Theory 3
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
Product/Market Grid Theory 3 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
Product/Market Grid Theory 3 Cafédirect Annual report 2005-06
Cafédirect introduce existing products in foreign market
Listing with a major supermarket chain “Parknshop” (50 stores)
Now available in all their major supermarket and many independent stores
Sales increased by 19% in 2005
Source: Cafédirect annual report 2006-2007 37
Product/Market Grid Theory 3 Cafédirect Annual report 2005-07 38
Product/Market Grid Theory 3 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
Product/Market Grid Theory 3 Cafédirect Annual report 2005-06 40
Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 41
Nike vs. child labor in the 90s Corporate Reputation Quotient application Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations 42
“ 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
Corporate Reputation Quotient application 43
Code of Conduct,1992
Minimum age for employment, 1998
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
Corporate Reputation Quotient application 44
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
Corporate Reputation Quotient application 45
Kano Model application 46
Kano Model application 47
Tag & Search
Kano Model application 48
Kano Model application 49
Photo Editing “ Wow, my photos are sharpened automatically” 50
Photo Editing “ Wow, I can add my own Text and Stickers” 51
Community “ Wow, I can find something interesting about Hong Kong” 52
Community “ Wow, this guy is quite popular here” 53
Fun “ Wow, the way of browsing is cool” 54
Fun “ Wow, I can explore the world” 55
Fun “ Wow, they have widgets can be embedded into other sites” 56
Product/Market 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
Product/Market Grid application The result was a 2.2% increase in net sales to 136,312 million yen 58
Product/Market Grid application 59
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.
Product/Market Grid application
2006, Perfume containing natural fragrances
Skin care series featuring natural fruit extracts
Agenda Introduction Social Enterprise Fair Trade Cafédirect Theories Corporate-Reputation Quotient Kano Model Product/Market Grid Case Application Learning Insights 61
Learning Insights 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 “Social Enterprise” identity as the excitement factor 4. Expand to mass market by increasing distribution channels 62 New Cafédirect Old Cafédirect Style Business Idealistic Skills Sales, Marketing Intellectual Values Commercial but ethical Non-commercial Staff Professional Semi-volunteers Structure Performance-based, clear responsibilities Democratic, Political
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.
63 Learning Insights
Go for mainstream market
In 1997, the cocoa farmers decided t o 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.
The Divine Chocolate 64 Learning Insights
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 real benefits for cocoa farmers.
The Divine Chocolate 65 Learning Insights
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.
66 Learning Insights The Divine Chocolate
67 Learning Insights The Divine Chocolate
Divine Partners (Smallholders in South African) 68 Learning Insights The Divine Chocolate
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