Starbucks is a global brand operating 5,689 outlets in 28 countries and subsequent to entering the UK market in 1998, has emerged very quickly to become the market leader.
All its outlets are company owned which helps to ensure the maintaining of a strong brand. In addition, the possession of a large infrastructure and excellent operational capabilities means that it has the resources in place to continue expansion at the current rate without allowing its brand or quality of coffee to become diluted.In addition to serving hot beverages and food, Starbucks also sells a range of other merchandise and operates a wholesale division. Costa coffee which is part of Whitbread Plc was the dominant player until 2002. The company has plans for continued expansion and plans to expand to around 500 outlets by 2004/ 05. It is one of the few brands to turn a profit, reported to be i?? 6.
9 million in the year end to March 2002. Costa Coffee also operates a highly successful wholesale division supplying to a wide range of businesses, including caterers, restaurants, health clubs and offices.This ranges from the provision of coffee and machines to full Costa service. Costa is seeking to curtail its growth in London with a focus on the regions and large provincial towns (representing the general trend for the branded coffee shops). Caffe Nero is the largest UK based, independent chain and operates across 40 towns and cities in the UK through its network of 110 stores. Its outlets are mainly high-street based although there are also some units in airports and railway stations.
Like its rivals, it also has plans for aggressive expansion as highlighted by its take-over of the Aroma brand in March 2002. Given its national presence, it has needed to reorganise and centralise its supply structure and has sought to take advantage of economies of scale as it seeks to meet market expectations of unit and profit targets. Puccino's is a flexible chain based predominantly in the South East with outlets comprising kiosks in transport hubs and larger stores on high streets.Flexibility of brand allows it to fit various locations, however this has the disadvantage that the different store formats may lead to a fractured brand identity.
This may explain the lower brand awareness identified in an Allegra survey. Unlike its competitors, Puccino's faces the problem of maintaining tight operational control over a loose network of franchises. Operating as a franchise may further reduce opportunities for attracting outside financing but this may not be such a problem as it has group backing with Segafredo Zanetti holding a 20% stake.The most dismal performer in recent times has been Coffee Republic which has failed to perform to expectations. Its outlets are to be found mainly in the high street, with half its sites located in London. It has undergone a programme of divestments which have seen the closure of most bookshop concessions.
It has also sought to arrange new supply deals potentially saving the company around i?? 1 million. Observers are commenting that it may be turning the corner as a result of its restructuring program.Given its strong brand it may be able to build back its position once its financial health improves. There appears to be very little differentiation between most of the brands with the majority of coffee shops being based on the European model.
Even Starbucks, widely regarded in the UK as characterising the American coffee shop model, is originally based on the European coffee shop culture, with servers referred to as 'baristas' and sizes given Italian names. In all of the branded chains, the food offering is also usually Italian in flavour, with panninis and ciabatta popular choices.Cakes and pasties are also popular and of a similar type. This has resulted in very little differentiation within the industry although the brands themselves are trying to provide this through the promotion of customer service, new product development as well as in-store atmosphere and ambience (Mintel, 2003). In addition to a similar product offering, the pricing structure also appears to be almost identical.
Thus these branded chains do not seem to be differentiating on the basis of price.
