Malaysia Campus

Nottingham University Business School

MBA Programme

Course : Marketing

Course Code : N1DM04

Module Convenors : Nelson Oly Ndubisi

Assignment Title:

Exam Coursework : Marketing Plan For Starbucks VIA In Malaysia

ZHIJING, EU (UNIMKL-004151)

Date: 14 th January 2010

COPY I

[Word Count : 2522 Words – Excluding Abstract , Section Headings , Table Headings and Appendices]

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Abstract

The instant coffee market within Malaysia is an attractive market to enter given the growing

coffee culture locally. The market is currently dominated by Nescafe and a few other

domestic brands with specific localised products. Starbucks has an opportunity to introduce

a new instant coffee product that is uniquely positioned against it’s competitors. However

the key risk that needs to be managed within the market mix is the dilution of the brand

identity as Starbucks has always been associated with premium coffee and this is in contrast

to the instant coffee market which has traditionally been viewed as “down-market” of the

gourmet segment. Key areas of attention within the marketing plan to ensure success would

be the consistency in the promotional messaging strategy and a development of

appropriate distribution channels as Starbucks will be entering a mature market as a late-

comer.

[141 words]

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Contents

1.Introduction........................................................................................................................................4

2.Market Evaluation..............................................................................................................................5

2.1 Market Environment Analysis......................................................................................................5

2.2 Competitive Landscape For Instant Coffee..................................................................................7

2.3 Market Trends.............................................................................................................................8

2.4 SWOT Analysis.............................................................................................................................9

2.4.1Strengths...............................................................................................................................9

2.4.2Weaknesses.........................................................................................................................10

2.4.3Opportunities.......................................................................................................................10

2.4.4 Threats................................................................................................................................10

3.Marketing Strategy...........................................................................................................................12

3.1Brand Positioning........................................................................................................................12

3.2 Target Marketing.......................................................................................................................12

3.3 Marketing Mix...........................................................................................................................12

3.3.1 Product...............................................................................................................................12

3.3. 2 Place/Channel....................................................................................................................13

3.3.3 Promotion...........................................................................................................................13

3.3.4 Price....................................................................................................................................14

3.4 Implementation of The Marketing Plan.....................................................................................15

4.Conclusion........................................................................................................................................17

5. References.......................................................................................................................................18

6. Bibilography.....................................................................................................................................19

List Of Figures & Tables

Figure 1. Mean Frequency of Beverages Consumed Daily By Population ( Norimah et al 2008) 5

Figure 2. Coffee Consumption Relationship To Purchasing Power (Kendrik 2008) 5

Figure 3. Malaysia Coffee and Tea Markets 2005-2013 (BMI 2009) 6

Figure 4. Five Forces Analysis On Instant Coffee Competitive Landscape 7

Figure 5. SWOT Analysis On Starbucks For Instant Coffee Market 9

Table 1. Marketing Plan Implementation Strategy Over Time 16

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1.Introduction

Starbucks in Malaysia is jointly owned by Berjaya Corporation and Starbucks Coffee

International and has enjoyed a healthy growth within the Malaysian market since it’s first

outlet opened in 1998. At present, there are 119 stores thru out Malaysia (Starbucks

Malaysia Website 2010). In Berjaya corporation’s most recent 2009 Annual Report, it was

stated that there was a 14% increase in revenue from previous year due to the continued

growing acceptance of the brand and products as well as new outlet openings.

This paper outlines the current state of the instant coffee within Malaysia in context of a

planned launch of “VIA”, Starbucks’s new line of instant coffee thru the analysis of the

potential market size, consumer preferences, market segmentation and growth areas for

the soluble coffee market within Malaysia. The paper also analyses the local competition

scenario within the instant coffee market and recommends a marketing plan to successfully

launch and sustain the growth of VIA.

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2.Market Evaluation

2.1Market Environment Analysis

Malaysia has a strong hot drinks culture. A survey (Norimah et al 2008) that showed that the

average Malaysian drinks 1.58 cups of coffee daily.

Figure 1. Mean Frequency of Beverages Consumed Daily By Population ( Norimah et al 2008)

Coffee drinking culture has been cultivated by the continued expansion of retail cafe

businesses of both international brands such as Starbucks , Coffee Bean & Tea Leaf that

bring in the “cafe culture” from the West and other domestic brands such as Old Town

White Coffee that build on the local “coffee-shop culture” (Euromonitor 2008).

Further research (Kendrik 2008) shows a positive correlation between the GDP per capita

and the amount of coffee consumed. This means that as the economy of Malaysia grows,

the market will begin to “thirst” for more coffee products.

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Figure 2. Coffee Consumption Relationship To Purchasing Power (Kendrik 2008)

The coffee market is a sub-set of the “Hot Drinks” market sector which can be further

categorised into instant coffee and ground coffee. According to a industry report (BMI

2009), total coffee sales in Malaysia total to approximately 61 Mil USD in 2008 and is set to

be a growth market as seen in Figure 1

Figure 3. Malaysia Coffee and Tea Markets 2005-2013 (BMI 2009)

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2.2Competitive Landscape For Instant Coffee

Figure 4. Five Forces Analysis On Instant Coffee Competitive Landscape

Based on Porter’s Five Forces Analysis, the threat of substitutes is high in the Malaysian

market given the propensity of Malaysian drinkers to prefer tea (Norimah et al 2008) and

the wide alternatives available in the form of malt or soy based drinks.

As the coffee bean commodity market is an mature open market, the bargaining power of

suppliers is low.

The threat of new entrants is high given that in the past few years, many domestic players

have entered into the instant coffee market. Affordable pricing and localised products were

identified by one industry report (Euromonitor 2008) as key drivers for the increased

prominence of the domestic coffee brands.

Industry rivalry is medium. Nescafe stands out as one of the major competitors and is

purported to currently command up to 70% of the local Malaysian market share in the

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coffee segment (Adam 2009) and the instant coffee market players have developed quite

specific value offerings based on the additional ingredients or style of coffee preparation.

The bargaining power of consumers is high given that instant coffee is readily available thru

various distribution channels and both private individual consumers and large wholesale

buyers (E.g Food & Beverage Outlets) have a very wide range of brands to choose from and

will make comparisons.

2.3Market Trends

The coffee market can be divided into consumers segment by where the coffee is drunk , In-

Home vs Out of Home ; and type of product , Soluble (Instant) vs Ground coffee.

Three market trends worth noting are firstly the anticipated growth of the out of home

segment based on a recent study by Nestle (As reported in Bernama Press 2009), where

Malaysians currently spend 35 per cent of their total food and beverage expenses out-of-

home.

Secondly, instant coffee market caters quite specifically to local tastes. This can be

witnessed by the behaviour of Nestle , the market leader, who in 2009 (Chan 2009) also

introduced a range of instant hot drinks targeted at local tastes to compete directly with

other domestic brands who have specialised in domestic flavours such as “White Coffee” or

“Kopi-O”.

Thirdly, “health branding” is a prevalent in the sector. For example, the anti-oxidant benefits

of coffee have been actively promoted (Nescafe Professional Website 2009) and other

brands have also incorporated herbal additives such as longifolia (Tongkat Ali) or healthier

sweeteners such as oligofructose.

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2.4SWOT Analysis

Figure 5. SWOT Analysis On Starbucks For Instant Coffee Market

2.4.1Strengths

Starbucks is the market leader in Malaysia. The brand equity of Starbucks is high as it is

perceived a premium quality brand and therefore this should translate into a positive

association with any product extensions such as VIA.

The core strength of Starbucks has been it’s ability to create a relationship with the

customer by marketing the “consumption experience”. As quoted by the Howard Schultz,

the CEO, Starbucks is not in the coffee business serving people but in the people business

serving coffee (Sellers 2005). The challenge with VIA is whether the coffee “experience” can

be mapped onto a product which traditionally has been a low involvement product for most

consumers.

Starbucks also has upstream supply chain management expertise in sourcing high quality

raw ingredients from it's retail activities and enjoys a strong corporate image due to it’s

efforts in ethical sourcing, environmental stewardship and community event involvement.

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2.4.2Weaknesses

Starbucks is a late entrant into the soluble coffee market as this is a crowded brandscape

where there are many other brands in the market both from international competitors such

as Nescafe and also domestic firms such as Old Town Coffee.

Starbucks is also disadvantaged by it’s lack of direct experience in managing the supply

chain for instant coffee distribution. At the moment it only markets roast coffee beans via

it’s retail outlets.

The premium image of the Starbucks brand could also be a weakness as price sensitivity in

the instant coffee market is higher when compared to the retail brewed coffee market and

Starbucks may be perceived as a highly priced brand compared to other local brands.

2.4.3Opportunities

The economic slowdown has not left Malaysia unaffected. Store on store sales growth for

Starbucks retail outlets were reportedly lower for the year 2009 and this trend is expected

to be similar for the 2010 period (Berjaya Corporation Annual Report 2009). Therefore the

sale of instant coffee as an alternative source of revenue for Starbucks can be viewed as an

opportunity for the firm to weather the crisis and at the same time extend the product line.

The VIA brand positioning as an equivalent substitute for gourmet coffee also potentially

opens up new market segments. For example, price conscious consumers may experiment

with VIA and decide that they would like to switch to gourmet retail brew. VIA could also

spread brand awareness quicker and grow demand in areas with a lower concentration of

Starbucks retail outlets.

2.4.4 Threats

The launch of VIA carries the risk of jeopardizing the brand equity of the core Starbucks

brand as the growth of the soluble coffee market could potentially cannibalise sales from

Starbuck’s retail outlets who then go on to switch to competitor instant coffee brands.

The extension of the product line into a new market may also cause a loss of focus on the

core business of retail brewed coffee if resources are not balanced. This can be exemplified

by the McDonald’s “McCafe” concept store which has already been launched elsewhere in

the Asia Pacific region.

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Furthermore , Nestle also stands out as a clear “global” competitor who already has

experience in other markets overseas in counter competing with Starbucks (Andrejczak

2009 and Roe 2009) and may have a retaliatory strategy ready.

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3.Marketing Strategy

3.1Brand Positioning

The launch of VIA will need to be consistent with the brand positioning objective to market

it as a new and exciting innovative product that is an equivalent substitute for freshly

brewed gourmet coffee for people on the move or working in locations remote from

Starbucks retail outlets.

3.2 Target Marketing

The initial target market sector for VIA will be the existing clientele of the retail Starbuck

outlets – middle to high income urbanites who place an importance on taste, quality,

ambience and the consumption experience.Therefore VIA will focus on “creating” new

demand from these existing consumers who up till this point may not have tried “gourmet”

instant coffee.

3.3 Marketing Mix

3.3.1 Product

The taste and convenience aspects of the product will be critical.Research should be

conducted in the trial phase to understand what features consumers would value. For

example, would solubility in cold water be important and what packaging would be the

most convenient (E.g. Fits neatly in shirt pockets)

The level of product information will also be reduced from usual Starbucks packaged coffee

beans as typically less is said about ingredient origins for instant coffee. The packaging

should also highlight the innovative microground process.

Sizing should be via an easy to tear “stick” sachet with multi-packs sized for travel. It will be

unlikely that VIA will be offered in loose power “jar” packaging as this does not fit the “on

the move” image.

Given that the only flavours available are Italian Roast and Colombia there is a temptation to

extend the flavours offered but a counter positioning of simplicty in offerings could be used

to address this issue.

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3.3. 2 Place/Channel

Within Starbucks Malaysia, there is no direct merchandising or distribution experience

outside of the retail outlets .However Berjaya Corporation ,a major shareholder in Starbucks

Malaysia franchise, should be able to leverage on it’s extensive businesses experience

elsewhere within the food and beverage sector to make headway into new distribution

channels.

VIA should adopt an exclusive distribution strategy thru the Starbucks retail outlets. This

allows for a very strong level of control and flexibility during the initial launch of the

product. A complementary tactic would be to market VIA thru channels that fit with the on

the move image such as airlines or trains. For example in the US, VIA was marketed on

United Airline flights and in the UK, thru EasyJet.

Later in the growth stages, Starbucks may wish to consider partnering with a premium

supermarket chains or grocery stores who have a complementary brand image of fresh

foods to allow the sale of VIA at their outlets.

3.3.3 Promotion

Initially, during the launch stage, secrecy and speed will be key to success to avoid pre-

emptive moves by other brands such as Nestle who would already have developed

retaliatory strategies elsewhere.

Instant coffee can be considered as a reasonably passive product in contrast to the

Starbucks brewed coffee which has a very strong service element associated with

it.Therefore an integrated marketing campaign needs to be implemented to ensure a

“customer relationship” can be built via the use of online communities in the existing

Facebook and Twitter social networking sites.In addition to this, other strategies used in the

US market (Shah 2009) to achieve this sense of coffee experience has been the taste test

and free samples.

Message consistency will be very important as VIA has to balance the message that it is just

as good as brewed coffee against the fact that Starbucks still wants VIA consumers to

frequent the retail outlets.

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Further down the road, there is also a chance for Starbucks to leverage on it’s corporate

identity by integrating VIA into it’s larger scope of environmental stewardship by creating a

recycling campaign around the product.

3.3.4 Price

At present, there are no equivalent premium instant coffee products at which to benchmark

a suitable price for Via. A cursory survey of prices at local supermarkets seems to indicate

that premium coffee tends to be of the “roast and ground” variety.

The pricing strategy is a clearly a price skimming strategy with an emphasis on setting a price

that is high enough such it complements the high quality. Therefore a skim pricing strategy

could work as there is currently no true “premium style” instant coffee product within the

market other than Nescafe’s Gold Blend . This product which currently retails at RM12.95

for 20 sachets of 20g ,could serve as a reference marker for the initial price setting.

A pricing strategy that offers rewards for loyal Starbucks customers would work well to

cement the relationship between the instant coffee and retail brew sectors. This could be a

simple modification of the loyalty card system that is already in place at the retail outlets or

this could work in reverse where customers are offered complimentary drinks if they collect

enough VIA wrappers.

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3.4 Implementation of The Marketing Plan

The marketing plan is outlined briefly in the Table 1 below.

Stage Trial (0-3 mths) Launch (3-6 mths) Growth (6-12mths) Sustain & Defend (12mths onwards)

Product

• Conduct initial surveys based on focus groups from existing Starbucks clientele on most valued features

• Emphasise the quality aspects and the innovation in product development

• Maintain the quality • Introduce new flavours • Reinvent the packaging

Price

• Survey the market to identify the price ranges within the instant coffee market

• Price skimming - Premium pricing that will set it apart from other economy pack brands

• Price skimming with potential for discounts related to purchase of main Starbucks products

• Maintain the price skimming strategy with flexibility for price changes depending on competitor reactions

Promotion

• Maintain secrecy and speed of the implementation to avoid retaliatory attacks

• Free samples in stores• Taste tests• Leverage on the online community presence

• Consistency in messages and monitoring impact on retail stores

• Integrate the brand image of VIA with the parent brand in terms of CSR activities

Place/Channel

• Explore and develop distribution channels available to the Berjaya parent company

• Exclusive Distribution - Offer VIA exclusively at Starbucks retail outlets • Other channels should match the "on the move" element

• Selective Distribution - Offer at "premium" supermarkets

• Maintain Selective Distribution

Focus KPI-s • Time To Market • Actual vs. Plan Pilot Trial Costs

• Product Awareness • Positive Consumer Online Feedback

• Sales Growth • Market Share • Sustained Sales • New Product Innovation

Table 1. Marketing Plan Implementation Strategy Over Time

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The implementation of the plan relies heavily on the appropriate allocation of resources , monitoring of progress and ensuring that there is

sufficient flexibility to cope with the anticipated competitor reactions against the introduction of VIA by either emphasing their lower prices ,

discrediting Starbuck’s claim of equivalent quality or promoting their larger product flavour range.

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4.Conclusion

The instant coffee market within Malaysia is an attractive area for Starbucks to enter into.

However the key risk that needs to be managed within the market mix is the dilution of the

brand identity as Starbucks has always been associated with premium coffee and this is in

contrast to the instant coffee market which has traditionally been viewed as “down-market”

of the gourmet market.

This issue extends to the issues of brand positioning and distribution channels where

Starbucks will be entering a mature market as a late-comer whereas most of their

competitors in th instant coffee sector have already established their brand identity.

This move would develop the demand for gourmet coffee and capture the instant coffee

drinker market as well as serve as a revenue buffer for the core business of retail brewed

coffee. With the right marketing strategy, there is the potential to capitalise on Starbuck’s

brand equity to extend the product successfully.

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5.References

Adam ZR 2009, 18th June, Nestle: Coffee is good, thanks to the antioxidants, Available From <http://www.btimes.com.my/Current_News/BTIMES/articles/nescdf/Article/index_html> [ Accessed 13th January 2009]

Andrejczak A 2009, 18th November , Instant-coffee war: Nestlé takes aim at Starbucks, Available From <http://www.marketwatch.com/story/instant-coffee-war-brewing-nestle-vs-starbucks-2009-11-18> [ Accessed 13th January 2009]

Berjaya Corporation , Annual Report 2009 , Available From <http://www.berjaya.com/annual2009.htm> [ Accessed 13th January 2009]

Bernama Press 2009, 13th October, Nestle Seeks To Double Share In Out-Of-Home Market , Available From <http://www.bernama.com/bernama/v5/newsbusiness.php?id=446642> [ Accessed 13th January 2009]

Business Monitor International 2009 , Malaysia Food & Drink Report Q4 2009, Available From <http://digitalibrary.mida.gov.my/equip-mida/custom/indReports/agro/2009/FoodDrinkReportQ42009.pdf> [ Accessed 13th January 2009]

Chan J 2009, 19th November, New range of Malaysian-style coffee launched , Available From <http://thestar.com.my/metro/story.asp?file=/2009/11/14/central/5102621&sec=central> [ Accessed 13th January 2009]

Euromonitor 2009 , Hot Drinks in Malaysia 2009 : Executive Summary , Published May 2009 , Available From <http://www.euromonitor.com/Hot_Drinks_in_Malaysia?print=true> [Accessed 13th January 2010]

Kendrik F 2008,Nescafe Presentation To Investors, Available From <http://www.nestle.com/Resource.axd?Id=B65395A2-C76C-42B2-A7D6-6648A3A66BF5> [Accessed 13th January 2010]

Nestle Professional Website : Health & Nutrition : Antioxidants, Available From <http://www.nestleprofessional.com/Australia/en/Insights/HealthandWellness/Pages/Antioxidants.aspx> [ Accessed 13th January 2009]

Norimah AK et al 2008 , Food Consumption Patterns: Findings from the Malaysian Adult Nutrition Survey(MANS), Mal J Nutr 14 (1): 25 - 39, 2008, Available From: <http://www.nutriweb.org.my/publications/mjn0014_1/mjn14n1_art2.pdf> [Accessed 13th January 2010]

Roe A. 2009, Jun 8 , Starbucks and Nestlé become instant enemies , Available From <http://www.komonews.com/economy/47066722.html> [ Accessed 13th January 2009]

Sellers P 2005 , “Starbucks , the next generation” Fortune 4/4/2005, Vol 151, Issue 6 p20 Shah A, 2009 , Inside The Mix - Starbucks strives for instant gratification with Via launch,

Available From <http://www.allbusiness.com/marketing-advertising/marketing-advertising-channels/13550953-1.html> [ Accessed 13th January 2009]

Starbucks Website 2010 , Starbucks In Malaysia , Available From <http://starbucks.com.my/en-US/_About+Starbucks/Starbucks+in+%28your+country%29.htm> [ Accessed 13th January 2009]

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6. Bibilography

Ching LH (1990), Coffee Products Sdn Bhd in JA Quelch, SM Leong, SH Ang and CT Tan (1996)

Cases in Marketing Management and Strategy- An Asian Perspective , Prentice Hall Singapore

Gbadamosi A. 2009, Low-income consumers’ reactions to low-involvement products, Marketing

Intelligence & Planning Vol. 27 No. 7, 2009 pp. 882-899

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