Café Xaragua

DifferentiateAnalysis Alternatives Implementation Outcomes 1

Café XaraguaRobert CurtisRachelle HincheyAmanda TindyebwaEmma Zaorski


How can Café Xaragua differentiate itself in the competitive Canadian

coffee industry?


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


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


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+


Premium coffee industrySo

cial I

mpa

ct

Brand affiliation

Bridge

Head

GMCR

Starbucks

Xaragua


Strategic alternatives

Differentiate

License and open store

Store on wheels

Focus on online sales


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


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


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


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


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


Recommendation

Short-term

• Raise awareness with store on wheels

Open store Long-term

• License product to other businesses


MarketingLogistics& Operation

s

Human Resources Finance


MarketingMarket research

Large use of social media

Store on wheels

Free mini samples in store

Emphasize Haitian culture and social impact


Logistics & Operations Lease mobile food trucksEstablish supply contracts

Measure success in trees planted/ year

Train in house roasting to Crave roasting and Bemard Callebaut


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


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


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


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


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


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


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


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


Thank you! Questions?


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


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

Café Xaragua

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