The Story of CafédirectSocial Enterprise Marketing
Agenda
IntroductionSocial EnterpriseFair TradeCafédirect
TheoriesCorporate-Reputation QuotientKano ModelProduct/Market Grid
Case Application
Learning Insights1
Agenda
IntroductionSocial EnterpriseFair TradeCafédirect
TheoriesCorporate-Reputation QuotientKano ModelProduct/Market Grid
Case Application
Learning Insights2
Social 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 social and environmental goals
To maximize shareholder value
e.g. Cafédirect e.g. The Body Shop
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SocialEnterprise
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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
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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.
Sources: see Littrell and Dickson, 1999; Mayoux,2001; Tallontire, 2001a 6
Cafedirect
1989• Collapse of the
International Coffee Agreement
1991• Cafédirect
was born
2004• Cafédirect
become a publicly listed company
2007„Cafédirect was voted as the most recommended brand in the nation in a survey of 2,000 companies
The History of Cafédirect
1994• Sales of
Cafédirect start increasing dramatically
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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.
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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.
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Sales Growth (1992-2000)
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Timeline (1995-present)
The success of Cafédirect
Old communication approach:
Advertising 1993-1995• focus on the fair-trade message• emphasize on producer advantages.
Changes of communication approach
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CafedirectNew communication approach
Advertising 1996-1998• 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 1999-2001The picture of a smiling Machu Picchu conveyed products qualities-its smell, its freshness, and its exotic origin.
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Cafedirect
In 1993,Gained national distribution in the Co-op and other supermarkets.
Later stages,Offering its products through vending machinesExpanding its products distribution channels to overseas
Original
Oxfam’s over 600 shops Traidcraft’s mail-order catalogue
Increase of distribution channels
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Source: Marketing Relationship, Helen Peck, Chartered institution of Marketing
CafedirectIncrease of products varieties
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Cafedirect– 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.[
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Cafedirect
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Agenda
IntroductionSocial EnterpriseFair TradeCafédirect
TheoriesCorporate-Reputation QuotientKano ModelProduct/Market Grid
Case Application
Learning Insights18
Corporate Reputation QuotientTheory 1
• Six drivers of the corporate reputation quotient
Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations
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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
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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.
Theory 1
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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.
Theory 1
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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.
Theory 1
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Kano ModelTheory 2
Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-48
Delighters
Excited Quality
Dissatisfier
Must-be
Expected Quality
“Didn’t know I
wanted it but I
like it.”
“Cannot increase
my satisfaction, but
can decrease.”
Dissatisfaction
Satisfaction
Service
Performance
Service
Performance
Satisfier
One Dimensional
Desired Quality
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Kano Model
3 categories of quality attributes influence customer satisfaction:
„ Basic FactorsDissatisfier , Must be’s ,‟Cost of Entry, Basic needs
„ Performance Factors Satisfier, More is better, Competitive, Performance
„ Excitement FactorsDelighter ,‟Latent Need, Differentiator, Surprise
Theory 2
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Kano ModelTheory 2
Factors KANO Category How to do better
Sanitation & Safety Basic Needs
Have to keep the customers
above the average
satisfaction levelQuality Basic Needs
Taste Performance
Sustaining improve on to
gain more return
Package Performance
Distribution Performance
Sales Promotion Surprise
Dig and focus onBrand Surprise
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.39-4826
Kano ModelTheory 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 factors27
Kano ModelTheory 2
Performance factors
Distribution- Charity, Church & Fair-trade world shops- Target the mainstream distribution channels such as supermarkets, catering, and coffee bars
Taste-"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
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Kano ModelTheory 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
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Kano ModelTheory 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)
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Product/Market GridTheory 3
Source: Cafédirect annual report 2006-2007
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Product/Market GridTheory 3
Ansoff Matrix
Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124
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Product/Market GridTheory 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
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Product/Market GridTheory 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
Emotional approach
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Product/Market GridTheory 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
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Product/Market GridTheory 3
Cafédirect Annual report 2005-06
Cafédirect introduce existing products in foreign market Hong KongListing with a major supermarket chain “Parknshop” (50 stores)
IrelandNow available in all their major supermarket and many independent storesSales increased by 19% in 2005
Singapore
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Source: Cafédirect annual report 2006-2007 37
Product/Market GridTheory 3
Cafédirect Annual report 2005-07
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Product/Market GridTheory 3
Originally, coffee, later, hot chocolateWhen 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
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Product/Market GridTheory 3
Cafédirect Annual report 2005-06
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Agenda
IntroductionSocial EnterpriseFair TradeCafédirect
TheoriesCorporate-Reputation QuotientKano ModelProduct/Market Grid
Case Application
Learning Insights41
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
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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$79.511993, Sep. US$ 41.98reduced 47.2%
Corporate Reputation Quotient
application
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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
Corporate Reputation Quotient
application
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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
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Kano Model application
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✴ Active Links✴ Legibility✴ Safety
Kano Model application
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✴ Storage✴ Upload speed✴ Tag & Search
Kano Model application
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✴ Photo Editing✴ Community✴ Fun
Kano Model application
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Photo Editing
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Photo Editing
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Community
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Community
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Fun
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Fun
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Fun
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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
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Product/Market Grid
applicationThe result was a 2.2% increase in net sales to 136,312 million yen
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Product/Market Grid
application
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„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 fragrancesSkin care series featuring natural fruit extracts
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Agenda
IntroductionSocial EnterpriseFair TradeCafédirect
TheoriesCorporate-Reputation QuotientKano ModelProduct/Market Grid
Case Application
Learning Insights61
Learning Insights
New Cafédirect Old Cafédirect
Style Business Idealistic
Skills Sales, Marketing Intellectual
Values Commercial but ethical Non-commercial
Staff Professional Semi-volunteers
StructurePerformance-based,clear responsibilities
Democratic, Political
From Cafédirect’s case, we learn that1. SE should keep long-term relationships with small-holders and set high standard of quality2. SE should market itself just like commercial organizations3. Guarantee basic factors, improve performance factors and make “Social Enterprise” identity as the excitement factor4. Expand to mass market by increasing distribution channels
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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.
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Learning Insights
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.
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Learning Insights
The Divine Chocolate
Good quality/ Good company image
Beans mean BusinessIn 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.
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Learning Insights
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.
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Learning Insights
The Divine Chocolate
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Learning Insights
The Divine Chocolate
Divine Partners(Smallholders in South African)
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Learning Insights
The Divine Chocolate
Q&A
Backup
Fair Trade
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
Global Fair trade Sales
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