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Page 1: Second Cup Limited

Second Cup Limited

• The Second Cup is Canada’s largest Canadian based franchisor of specialty coffee cafes.

http://www.google.ca/imgres?imgurl=http://upload.wikimedia.org/wikipedia/en/3/38/Secondcup.jpg&imgrefurl=http://en.wikipedia.org/wiki/Second_Cup&h=150&w=200&sz=8&tbnid=iREU7x_T0ydQCM:&tbnh=90&tbnw=120&prev=/search%3Fq%3Dsecond%2Bcup%2Bpictures%26tbm%3Disch%26tbo%3Du&zoom=1&q=second+cup+pictures&docid=mda2thtOM7UGmM&hl=en&sa=X&ei=57w8TvunE8zZiAKausjqCg&sqi=2&ved=0CB0Q9QEwAA

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Beginnings

• The Second Cup started in 1975 as a small kiosk in a Toronto shopping mall

• Original business partners were Tom Culligan and Frank O’Dea

• Specialized in only selling whole bean coffee

http://bbb4m.wikispaces.com/Second+Cup

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Growth

• The Second Cup was sold in 1988 to Michael Bregman after being built to a 150 store chain.

• Second Cup goes public in 1993• Sold to Cara Operations then to Dinecorp

Hospitality Inc.• Expanded successfully to international

markets including:– United States, Saudi Arabia, Cyprus and Syria

http://en.wikipedia.org/wiki/File:Second_Cup_Bloor_West_Toronto.jpg

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Leadership

• Chief Executive Officer– Stacey Mowbray, a veteran of Cara Food Services,

has been CEO since 2008

http://www.theglobeandmail.com/globe-investor/a-second-shot-for-second-cup/article1849849/

Title: Stacey Mowbray

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Products

• The Second Cup has many different drinks including:– Fresh ground coffees– Assorted Lattes– Teas, Espressos, Specialties and Chillers

http://www.bing.com/images/search?q=Second+cup+picture&view=detail&id=7C6B2AA468212A95FD2E6BE751B2FF85709611A0&first=0

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Marketing

Under direction of CEO Stacey Mowbray Second Cup recently doubled advertising budget focuses on:– Increased coffee quality– Environment and Social Certification– In house “Coffee Experts”– Increasing store sizes– More drive thrus!

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Demand for Coffee

• 81% of Canadians drink coffee occasionally• 63% of Canadians drink coffee on daily basis• Coffee is more popular in Canada than in the

U.S. at 49% daily drinkers

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Production and Productivity

• Coffee is sourced thru contracts with other firms– Nestle is a major supplier– Liquid coffee sales account for 40% – Whole Bean Coffee account for 25%

• Owner/Operators are encouraged by the company• Parent Company assists franchisee services

– Selects locations– Provides marketing plans– Promotion – Product development– Public Relationshttp://www.entrepreneur.com/tradejournals/article/8892152.html

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Pricing

• A 300 ml cup of coffee costs $1.60 (including tax) and prices go up from that point

• Premium drinks start at $3.00 for the same volume

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Significant Fixed and Variable Costs

• Fixed Costs faced by Second Cup Franchisees include:– Rent– Utilities– Labour

• Variable Costs include:– Arrabica Coffee Bean Prices

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Company Profits and Profit Margins

Consolidated Statements of Operations and Comprehensive Income

(Expressed in thousands of dollars. 2010 2011Revenue 25,171 19,504

Operating Expenses 14,388 8,412

Operating Income 10,783 11,092

Other Expenses 1,596 819

Net Earnings 9,303 11,464

http://www.secondcup.com/investor/SC_FS_final_2010.pdf

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Competition

• Coffee cafes are a Monopolistic Competitive Industry• Second Cup’s largest competitor is Starbucks

– In ten years:• Starbucks has opened over 800 stores in Canada• Second Cup has closed over 50 stores

• Tim Horton's, McDonalds and Seattles Best are other major competitors

• The Second Cup’s competitive advantage is:– Using ethically and socially responsible products– Customers Trust

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Summary• The Second Cup has had continuing success in the Specialty

Coffee Cafe Market • Strengths:

– They have stayed true to traditional coffee making methods – Stores have coffee experts delivering customer service

• Weaknesses – Weak Marketing Strategy

• No counter to Starbucks aggressive expansion and market share dominance

• The Second Cup’s new five year plan will boost customer loyalties and perceptions of their brand and return it to its former spot as Canada's #1 specialty coffee cafe