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Differentiate Analysis Alternatives Implementation Outcomes Café Xaragua 1 Robert Curtis Rachelle Hinchey Amanda Tindyebwa Emma Zaorski.

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Presentation on theme: "Differentiate Analysis Alternatives Implementation Outcomes Café Xaragua 1 Robert Curtis Rachelle Hinchey Amanda Tindyebwa Emma Zaorski."— Presentation transcript:

1 Differentiate Analysis Alternatives Implementation Outcomes Café Xaragua 1 Robert Curtis Rachelle Hinchey Amanda Tindyebwa Emma Zaorski

2 Differentiate Analysis Alternatives Implementation Outcomes 2 How can Café Xaragua differentiate itself in the competitive Canadian coffee industry?

3 Differentiate Analysis Alternatives Implementation Outcomes Strategic priorities Social Responsibility Quality Brand image Differentiation Gather necessary funding 3

4 Differentiate Analysis 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 options High subsidies Need to differentiate product from competition and substitutes

5 Differentiate Analysis Alternatives Implementation Outcomes Internal analysis Rare product sourcing Strong relationships with contacts Committed to social responsibility High quality product Weaknesses Limited store front experience Limited startup capital Limited product portfolio Relying on others for baked goods 5 Leverage core competencies Strengths

6 Differentiate Analysis Alternatives Implementation Outcomes 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+ 6

7 Differentiate Analysis Alternatives Implementation Outcomes Premium coffee industry 7 Social Impact Brand affiliation Bridge Head GMCR Starbucks Xaragua

8 Differentiate Analysis Alternatives Implementation Outcomes Strategic alternatives Differentiate License and open store Store on wheels Focus on online sales 8

9 Differentiate Analysis Alternatives Implementation Outcomes 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 9

10 Differentiate Analysis Alternatives Implementation Outcomes 2- Store on wheels Attract attention and excitement Create high levels of brand awareness Time to acquire permits Cost to modify food truck 10 Have a temporary store in a mobile food service truck to increase reach and brand recognition Open a store after 4 months Differentiate through reach

11 Differentiate Analysis Alternatives Implementation Outcomes 3- Focus on online sales Lower cost to implement Already familiar with online sales Difficult to make partnership with grocery stores Less reach 11 Increase online sales and begin selling in grocery stores. Differentiate on price

12 Differentiate Analysis Alternatives Implementation Outcomes Key decision criteria CriteriaKey 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 12

13 Differentiate Analysis Alternatives Implementation Outcomes Key decision matrix License and open store Store on wheels Focus on online sales Sustainable321 Ease of implementation 231 Financially feasible213 Reach231 Total 99 6 13

14 Differentiate Analysis Alternatives Implementation Outcomes Recommendation 14 Short-term Raise awareness with store on wheels Open store Long-term License product to other businesses

15 Differentiate Analysis Alternatives Implementation Outcomes 15 Marketing Logistics& Operations Human Resources Finance

16 Differentiate Analysis Alternatives Implementation Outcomes Marketing Market research Large use of social media Store on wheels Free mini samples in store Emphasize Haitian culture and social impact 16

17 Differentiate Analysis Alternatives Implementation Outcomes Logistics & Operations Lease mobile food trucks Establish supply contracts Measure success in trees planted/ year Train in house roasting to Crave roasting and Bemard Callebaut 17

18 Differentiate Analysis Alternatives Implementation Outcomes Operations Rent out food trucks on contractual basis Locate and negotiate rent prices for brick and mortar Establish baked and specialty goods supplier Locate licensees with similar value proposition 18

19 Differentiate Analysis Alternatives Implementation Outcomes 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 19

20 Differentiate Analysis Alternatives Implementation Outcomes Projection analysis Revenue per day Sales per day 050100150200250300 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 20 Estimated 200-300 sales per day

21 Differentiate Analysis Alternatives Implementation Outcomes Breakeven analysis Earnings before income and tax Sales per day 0.310.320.330.340.350.360.3 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 21 Sell 30.3 cups a day to breakeven

22 Differentiate Analysis Alternatives Implementation Outcomes Finance Request bank loan from local Canadian banks such as Scotiabank or RBC Commit to interest coverage ratio (ICR) debentures Current ICR = 26.1 ICR collar = 15 Give bank option to call loan if ICR falls below collar 22

23 Differentiate Analysis Alternatives Implementation Outcomes Short term timeline 23 Operations HRR Marketing Finance Monday 1 year + Q1Q2Q3 Engage customers Truck campaign Communicate Launch Hire and train Social tourism Bank Loan Store design Lease trucks Establish supply contracts Locate licenses

24 Differentiate Analysis Alternatives Implementation Outcomes Severity Lack of suitable businesses to license with Likelihood Cannibalization Shortage of Arabica grain 24 Begin due diligence early Begin product expansion Store excess in case of storm

25 Differentiate Analysis Alternatives Implementation Outcomes Financial outcomes & assumptions 25 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

26 Differentiate Analysis Alternatives Implementation Outcomes Thank you! Questions? 26

27 Differentiate Analysis Alternatives Implementation Outcomes Constants Shop size1571 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 year25000 Full time Manager salary per year60000 27 Incorporation $ 6,000.00 Licenses and permits Professional certification $ 10,000.00 Lease improvements $ 35,000 Total one-time expense $ 51,000.00

28 Differentiate Analysis Alternatives Implementation Outcomes 28 Column1201220132014201520162017 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 Manager expense $ 25,000 $ 60,000 Marketing expense $ 1,000 $ 1,030 $ 1,061 $ 1,093 $ 1,126 $ 1,159 Utilities expense $ 393 Insurance $ 3,000 Admin expense $ 4,200 Maintenance $ 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 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


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