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S&S has been in business for six years.  The business has been well received and marketing will be key to elevate the business to the next level.  The basic market need is a source of high quality Arabica coffee beans that exceeds the quality of almost every other bean on the market.

Market Summary

S&S possesses good information about the market and knows a great deal about the commit attributes of the targeted customers.  This information will be leveraged to better understand who is served, their specific needs, and how S&S can better communicate with the target market.

Market Analysis

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Market Analysis
  20032004200520062007 
Potential CustomersGrowth     CAGR
U.S. Importers26%70,14088,376111,354140,306176,78626.00%
Brazilian Wholesalers26%30,06037,87647,72460,13275,76626.00%
Other0%000000.00%
Total26.00%100,200126,252159,078200,438252,55226.00%

Market Needs

S&S is providing its customers with a high quality Arabica coffee bean, exceeding the quality of almost every other bean on the market. S&S seeks to fulfill the following benefits that are important to their customers:

  • Quality beans.
  • Fresh beans.
  • Timely, professional service.

Coffee is the second largest commodity market next to oil and Brazil has remained the largest producer of coffee in the world for two centuries. Imports of Arabica coffee in the United States have increased ninety-four percent in the past five years and consumption of coffee within Brazil has seen similar increases. In addition, demand for green coffee is above the market clearing level, and market price and crop yield estimates are at an all time high.

The increase in the number of independent specialty roasters in the United States and Brazil has contributed to and is an indicator of the increased demand for coffee. Within the larger coffee market is the target market, the specialty roaster. These discerning customers want the highest quality coffee beans. They serve the growing "gourmet" coffee market and are represented by large American companies like Starbucks and thousands of smaller specialty roasters. The Arabica bean is considered to be the best in the world and as such, the demand for Arabica beans is high on the specialty roaster market. Specialty roasters are willing to pay more for Arabica beans and attempt to distinguish themselves via the characteristics of the bean they use i.e.: the location in which it was grown, farming methods, bean size, etc. The final consumer is relatively price insensitive if the coffee is good, has won awards, or is compatible with a popular trend. S&S estimates that specialty roasting in the U.S. alone is a ($US) $1 billion market.

Market Growth

Coffee has been a growing industry for the past five years. The most notable growth has been in the American market where imports have increased almost 100% and the market price has nearly doubled. The number of specialty roasters has increased from a handful of well-known companies to thousands of independent entities. There is a constant struggle within this market to produce the best coffee and serve one or more niches within the larger market. Brazilian coffee producers and exporters have made great efforts to improve agricultural techniques, processing methods, and distribution in order to better serve this growing market. Demand for Brazilian coffee is currently greater than supply.

SWOT Analysis

The following SWOT analysis captures the key strength and weaknesses within the company, and describes the opportunities and threats facing S&S.

Strengths

  • Strong relationships with growers as well as American and Brazilian wholesalers and roasters.
  • The use of the highest quality beans.
  • Sophisticated technology that drives production costs done while ensuring quality.

Weaknesses

  • Costs of doing business with American firms while S&S is located in Brazil.
  • Dependence on a few suppliers who are the only ones capable of growing the highest quality Arabica beans.
  • A limited marketing budget, necessary for developing brand awareness.

Opportunities

  • Participation within a growing industry.
  • Coffee is a universal beverage.
  • The ability to increase the profit margin through the leveraging of technology.

Threats

  • The commodity aspect of coffee.
  • Costs associated with international trade, NAFTA not withstanding.
  • Future/potential competition from large corporations like Starbucks who are seeking more vertical distribution channels.

Competition

Silvera & Sons deals exclusively in the exportation and sale of green Arabica beans. There are approximately 150 Brazilian businesses in this market. However, approximately 30 companies account for approximately eighty percent of the total amount of green Arabica exports. In addition many of these companies prepare, export and sell, to the Brazilian market, other coffee products. Additional products include:

  • Green Robusta (Conillon) beans: The Robusta bean is produced in far less quantity, in Brazil, than the Arabica and is considered an inferior species. The Robusta market represents less than ten percent of all coffee produced in Brazil.
  • Soluble coffee products: These are instant (water soluble) coffees and are either decaffeinated or not. Sales of soluble coffee products account for approximately twelve percent of the total market.
  • Roasted & Ground coffee: Approximately eighty-five percent of all roasted and ground coffee (decaffeinated and non-decaffeinated) goes to internal consumption and represents approximately twenty-seven percent of the total coffee market.
  • Primary competitors include: Golden Brazil, Bramazonia, Comexim, and Nicchio Cafe.

The purchase decision for the customer is based on trust in the process and bean selection. S&S has established relationships with the customers that extend beyond that of the buyer/seller. The Silvera & Sons label means that the product has been chosen and prepared with the highest quality standards in mind. The beans are priced up to nine percent higher than similar products. The customers are willing to pay more for S&S' product because they are familiar with them and trust in the quality of the beans.

There are approximately 150 exporters of green Arabica beans in Brazil. According to the Brazilian Coffee Exporters Association, ABECAFE, fifty percent (50%) of all green coffee exports come from their 45 members. Approximately eighty percent (80%) of these exports come from 20 ABECAFE members. Market contributions of individual exporters are held in strict confidence and are not available to the public. However, based on this information and given the large number of remaining exporters not affiliated with ABECAFE who account for the remaining sixty percent (60%) of all exports, S&S assumes that many of the largest competitors are amongst the ABECAFE members.

Product Offering

Silvera & Sons deal exclusively in green coffee, grown in the southern states of Brazil and 100% Arabica. Beans in parchment are purchased directly from growers and are de-husked and packaged into 60kg sacks in the Silvera & Sons' plant. The final product is suitable for sale and exportation.

An alternative to the Arabica bean, Coffea Robusta, though it shares some similarities with the Arabica bean, is very different. Coffea Robusta is grown at lower elevations and has a higher yield per plant as well as being more resistant to disease. It also has up to twice the caffeine level as its cousin the Arabica Bean. Due to the lower cost and larger market amount of Robusta coffee, it is found primarily on supermarket shelves. The Arabica species grows at much higher elevations, better soil rich areas, and is the source of the world's finest coffees.

By providing the finest species of coffee, Silvera & Sons has taken the first step towards a differentiated product. To further distinguish their coffee, S&S adheres to higher quality standards than approximately ninety-five percent of the market. In addition, all of the beans are of the Bourbon Santos variety. The "Bourbon" strain is considered one of the finest Brazil has to offer. It is grown in the mountains surrounding Sao Paulo and is highly sought after by specialty roasters from around the world. S&S has assumed the position of a specialized provider of this exceptional coffee. Their customers, American and Brazilian specialty roasters, recognize Silvera & Sons for the ability to provide the type of beans they require to produce award-winning coffee.

Keys to Success

The keys to success for Silvera & Sons are:

  • Establishing and maintaining working relationships and contractual agreements with American importers and Brazilian coffee brokers and wholesalers.
  • Bringing the new facility to maximum production within three years of operation.
  • Increasing S&S' profit margin with the use of improved technology in the new facility.
  • Effectively communicating, to current and potential customers S&S' position as a differentiated provider of the highest quality Arabica beans in the world.

Critical Issues

The critical issues that S&S faces are:

  • Continue to ensure that their product is superior to the other Arabica beans on the market.
  • Continue to analyze market demand to verify that S&S is indeed meeting the market needs.

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