Sunday, April 3, 2016

ARTICLE | KoPinoy: Local Variety of of Coffee and Tropical Shakes





Drinking coffee has undeniably become a part of the Filipino way of living be it from the traditional roasted rice to the expensive branded coffee products that come in tall, grande and venti sizes. No one can deny the Filipinos’ love for coffee. Studies in the United States alone found that more than half of the people (55%) in their country consume coffee creating a “loyal coffee culture.” Perhaps this is the reason why coffee shops started sprouting in the last five years. Businessmen have realized the potential of mixing not just coffee, but also the passion for coffee and the need for a space where people can just sit back and relax.

Coffee industry in the Philippines can be traced as early as 1740 when the Spaniards brought coffee trees in the country. Batangas was the first province to cultivate coffee trees and since then became a major source of wealth for the region. Other provinces such as Cavite soon followed the footsteps of Batangas in terms of coffee cultivation.During the American period, more resistant type of coffee were brought to the country and at the same time, instant coffee was introduced in the market.At present, the Philippines is trying to regain its status as a formidable grower of coffee beans competing wih exporting giants like Vietnam and Indonesia.

Contrary to popular belief, that because of the caffeine coffee contains it causes disease. Coffee actually has more health benefits as shown by recent studies. According to these studies, coffee lowers the risk of acquiring Type 2 Diabetes, reduces the risk of developing Parkinson's Disease, Cancer, Cirrhosis of the Liver, Alzheimer's. Plus, it is an antioxidant, relieves headaches and boosts cognitive performance.

In terms of substitute coffee, which are defined as non-coffee products used to imitate coffee, people use them for several purposes including: medical. economic and religious purposes. Some examples of substitute coffee are barley, rye, chicory, cereal, beetroots, soybeans, rice, peas, etc.

At present, Philippine agricultural industry is focused on fruit and vegetable production due to export potential thus making it a good tandem with coffee particularly for those who are more keen on cold drinks such as shake.

After analyzing the market potential of a local coffee shop, the following aspects of SWOT have been produced. In terms of its strength, a coffee shop business can compete with price, location and operation, alternatives and options it can provide, the interior, and the target market. On the other hand, it is challenged on the following points including its perishability, product seasonability, novelty in the market, price intimidation and limited funds. Externally, the coffee shop is seeing exportation, mass production, expansion, co-branding, and advertising as its opportunities. However, threats seen are its competitors, the volatile market, economic status, and the decline of trend.

On the marketing side of the proposed business, the researchers deem the brand positioning of the business important. In particular, the business will market the business as a new and exciting innovative product which is fresh locally brewed gourmet coffee fro people on the move or working in locations remote from well established coffee shops, targetting middle to high income urbanites, men and women ages 16-27, educated and cultured, urban and suburban and place importance on taste quality, ambience and consumption experience. Primarily, the coffee shop will highlight Philippine coffee blends alongside tropical fruit shakes, with the introduction of subsitute coffee and healthy snacks. The place will be designed in such a way that customers will feel comfortable to do their business works and meetings. In particular, the interior of the place will utilize low ceiling architectural design, with warm toned lighting and painting. Furniture will be wider and cozier as well. In terms of the business promotion, integrated marketing campaigns such as soft opening, free tasting, brochures, leaflets, and online placements in Facebook and Twitter to name a few. In terms of price, it will be slightly lower than other cofee shops.

The operational aspect of the business includes the location of the business which is in Quezon City along Commonwealth Avenue next to Fairview Center Mall. It will be housed in a new building with improved technological devices such as wi-fi accessibility. Necessary equipment such as coffee makers and furniture among others shall be purchased. Employees will also be hired and trained to perform necessary tasks such as serving the customers and making coffee and shakes. Shop manager shall also be hired to ensure the smooth coffee shop experience of the customers.

In terms of human resources, qualified employees shall be hired to work in the coffee shop. They will undergo certain screenings and training to ensuer their eligibility. The shop will hire managers, cashiers and crew. All of them will have their specific functions. In addition, they will be sent to trainings for coffee making. Compensations and benefits will follow the Philippine Labor Code.

In terms of the financial aspect, start up assets, expenses and projected profit shall be computed (see Financial Aspect). As of writing, the start up assets is pegged at P1,150,500.00; the expenses is seen to reach P1,224,000.00. On the other hand, remaining principal for 12 months is projected to reach P1,045,800. Finally, annual projection of gross profit is seen to reach in as much as P42,196.00 by May 2011.



Getting To Know More What's In The Cup

Coffee can be considered as one of the most important crops in many countries. According to Agriculture Magazine (2004), coffee is among the top ten agricultural crops in terms of economic value. Furthermore, coffee ranks first among the enjoyment goods surpassing alcohol drinks, tea and tobacco. There are many interesting facts about coffee. According to Chua (2010) in her speech on “The Coffee Industry” the world’s coffee shops make up the fastest growing part of the restaurant business, checking in with a 7% annual growth rate. Furthermore the world coffee production is estimated at 110-120 million bags per year. Interestingly, fourteen billion espresso coffees are consumed each year in Italy reaching over 200,000 coffee bars and growing. Americans, on the other hand consume 400 million cups of coffee per year equivalent to 146,000,000,000 (billion) cups per year making the United States the leading consumer of coffee in the world while Japan ranks number 3 in the world for coffee consumption. Café bars have total average sales that reach 230 cups a day indicating a big market potential.

It was found in a recent study that 55% of United States adults consume coffee on a daily basis creating a "loyal coffee culture." Furthermore, television advertising dominates for coffeehouses which also uses interactive marketing and product sampling to increase sales. In terms of demographics, men are more likely to use coffeehouses as a workspace. Young customers (18-24 year olds) visit coffee houses for leisure time. For households with children a drive through is important especially in suburban areas. Finally, the most important features that attract potential customers are: convenience and price (Foley et al., 2008)

Furthermore, the study of Foley et al. (2008) showed some interesting insights on people’s opinions on drinking coffee. Demographically, men and women ages 16 to 27, educated and cultured, urban and suburban, middle to upper class are the target market of most coffee shops. According to the study, people drink coffee due to two main reasons: for relaxation and as a necessity working in the morning. In choosing a place to drink coffee, people prefer a less crowded place and intellectual looking. Ironically, as people become more conscious about their health, coffee was viewed as not healthy by coffee drinkers. Other aspects considered by coffee drinkers include individualization of coffee products that meet the palate needs of the customers.


A. The Philippine Coffee Industry: Tracing Its History

Coffee was brought to the Philippines around 1740 by the Spaniards. They planted coffee trees on the highlands and because of the good combination of humidity, cold, soil and the tropical climate, these plantation flourished. By the 19th century, the Philippines was the 4th largest coffee producing country in the world (Philippine coffee, n.d.).

The first coffee tree was introduced in Lipa, Batangas in 1740 by a Spanish Franciscan monk. From there, coffee growing spread to other parts of Batangas like Ibaan, Lemery, San Jose, Taal, and Tanauan. Batangas owed much of its wealth to the coffee plantations in these areas and Lipa eventually became the coffee capital of the Philippines (Coffee’s rich history, n.d.)

By the 1860s, Batangas was exporting coffee to America through San Francisco. When the Suez Canal was opened, a new market started in Europe as well. Seeing the success of the Batangeños, Cavite followed suit by growing the first coffee seedlings in 1876 in Amadeo. In spite of this, Lipa still reigned as the center for coffee production in the Philippines and Batangas barako was commanding five times the price of other Asian coffee beans. In 1880, the Philippines was the fourth largest exporter of coffee beans, and when the coffee rust hit Brazil, Africa, and Java, it became the only source of coffee beans worldwide (Coffee’s rich history, n.d.).

The glory days of the Philippine coffee industry lasted until 1889 when coffee rust hit the Philippine shores. That, coupled with an insect infestation, destroyed virtually all the coffee trees in Batangas. Since Batangas was a major producer of coffee, this greatly affected national coffee production. In two years, coffee production was reduced to 1/6th its original amount. By then, Brazil had regained its position as the world’s leading producer of coffee. A few of the surviving coffee seedlings were transferred from Batangas to Cavite, where they flourished. This was not the end of the Philippines’ coffee growing days, but there was less area allotted to coffee because many farmers had shifted to other crops (Coffee’s rich history, n.d.).

During the 1950s, the Philippine government, with the help of the Americans, brought in a more resistant variety of coffee. It was also then that instant coffee was being produced commercially, thus increasing the demand for beans. Because of favorable market conditions, many farmers went back to growing coffee in the 1960s. But the sudden proliferation of coffee farms resulted in a surplus of beans around the world, and for a while importation of coffee was banned in order to protect local coffee producers. When Brazil was hit by a frost in the 1970’s, world market coffee prices soared. The Philippines became a member of the International Coffee Organization (ICO) in 1980 (Coffee’s rich history, n.d.).


B. Present State of the Coffee Industry in the Philippines

The Philippines is one of the few countries that produces the four varieties of commercially-viable coffee: Arabica, Liberica (Barako), Excelsa and Robusta. Climatic and soil conditions in the Philippines – from the lowland to mountain regions – make the country suitable for all four varieties (Coffee’s rich history, n.d.). Due to the abundance of coffee in the country, majority of Filipinos drink coffee as much as they eat rice and drink beer. (Chua, 2010).

At present, the Philippines is trying to regain its status as a formidable grower of coffee bean. According to AFP (2010) The Philippine Coffee Board (PCB), an industry group spearheading the revival attempt, knows the country cannot compete with regional exporting giants Indonesia and Vietnam so they are aiming for niche markets and targeting the fast-growing number of young Filipinos who crowd cafes across the country. Josefina Reyes, director of PCB even mentioned that the Philippines has lots of exotic coffees which can be presented to potential customers. In addition, the Philippines had a long thriving coffee-drinking culture with a populace that favored coffee over tea and this is becoming stronger as society modernised. People are drinking more coffee with the change in lifestyles. For example, more people are working 24-7 in call centers so there is more opportunity to drink coffee.

One good example of integrating regional blends to coffee is "Kape Isla", which loosely translates to "Island Coffee" and is a trademark to distinguish specialty coffees grown in the Philippines. Coffee shops like "Kape Isla" offer their own regional blends to compete with global giants such as Starbucks whose local outlets sell specialty coffees generally only from Africa and South America. The gourmet coffee products that the Philippines are starting to offer include special 'premium arabica' blends and the strong 'barako' bean that is favoured by Filipinos. “Kapeng Barako” is not only famous for its strong aroma but also for its exquisite Filipino taste. “Kapeng Barako” is not a common variety of coffee but it is abundant in the Philippines. It has been said that its taste is superior than that of other coffee varieties like Robusta and Arabica (Chua, 2010). Special varieties found only in isolated areas are also being developed, as is the production of 'civet coffee' - made from beans eaten and excreted by civet cats (AFP, 2010)

Barako coffee is the Philippine term for coffee produced in Batangas. This Philippine coffee is of the Liberica variety. Liberica is rare and exotic, grown only in 3 countries out of about 70 coffee producing countries in the world. The first Barako tree was a cutting from Brazil planted in the 1800s in Barangay Pinagtung-Ulan, Batangas by the Macasaet family. Barako coffee has strong taste, flavor, and has a distinctively pungent aroma. All coffee grown in Batangas is generically called Barako (Philippine coffee, n.d.).

Today, there are only a handful of Barako trees and is in the brink of extinction. The title "coffee capital" of the Philippines has also shifted from Batangas to the town of Amadeo in Cavite province. The decline of coffee industry in the Philippines started when crops were plagued by "Coffee Rust" an infestation the almost wiped out the Philippine coffee industry. And South American countries took over to satisfy the world demand for coffee. In recent years, this was aggravated by the flooding of Vietnam with cheap coffee which made the world prices collapse even further. Even today, world prices of coffee is a fraction of the prices during the boom years (Philippine coffee, n.d.).

The recent world wide popularity of special brews and exotic blends of coffee gives a sliver of hope to the Philippine coffee industry. This new trend might be the breath of life that the Philippine coffee industry needs to savour once again the taste of Barako coffee's golden years (Philippine coffee, n.d.).


C. Health Benefits of Caffeine

People often perceive coffee as a health hazard beverage due to the caffeine it contains. However studies show that caffeine actually helps the body ward off some common illnesses making it more healthful than harmful (Kirchheimer, n.d.).

1. Type 2 Diabetes (Diabetes Mellitus Type 2)

It was found that of all the studies on coffee, lowered risk of acquiring Type 2 Diabetes or Adult-Onset Diabetes among coffee drinkers was the most consistent (Philippine coffee, n.d.). Findings of Harvard University’s study on coffee and caffeine examining 126,000 people over an 18-year period indicated that people who drink one to three cups of coffee a day are up to 9% less likely to contract Diabetes. Men who drank six or more cups of coffee per day slashed their chance of contracting diabetes by 54% and women by 30% (Brain & Bryant, n.d.) and this relationship was later known to be linear (Martinez et al., 2004; Huxley et al., 2009)

2. Antioxidant

Coffee is a good source of antioxidants as it contains a group of compounds called quinines (Kirchheimer, n.d.). Green coffee beans contains about 1,000 antioxidants and is increased during brewing. The roasting process also creates it own set of compounds that are beneficial to health and are unique only to coffee. Coffee contains more antioxidants than cocoa, red wine and 4 times more than green tea. Initial findings show that even 1 to 2 cups of coffee a day has beneficial effects and it seems both caffeinated and decaffeinated coffee increases the body's antioxidant levels (Philippine coffee, n.d.).

3. Parkinson’s Disease

Independent studies have shown that drinking coffee daily reduces the risk of Parkinson’s Disease by as much as 80% and the more they drink, the lower the risk. In fact, Parkinson’s drugs are noe being developed that contain a derivative of caffeine (Philippine coffee, n.d.; Brain & Bryant, n.d.).

4. Cancer

Research shows that compared to not drinking coffee, two cups daily can translate to a 25% reduced risk of colon cancer (Kirchheimer, n.d.). Coffee consumption is also correlated to a reduced risk of oral, esophageal, and pharyngeal cancer. Another study found a correlation between coffee consumption and a lower risk of aggressive prostate cancer (Can coffee, n.d.). This correlation may be due to anticancer compounds such as methylpyridinium in coffee. This compound is not present in significant amounts in other food materials. Methylpyridinium is not present in raw coffee beans but is formed during the roasting process from trigonelline, which is common in raw coffee beans. It is present in both caffeinated and decaffeinated coffee, and even in instant coffee (Coffee can prevent, 2003).

5. Cirrhosis of the Liver

Two cups of coffee a day causes an 80% drop in liver cirrhosis (Brain & Bryant, n.d.) and has been linked to a reduced risk of hepatocellular carcinoma, a primary liver cancer that usually arises in patients with preexisting cirrhosis (Inoue et al., 2005).

6. Alzheimer’s

The study of Byrd Alzheimer’s Institute in Florida, USA showed that lab mice injected with caffeine were protected against Alzheimer’s disease. The findings lead the doctors to believe that up to five cups of coffee a day could have the same positive effects on humans (Brain & Bryant, n.d.). Furthermore several studies comparing moderate coffee drinkers with light coffee drinkers were significantly less likely to develop Alzheimer’s disease later in life (Maia & De Mendoca, 2002; Lindsay, 2002).

7. Headache

Caffeine had been shown beneficial in stopping headaches (Brain & Bryant, n.d.) which increases the effectiveness of painkillers especially migraine and headache medications. Many over-the-counter headache drugs include caffeine in their formula. A single dose of pain reliever such as Anacin or Excedrin contains up to 120 milligrams of caffeine (Kirchheimer, n.d.).

8. Cognitive Performance

Caffeine had been found to have functional effect on concentration and alertness (Philippine coffee, n.d.). Likewise, people drink coffee for its ability to increase short term recall (Koppelstaeter, 2005). Meanwhile, studies showed that in tests of simple reaction time, choice reaction time, incidental verbal memory, and visuospatial reasoning, participants who regularly drank coffee were found to perform better on all tests, with a positive relationship between test scores and the amount of coffee regularly drunk. Elderly participants were found to have the largest effect associated with regular coffee drinking (Jarvis, 2005). Lastly, another study found that women over the age of 80 performed significantly better on cognitive tests if they had regularly drunk coffee over their lifetimes (Kozlow et al., 2002).

Other health benefits of caffeine include: Decrease risk of gout in men over age 40 (Choi, Willet & Curhan, 2007), prevention of cavities (Decker & Loveren, 2003), stimulant of peristalsis and cleansing of the colon (Brown, Cann & Read, 1990), less depression (Kirchheimer, n.d.), less heart disease (Kirchheimer, n.d.; Can coffee lower, n.d.), prevention of cavities (Kirchheimer, n.d.), reduction of asthma attacks (Philippine coffee, n.d.; Kirchheimer, n.d.), boosting mood (Brain & Bryant, n.d.), and lower incidence of gallstone and gallbladder disease (Leitzmann et al., 1999; Kirchheimer).


D. Substitute Coffee

Coffee substitutes are non-coffee products, usually without caffeine, that are used to imitate coffee. According to Wikipedia (n.d.), coffee substitutes can be used for medical, economic and religious reasons or simply because coffee is not readily available. Furthermore, roasted grain beverages are common substitutes for coffee. In addition, coffee substitutes are sometimes used in preparing foods served to children or to people who avoid caffeine, or in the belief that they are healthier than coffee. For religious reasons, members of the Church of Jesus Christ of Latter-day Saints are not supposed to consume coffee but may enjoy a substitute (Coffee substitute, 2010). Some culinary traditions, like that of Korea, include beverages made from roasted grain instead of coffee or tea (including boricha, oksusu-cha and hyeonmi-cha).

1. Substitute Coffee in the USA and Europe

According to Edwards (2002), Native American tribes of what is now the Southeastern United States brewed a ceremonial drink containing caffeine “asi” or the “black drink” from the roasted leaves and stems of the Yaupon Holly. European colonists adopted this beverage as a coffee substitute, which they called “cassina.” During the American Civil War, ground roasted chicory root has been widely used and sold commercially. Postum, as an instant type of coffee substitute made from wheat bran, wheat molasses and maltodextrin from corn, reached its height of popularity in the US during World War II but is no longer made. At present, coffee substitutes in the US continue to innovate with addition of other ingredients deemed to make substitute coffee even healthier. For instance, the Ayurvedic Roast is a coffee substitute which borrow from both European tradition of using roasted barley, rye, and chicory and the Indian Ayurvedic system of health by adding traditional herbs of ashwagandha, shatavari, and brahmi (Coffee substitute, n.d.)

In Europe, cereal coffee substitutes made of malted barley, chicory, barley, rye and beetroots were made. Cafix and Pero are two popular European brands produced in Switzerland, while Caro-Kaffee and Caro Malzkeffee are German coffee substitutes of the same ingredients. Other coffee substitutes in Europe are Soyfee, a caffeine-free, organic, upscale, brewed, coffee alternative made from soybeans that tastes like coffee; and Ersatz Coffee which is a new caffeine-free coffee substitute using roasted rice, roasted peas, and roasted chicory (Coffee substitute, n.d.)

At this point, one can easily realize the market potential of substitute coffee. As indicated earlier, coffee substitutes have actually been produced in the USA and Europe as cheap alternative to coffee with medical, economic and religious purposes. Furthermore, the question arises that as coffee growing and processing is an expensive business, why spend money on it? It’s much easier to take a cheap substitute which grows everywhere, don’t need special care and can be turned into coffee without much effort (Coffee substitute, 2010). More importantly, these ingredients are locally found and do not require importation which perhaps decreases the cost of making coffee. In the Philippines, two of the most common coffee substitutes which can be used are corn and rice coffee. However, a look at the current coffee shops in the country showed that these substitute coffee ingredients remain to be tapped for consumption.


E. Market Potential of Tropical Fruits


There are many kinds of fruits that are abundant in the Philippines. Some of them are even being exported to oriental food dealers in Europe and United States. Fruits that taste so good that it is worth the money. Many scientists found that some fruits prevent cancer, antioxidant and good for our health (Dela Cruz, 2006).

The Philippine agricultural industry is focused on fruit and vegetable production due to their export potential in the world market. Quality-wise, our fruits and vegetables are among the best in the world but their quality deteriorates when they get transported. And with the strict quarantine requirements set by the US, Japan, and Australia, which comprise some of the biggest market potentials for our fruits and vegetables, it becomes more difficult to export these perishable goods (Dela Cruz, 2006).




Potential In The Market

Strengths

The strength of the business lies in the following points: price, location and operation, alternatives and options, interior and target market. Specifically, the price will be competitive as it will be slightly cheaper compared to existing brands like Starbucks, Coffee Beanery, etc. The location will be strategically chosen ideally where there are students, workers and people who would be interested in drinking coffee. This location will also be accessible to deliveries such as coffee and dairy products needed by the shop. Banking on the service of highly trained “baristas,” the coffee shop will be popular to its customers operating 24 hours a day, the shop would truly have its leverage against competitors. Also, being a healthy coffee shop it will provide healthy alternative coffee experience to its customers with coffee substitutes like corn and rice, drinking coffee in this shop will never be the same. Of course, there’s the infamous Barako coffee which will be known for all its health benefits. Lastly, if they feel like cooling down, they can choose to purchase ice cold products with the shakes available in the shop. Not to mention the healthy treats like donuts and cakes, made with less fattening ingredients. All in all, the coffee material which will be used in the shop will come from the Philippines to promote locally made products with a touch of excellence in coffee taste and experience. Furthermore, the cozy interior of the coffee shop will be an additional attraction for the customers. This interior will suit the needs of students and business men who need adequate space to do their homework, office work, business meetings, a place to relax, etc. Bigger and more comfortable fixtures shall be provided and in-between space wider to make their dining experience more private and pleasurable. The research also deems that since this coffee shop would cater to both men and women ages 16-27, educated and cultured, urban and suburban, middle to upper class, the coffee shop would expect high return of investments since many people would patronize the shop.


Weaknesses

The researchers deem that since this healthy coffee shop is relatively new in the market, customers might hesitate to try it. In addition, since the coffee shop products will be cheaper compared to others, it is possible that the customers might perceive the products with lower quality. Perishable and seasonal products such as the tropical fruits is also seen as a weakness. Finally, limited funding is seen as a potential weakness which can hamper and delay the plans for the opening of the coffee shop.

Opportunities

Due to Filipinos’ penchant for drinking coffee, products in the coffee shop can be exported to countries where there are many Filipinos. This exportation can be through packaging of coffee and coffee substitutes in export sizes. Consequently, with the increase in demand locally and abroad, mass production of packaged coffee is a possibility. Co-branding with regional products can also be done where local producers can sell their products in the coffee shop in partnership with the shop. Domestically, the coffee shop can expand and build more branches to other areas where there are people working especially at night especially call center agencies where a demand for 24-hour coffee shops is higher. Finally, since this business is all about coffee, advertising in traditional and new media including above and below the line advertising methods would be easier.


Threats

The main threat that this business sees is the competition in the market. Truth of the matter is that the coffee industry is fairly saturated by local and international coffee franchises. These established coffee shops also have an advantage over innovation of new coffee products getting mainly the latest training in coffee production since they have partners all around the globe. Their level of knowledge in coffee is definitely higher compared to this emerging business. Other threats that the researchers see is the instability and volatility of the economy. Due to inflation and deflation, the coffee shop will be exposed to rises in the cost of coffee and dairy products. Finally, the trend of drinking coffee could end.



The Product

Brand Positioning

The launch of KOPI-NOY will need to be consistent with the brand positioning objective to market it as a new and exciting innovative product which is fresh locally brewed gourmet coffee for people on the move or working in locations remote from other well established coffee shops.


Target Marketing

The initial target market sector will be the middle to high income urbanites, men and women ages 16-27, educated and cultured, urban and suburban, who place an importance on taste, quality, ambience and the consumption experience. Therefore KOPI-NOY will focus on creating new demand from these existing consumers who up till this point may not have tried local gourmet different from the rest of popular coffee shops.


Product


The taste and convenience aspects of the product will bank on the unique taste of Philippine coffee blend alongside tropical fruit shakes. Coffee sizing in the shop should be distinct from each other. Freshly made coffee in Styrofoam cups for take out.with different sizes from small- medium- large cups shall be used. Likewise, coffee made in decorated mugs for dine in costumers will be provided. Given that the blends are from locally made ingredients such as roasted corn coffee, peanut roasted coffee , rice coffee and the famous “Kapeng B arako.” There will also be fruit shakes available mainly using tropical fruits in the Philippines. In addition, healthy pastries and breads will be available in the shop.


Promotion

Initially, during the launch stage, secrecy and speed will be key to success to avoid pre-emptive moves by other brands such as Starbucks, and Coffee Beanery which would already have developed retaliatory strategies elsewhere.

An integrated marketing campaign needs to be implemented to ensure a “customer relationship” which can be built via the following promotion: the use of online communities in the existing Facebook and Twitter social networking sites, the taste test and free samples, leaflets and brochures.

Further down the road, there is also a chance for KOPI-NOY to leverage on in the future to its identity by integrating into it’s larger scope of environmental stewardship by creating a recycling campaign around the product.


Price

This product will sell at the following prices: P50 for a small mug, P75 for medium mug, and P100 for a large mug. These prices will be competitive to other coffee shops due to its cheaper price, quality service, palatable flavor and relaxing ambiance. The price could serve as a reference marker for the initial price setting. It is deemed that a pricing strategy that offers rewards for loyal KOPI-NOYcustomers would work well. This could be a simple modification of the loyalty card system to be placed at the coffee shop or this could work in reverse where customers are offered complimentary drinks if they collect enough stickers earned when they buy coffee.


Comparison of Domestic and Foreign Coffee Prices


A look at the current pricing of local and international coffee ingredients showed that different varieties of coffee have their own prices. According to International Coffee Organization, 248 lbs of Colombian mild Arabicas would cost US $245. Other mild Arabicas at 214 lbs would reach US $214. On the other hand, Brazilian Natural Arabicas would cost US $1553 at 167 lbs. Finally Robusta at 85 lbs would cost US $93.

Locally, Rice coffee would cost between P30 – P50 for every 250 grams. Similarly, Corn coffee would cost P50 for every 200 grams. Finally, Kapeng Barako woule amount to P115 for every 250 grams.

Doing the mathematical computation for the local and foreign coffee we see that the foreign coffee is slightly cheaper compared to local coffee. Locally, for every gram of rice and corn coffee we have P0.20, while “Kapeng Barako” amounts to P0.40 for every gram. Foreign coffee on the other hand, revealed some cheaper price. For instance, the Colombian Mild Arabicas only cost P0.10 for every gram, other Mild Arabicas cost P0.10 for every gram as well. Brazilian Natural Arabicas amount to P9.30 for every gram while Robustas had P1.10 for every gram.

From this comparison, we see that the local coffee remains competitive in terms of its pricing. Rice, corn and “Kapeng Barako” can be regarded as slightly more expensive than the Colombian Mild Arabicas, but they remain cheaper than the Brazilian Natural Arabicas and Robustas.



Table 1. Rice, Corn and Barako Prices

Rice Coffee
Corn Coffee
Kapeng Barako
Price
Amount
Price
Amount
Price
Amount
P51.00
200g
P51.00
200g
P130.00
10 Bags
P30.00
250g
P168.00
1 Box
P115
250g
 
 
P2016.00
1 Dozen Box
 
 


Table 2. International Coffee Price[1]

*US cents per lb[2] (as of July 30, 2010)
Colombian Mild Arabicas
Other Mild Arabicas
Brazilian Natural Arabicas
Robustas
Price
Daily Weighted Average
Price
Daily Weighted Average
Price
Daily Weighted Average
Price
Daily Weighted Average
245
248
214
214
155.3
167
93
85



Table 3. Conversion in Peso and Grams

Colombian Mild Arabicas
Other Mild Arabicas
Brazilian Natural Arabicas
Robustas
Price
Weight
Price
Weight
Price
Weight
Price
Weight

P11058

112532 g

P9659

97091 g

P7010

75614g

P4211

38705g

Table 4. Price Per Gram Comparative Table


Price Per Gram (in Phil. Peso)
Price Per Gram (in Phil. Peso)

Local


International
Rice coffee
0.20
0.10
Colombian Mild Arabicas
Corn coffee
0.20
0.10
Other Mild Arabicas
Kapeng Barako
0.40
9.30
Brazilian Natural Arabicas


1.10
Robusta



Financial Aspect


In this section of the study, the researchers aimed at estimating the possible financial costs of starting up KOPI-NOY. Start-up assets, total cost of capital equipment, principal for 12 months and projected income statement for five months of the year 2011 were all outlined to give a better idea on how much would be needed and gained in the business.


Cost Analysis

Table 5. Start-up Assets

Start-Up Assets
Owner’s Initial contribution
Php200,000
Equipment Loan
Php180,000
Remodeling Loan
Php90,000
Operating Loan
Php430,000
Investors
Php250,500
Total available cash
Php1,150,500



Table 6. Total Cost of Capital Equipment

Total Cost of Capital Equipment
Beginning Inventory
Php515,000
Building Lease
Php25,000
Equipment
Php450,000
Legal Fees
Php15,000
Accounting Fees
Php29,000
Licenses and Permits
Php25,000
Remolding works
Php48,000
Deposits (public utilities, etc.)
Php38,000
Adverting (grand opening, etc.)
Php64,000
Promotions (door prizes, etc.)
Php15,000
Total Start-up Expenses
Php1,224,000


Table 7. Capital Equipment

Capital Equipment
Equipment
Cost
tables
Php45,000
Couches
Php52,000
chairs
Php27,000
10 lamps
Php3,500
5 end tables
Php2,300
curtains
Php500
rugs
Php300
Sound system
Php18,000
POS system
Php26,500
Dishes
Php17,500
Uniform shirts
Php4,000
Total Cost Capital Equipment
Php172,750



Table 8. Remaining Principal for 12 Months

Month
Monthly Pay
Interest
Remaining Principal
1
Php65,000
Php8,715
Php87,150
2
Php65,000
Php8,715
Php87,150
3
Php65,000
Php8,715
Php87,150
4
Php65,000
Php8,715
Php87,150
5
Php65,000
Php8,715
Php87,150
6
Php65,000
Php8,715
Php87,150
7
Php65,000
Php8,715
Php87,150
8
Php65,000
Php8,715
Php87,150
9
Php65,000
Php8,715
Php87,150
10
Php65,000
Php8,715
Php87,150
11
Php65,000
Php8,715
Php87,150
12
Php65,000
Php8,715
Php87,150
Total
Php780,000
Php104,580
Php1,045,800


Table 9. Projected Income Statement for Year Ending Jan-May 2011

Projected Income Statement for Year Ending December 31, 2011
 
Jan '11
Feb '11
Mar '11
Apr '11
May '11
Jun '11
Sales
Php52,538.00
Php54,639.00
Php56,825.00
Php59,098.00
Php60,280.00
Php61,486.00
Cost of Sales
Php15,761.00
Php16,392.00
Php17,048.00
Php17,729.00
Php18,084.00
Php18,446.00
Gross Profit
Php36,777.00
Php38,247.00
Php39,778.00
Php41,369.00
Php42,196.00
Php43,040.00




RISKS


New in the market

Being a fairly novel coffee shop in the country, the business runs the risk of attracting or dispelling consumers’ interest in trying out something new. After all, there are more established coffee shops where they can always hang out and enjoy what they have been used to. Furthermore, the healthy culture in the country has not rooted very deeply since it is still starting to grow. It was observed that many Filipinos are still after the price and not the health benefits that food products can offer.

Perishable Goods

The main ingredients in the coffee shop such as the fruits for the cold drinks and pastries/bread all run the possibility of being spoiled due to their being perishable. For this reason, the coffee shop has to quickly dispose these products at the fastest time even if refrigeration can prolong their shelf life.




Limited Funding

The funding of the coffee shop is at best would come from limited sources. Due to the limited funding that the business faces, there are chances that some of the plans for the business might not be pushed through, and this can hinder the chance of the coffee shop to make a name in the market.


High Competition / Saturated Market

The Philippines is now marred by various coffee shops in every corner of the city and establishing a new one such as our business would have to compete with the rest. The existence of many coffee shops runs the risk of losing in the competition.


Volatile Economy

So far the economy of the country has not been so seriously affected by the economic fluctuations the world is experiencing but with what other countries has experienced, the country also poses the risk of economic recession which can surely affect the sales o9f the coffee shop. Not only would there be an increase in the price of commodities but most especially consumers might further distance from drinking coffee in coffee shops.


Shift of Consumers’ Interest in Coffee

It is possible that consumers can patronize our product but the trend changes rapidly and this brings the coffee shop at the mercy of social interest. We rely on the existing fad and without the interest of consumers, the business will die.




BIBLIOGRAPHY



JOURNALS


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Touger-Decker, R. & van Loveren, C. (2003). Sugars and dental caries, American Journal of Clinical Nutrition, October 2003, 78:4, 881S-892S.


ONLINE SOURCES

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Brain, M. and Bryant, C. W. (n.d.) How caffeine works



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Choi, HK; Willett W, Curhan G (2007). "Coffee consumption and risk of incident gout in men: A prospective study". Arthritis Rheum 56 (6): 2049–55. doi:10.1002/art.22712. http://www3.interscience.wiley.com/cgi-bin/abstract/114269884. 

Chua, S. L. (2010). Forum on “The Coffee Industry: Philippines and Abroad Event. May 02, 2010, Manila Grand Opera Hotel.

Can Coffee lower the risk of Prostate Cancer? http://www.npr.org/templates/story/story.php?storyId=121343438.

Coffee can prevent colon cancer (2003). The Naked Scientists. BBC. 2003-10-19. http://www.thenakedscientists.com/html/Shows/2003.10.19.htm#3. Retrieved 2006-11-17.

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Coffee substitute (n.d.) Retrieved on July 31, 2010 from http://en.wikipedia.org/wiki/Coffee_substitute

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Edwards, Adam. (2002) "Variation of caffeine and related alkaloids in Ilex vomitoria Ait. (Yaupon holly): A model of intraspecific alkaloid variation".] Society for Economic Botany Julia F. Morton Award. Retrieved from


Foley, T., Nugent, B., Reed, S., Shahab, M., and Stelle, L. (2008). Digging to the bottom of the cup : Starbucks new business pitch. Retrieved on July 28, 2010 from http://www.slideshare.net/MShahab/starbucks-case-study-2776465

Huxley R, Lee CM, Barzi F et al (2009). "Coffee, decaffeinated coffee, and tea consumption in relation to incident type 2 diabetes mellitus". Arch Intern Med 169 (22): 2053–2063.

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Inoue M, Yoshimi I, Sobue T, Tsugane S; JPHC Study Group. Influence of coffee drinking on subsequent risk of hepatocellular carcinoma: a prospective study in Japan. J Natl Cancer Inst 2005;97:293-300. PMID 15713964.

Jarvis, M.J., Does caffeine intake enhance absolute levels of cognitive performance?, Psychopharmacology, 2 December 2005, 110:1-2, 45-52. ([5] accessed Nov 30, 2005).

Johnson-Kozlow, M., et al., Coffee Consumption and Cognitive Function among Older Adults, Am J Epidemiol 2002; 156:842-850 ([6] accessed Nov 30, 2006)

Kirchheimer, S. (n.d.) Coffee: The New Health Food? Reviewed by Michael W. Smith. Retrieved on July 31, 2010 from http://men.webmd.com/features/coffee-new-health-food

Koppelstaeter F, Siedentopf C, Poeppel T, Haala I, Ischebeck A, Mottaghy F. Influence of caffeine =excess on activation patterns in verbal working memory. Radiological Society of North America, 2005, abstract no LPR06-05 link.

Lindsay, J. et al. (2002). Risk factors for Alzheimer’s Disease: A prospective analysis from the Canadian Study of Health and Aging. Am J Epidemiol 2002; 156:445-453.

Philippine Coffee - Barako (n.d.) Retrieved on July 28, 2010 from http://www.philippineherbalmedicine.org/coffee.htm

Pinkhawk (n.d.) Coffee Production (Philippines). Retrieved on July 28, 2010 from http://hubpages.com/hub/coffee-production-philippines.

Stopping the Coffee Berry Borer from Boring Into Profits (2004). In Agriculture Magazine: Pointsettia Lady of Bacolod issue. Pp. 56-57, December 2004.

Salazar-Martinez E, Willett WC, Ascherio A, et al. (January 2004). "Coffee consumption and risk for type 2 diabetes mellitus". Ann. Intern. Med. 140 (1): 1–8. PMID 14706966. 





[1] http://dev.ico.org/prices/pr.htm
[2] 1 pound = 453.59 grams



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