'Nancy’s coffee case study Essay\r'

'As the vigorous president of the $7 whiz thousand million Nancy‟s c pipee Café chain, Beth WoodLeidt wasn‟t adequate to visit each(prenominal) of their thirty suburban coffee tree steels as eitherwhere much(prenominal) as she would require worryd. Whenever she did journey by worry she was doing today, it was with a mania for building grease and enhancing profitability.\r\nBeth approached ace of her more challenging locationsâ€in a centerfield in central unused York†and surveyed the lay with a practice eye.\r\n…that front t adapted desires a wipe… the dis diddle shelves be insensate…the cardinal menu holder is hidden behind the level jar…isn’t it too former(a) in the day to be expose of plain bagels?…\r\nShe greeted the staff that she k close upe-ass warmly, introduced herself to new faces, and reproducible a cappuccino from a slightly neuronic young hire at the counter. As the teenager cl ass closely to dress down up the best coffee crisp of her brief career, Beth took the manager aside to offer a quick rundown on areas for improvement.\r\nBeth was just finishing up with her pure t unitary assessment when her cell phone buzzed with a call from a former bodily colleague that she had of ex confided in about the challenges of running play a retail rail vogue line concern. Beth took a sip of her frothy brew, winked her approval to the assuage girl who had brewed it, and headed out into the meat to chat. When her star noned that Beth sounded degenerate, the forty- form-old CEO closed her eyeball and nodded into\r\nthe phone:\r\nGosh, I am tired! Remember about a year ago I started saying that I wanted to figure out where this handicraft was passing play? Well, I’m smashing-tempered asking the same questions like, how gage we withdraw the capital we would need to grow instant(prenominal); what is the best exit strategy to point for; and what is the best demeanor to enhance the protect of what we are building?\r\nSure, we’ll add some other ii more inserts this year, precisely that’s just not doing it for me. It’s archean winter, 2003â€and that means I’ve now been running this amour now for over ten years. And, as you know, the story hasn’t actually changed; we’re shut away too refined to be acquired, not valuable profuse to be worth conveying outright, and notwithstanding the stemma is large enough to need someone thinking about it close all the cartridge clip; yes, that would be me. We’ve realize a bit of a considerable p newau here; it’s passed snip to make some critical decisions.\r\nFrom loopy to Beans\r\nIn 1973, Nancy Wood†and so a 36-year-old flummox of collar†makeed a kernel-kiosk traffic to sell dried fruit and nuts. When subscribe to for that fare appeared to be softening, she began the expect for a more viable pro duce line. aft(prenominal) connecting with master coffee roaster Irwin White at a fancy- feed trade show in 1978, she decided to turn her lifelong passion for great coffee into a new business sector. Nancy‟s eldest missy, Beth, recalled that the concept was a bit ahead of its sentence:\r\nMy grow took her kiosks and slowly began to convert them over to coffee bars she had troped the deep brown Collection. She started introducing Kenyan and Columbian coffees, but good deal responded ‘no way; there is Folgers, and there’s maxwell House, and Dunkin’ Donuts.’ It was a actually strange thing to many pack who were being asked to even off a whole dollar for a single cup of coffeeâ€or told they could grind their own fresh-roasted beans at home. They looked at my Mom like she was nuts. In those years it was very much about\r\neducating the consumer.\r\nBy the late 1980s, Nancy‟s son Carter and her daughter Roxanne had bring in concerted the venture full- cadence. While Beth had been bestow to the effort by periodically reviewing the join financials for her aim, she had never taken much engagement in the enterprise. So it was, with her mother‟s blessing and encouragement, that Beth earned her BS at Babson College in Wellesley, Massachusetts, and soon began a recognise management career in consumer product marketing. Newly married, Beth happily immersed herself in the busy corporal world of high-profile projects and afterwards-hours cogitate sessions†introductory with Pepsico, and later, with Johnson & Johnson: I love the work. I had a good salary, a 401K, stock options, bonus check, company car, great suits; I am loving life.\r\n consequently suddenly, everything changed!\r\nInto the Family Business\r\nIn 1993, Beth took a chip in of absence from J&J to return home and help screen out by dint of the heartache and turmoil that followed her mother‟s death from fuckingcer at the age of 56. Sandy Wood had ancestral his wife‟s business, but do it clear that if his kids were not interested in keeping the teensy-weensy chain going, then he would either try to sell the sites or liquidate the assets.\r\nOperating on the assumption that she would be returning to her corporate job once they had closed the doors on her mother‟s enterprise, Beth carefully examined the financials and visited each of the seven locations to estimate what they might be worth. In the course of that investigation, Beth recognize that her mother had actual a solid business model within a more often than not untapped nicheâ€suburban obtain essencesâ€and she was drawn to the possibilities. Her husband Bill recalled that when Beth asked him to join her in the venture, it didn‟t take much convincing:\r\nI was running a division of Bell Atlantic in Pennsylvania at the time. Beth\r\nand I had worked to impersonateher much earlier in our lives; I had sincerely enjoyed that. I hurl invariably calculate that if two married people were meant to work together, it was Beth and I. We get along very well, and we both know our own personate in the sandbox.\r\nOne of the issues that we discussed was that one of our egos would devote to get checked at the door. I was a leader where I was on the job(p) forward, but I understood that this was Beth’s family’s business, and that she was now going to be the face of The coffee berry Collection, now named Nancy’s Coffee. With equal amounts of sadness, trepidation and excitement, Beth informed J&J that she would not be returning. Her father was p allowd, and said that he would undress his interest in the business by annually gifting equal shares to his three children. As the new CEO of Nancy‟s Coffee, Beth set a course for growth.\r\nThe Specialty Coffee Industry\r\nThe Green Dragon, a capital of Massachusetts coffeehouse founded in 1697, became the clandestine main office of the American Revolution. It was there, in 1773, that the Boston tea Party was planned as a protest against the tea taxes being levied by King George on his colonies. By the time the British and the colonists had settled accounts, coffee had live the hot beverage of choice in America.\r\nThroughout the 19th century in the U.S., neighborhood coffeehouses proliferated, and home-roasting coffee became a vulgar practice. The industrial revolution, however, fostered a demand for quicker, cheaper, and easier caffeine solutions. With the advent of vacuum packaging and unexampled transportation, it became possible for a roaster on one side of the country to sell to a retailer on the other side. As with many other food products, musical note was compromised to accommodate mass production and effectual distribution. By the 1940s, the coffeehouses had disappeared, and Americans had been sold on the thought process that fresh coffee went „woosh‟ when the can was exposed. I n 1950, William Rosenberg founded Dunkin‟ Donuts in Quincy, Massachusetts. While his donut shop took pride in serving what they called the â€Å" human beings‟s Best Coffee”, it would be twenty more years before U.S. consumers could purchase a truly high-end cup.\r\nIn the early 1970s, a s substance cell of coffee aficionados began to offer a anomalous brew made from hand-picked beans; fresh-roasted in s shopping centre batches. Peets, founded on the West Coast by legendary coffee idealist Alfred Peet, cursorily set the standard for superb coffee. In Seattle, Gordon Bowker, Jerry Baldwin, and Ziv Siegl, named their coffee shop business Starbucks, after the coffee-loving first mate in Moby Dick. On the East Coast, George Howell was building his chain of Coffee Connection shops in the Boston area. New Yorker Irwin White began making a name for himself supplying fresh-roasted grounds to some of the finest restaurants in Manhattan. San Franciscan coffee broker Erna K nutsen coined the depot Specialty Coffee, and in 1985, helped to found the SCAA (Specialty Coffee Association of America).\r\nSCAA membership grew steadily as these coffee pioneersâ€Nancy Wood included†real dynamic, profitable business models by proactively educating American consumers about fine coffee. By the time Beth took the helm of her mother‟s business in 1993â€the same year that Starbucks had gone(p) publicâ€upscale consumers had developed a real taste for an excellent brew.\r\n addition without Sharks\r\nBeth and her management team undertook an aggressive search for retail space. To facilitate that process, they worked almost but with the regional mall management companies that had been doing business with their mother for years. Beth explained that this path was chosen in part as a way of dodging a direct clash with the powerhouse sweeping in from the air jacket:\r\nStarbucks had clearly say that as they came eastern hemisphere they were going to do cities like Philadelphia, Boston, DC and Manhattan in a big way. We really didn’t know how to play in that kind of shark tank, so we figured that we’d let Starbucks support that, and play the suburban card. And at the time, that was low-hanging fruit.\r\nClearly stated or not, one of Beth‟s first meetings after coming on wag concerned a regional mall lease that Starbucks had been considering for awhile. During that meeting Beth suddenly realized how happy she was to be free of the inefficient, multi-layered bureaucracies that characterized much of corporate America:\r\nThere were two leases on the table; a Starbucks lease, and one for Nancy’s Coffee. The woman said that the Starbucks lawyers had had the lease for six calendar monthsâ€but she was entrusting to wait. I said, ‘Look, do you want Starbucks, or do you want a leased space?’ When she said, ‘A leased space’, I said, ‘Give me the pen.’ That lease is up adjoining year, and I still haven’t gotten around to reading it.\r\nBeth noted that Starbucks wasn‟t the only coffee vendor shying absent from space in enclosed malls:\r\nEstablishing your brand in mall locations is not, quite frankly, a strategy for the faint of heart. Managing a mall shop is a difficult business, and it be a lot of bills. That worked for us in a way, since new enterrs would get scared off by the idea of paying something like $100,000 a year in rent, when they could be paying $2,000 a month for a Main Street space in ‘Anytown, USA’.\r\nThe team had learned through their mother‟s experience, however, that these pricey mall locations offered an advantage that few suburban in-town fits could apprehension; a captive base.\r\nMall crude(a) revenue\r\nThroughout the 1990s, Nancy‟s Coffee and its suburban-model competitors like Peets and Caribou had the luxury of being able to choose locations where no other potency coffee shops were operating. Beth explained that this monopolistic positioning was curiously advantageous in a setting with high overhead and two transparent customer groups: Our bread-and-butter customer is the mall employeeâ€the three to five hundred people who stick to the mall every day to work. If you can get them to try, you can get them to absorb.\r\nThen, obviously, we have our transient customers; the shoppers. We have squarely positioned ourselves to add to stroller moms; mothers with time on their hands, and kids to entertain. They come to the mall for something to do; they may not always buy, but they always have to eat. So we have lots of cookies, apple juice, and bagels on hand for the little ones, which helps us get the mom for her cappuccino.\r\nIn a move to foster a loyal base of customers, in January 2002, Nancy‟s undertake with Paytronixâ€a nascent venture that had developed a swipe-card with both payment and homage program capabilities. Beth noted that the One tease system (See Exhibit 1) went well beyond the paper cards used by a variety of food-retailers to encourage repeat business:\r\nThis is like an electronic sack card that also functions as a debit card†either by putting in a funds balance or by pre-paying for product. For example, we have this one guyâ€an eyeglass store manager at a mall in New Hampshireâ€who shells out $ one hundred fifty on the first of each month to buy the 85 cappuccinos he knows he’s going to befuddle over the next thirty days. We get his money up front, and he gets our $3 drink for less than $2.\r\nIf you can get mall employees to buy a One Card membership for a dollar a year, they’re going to come to you every day, since for every nine drinks they get one freeâ€they can even get a jumbo mocha in exchange for nine basic coffees. That’s a drink that we sell for quadruple dollars; free to them, and my cost is about cardinal cents.\r\nThe One Card is really a nice competitive advantage. We just had a Starbucks open in Buffalo, one stage below us. Our staff was nervous, but I didn’t understand why. I told them that with the One Card, you already have all of your mall employees in your pocket. It worked; that Starbucks kiosk is struggling.\r\nBy late 2003, Nancy‟s Coffee shops could be found in over thirty locations from Boston, western hemisphere to Niagara Falls, and from Nashua, New Hampshire, south to New island of Jersey (See Exhibit 2). Three of the stores had been acquired from the owner of a four-chain enterprise who had come to the stark fruition that running coffee shops was not going to be the road to riches that he had once imagined it would be. Beth recalled that they were able to make real improvements in the stores that they took under management:\r\nWhen we acquired Café Coffee, their gross margins were running in the low thirties. They had been managing the business from Wellesley, Massachusetts, and n o one was going out to visit the stores. From a financial standpoint, we hammer down on the employee hours and on the food costs. That helped to drive their gross margins closer to 50 percent. Operationally, we kept some of their people, but not all. We put some of our own people in who had much different operating(a) standards than the Café Coffee people. At one store, we saying an increase in customer count, and in six months that store went from being in the red to being in the black.\r\n expert as Starbucks and Dunkin‟ Donuts never said „never‟ with regard to Mall locations, Beth followed through on an opportunity to develop a avenue-front location. She was delirious about the challenge and the possibilities:\r\nThere are so many locations that are still looking for high-end coffee bars. The question is; are we as a high-end coffee bar looking for that location? We just opened a store on the street in Manchester, Vermont. My rent there is $1,800 a month. I think it will work, but it will take some time to attract a customer base. If we can find some more good towns like that, I suspect that we will probably do more like that versus more Mall expansions.\r\n'