Success Story - Benchmarking Review

Background

A client with an established coffee shop brand in the Middle East were experiencing a period of significant growth and as such were considering opportunities to establish a foothold in the UK market. With no existing presence in the UK market, the organisation was keen to undertake focused research on the industry in London to develop their commercial strategy.

The organisation was also keen to develop a holistic understanding of the typical cost profile of competitor coffee shops, including costs related to the rental and maintenance of commercial property, tax implications related to staff employment and other key cost drivers.

As a result, we were engaged to support the client on their expansion strategy through conducing a benchmarking review of the London market.

Approach

The objectives of this benchmarking report was to undertake a structured analysis and assessment of the coffee industry in London. Our methodology for the review was as follows:

• Identify a series of KPIs to assess operating conditions and trends in the London market e.g. costing ratios, pricing, market average profit margins.
• Select a peer group for benchmarking and perform an assessment of the performance of these companies utilising internal expertise and datasets.
• Assess specific geographical enablers and constraints in order to help the organisation to identify a specific London location to establish their brand.

The outputs of our review was a comprehensive report detailing the findings of our research and a set of insights and recommendations to support the organisation’s expansion strategy. The report was structured as:

• Market review: Overview of the London market including concentration of coffee shops by location,  market trends and sales volumes.
• Price analysis: Consideration of competitor pricing strategies to help the organisation establish a competitive price for their products.
• Cost analysis: Overview of anticipated start-up costs and operational costs of establishment of coffee shops in the London market.

Outcome

We presented the key findings of our review to the management team of the organisation, structured around an overview of coffee brands and their locations in Central London and the West End. This was tied to market projections of sales volumes over the next 5 years. We also researched and presented the key trends in the coffee industry which we anticipated to have an impact on the organisation’s performance in the 5 year period to support decision making on their procurement strategy.

Whilst the focus of our review was on the cost profile of the coffee industry, we also detailed out coffee prices for a sample of competitors to provide a matrix of the average pricing of coffee in London utilising publicly available data.