Market & Competitive Analysis: Case Study

Client Situation

As part of its overall strategy to drive growth through systematic expansion into complementary product categories in the foodservice channel (e.g., restaurants, convenience stores), a leading beverage manufacturer identified hot beverages (e.g., coffee, tea) as an untapped market opportunity that it would like to explore and potentially pursue. Unfortunately, the manufacturer had little experience in this beverage category and did not understand the characteristics or dynamics of the marketplace. Management did, however, have the capital necessary to invest in this opportunity, but was hesitant to do so without a sound business case to justify the investment.

To help develop the business case, Alliance was asked to work with the Marketing and Business Development functions to thoroughly understand the market and competitive environment and assess the attractiveness of the potential new market opportunity as a potential source of future business growth.

Alliance Approach

Using primary data collected from nearly 200 channel customer interviews and secondary data gathered from a variety of sources, the team assessed the size and growth rate of the market, determined customer needs, evaluated the competitive landscape and analyzed the value chain economics.

The market and competitive analysis revealed the following insights:

  • Large, Growing Market. The U.S. coffee market was found to be large and growing in dollar terms. Of particular interest to the foodservice focused client, the “away from home” consumer consumption location was found to be the fastest growing market segment.
  • Customer Needs Evolving. Historically, foodservice outlets offered and consumers expected coffee to be simply hot and black. However, with the advent of specialty hot beverages (think Starbucks), consumer expectations for their hot beverages were on the rise. To meet their customers’ evolving expectations, foodservice outlets sought to move their hot beverage offering upscale by providing specialty beverages (e.g., cappuccinos), among other things. In addition, interviews revealed that foodservice outlets preferred an integrated hot beverage bundle (i.e., product, equipment, service) from a single supplier.
  • Competition Not Meeting Customer Needs. Not only was the competition found to be fragmented, but competitive offerings did not meet rapidly changing foodservice outlet needs. For example, few, if any, competitors offered specialty beverages as part of their bundle. In addition, none of the competitors offered a complete hot beverage bundle as desired by foodservice outlets.
  • Attractive Economics. The economics of the business were highly attractive to all participants in the value chain. Gross margins were on the order of 80% for both the foodservice outlet and wholesale supplier. In addition, average price points were expected to rise as the product mix shifted to a greater proportion of higher priced specialty beverages (e.g., cappuccinos)

From this fundamental analysis, the team concluded that the opportunity would be a very attractive investment for the client. The team developed a sound business plan to support this conclusion based on the market and competitive analysis and recommended that further investment be made to pursue the opportunity.

Results and Impact

As a result of the team’s business plan and recommendations, senior management supported the initiative and provided seed funding. Since then, the team has developed a product and brand concept, commercialized the delivery system, developed a go-to-market strategy, successfully pilot tested the concept and is currently rolling out the product both domestically and internationally in key foodservice channels.