I have in the past been involved in the coffee industry and I have some current associations with it. A discussion I had this morning led me to thinking about the coffee roasting industry in New Zealand.
Currently there are a plethora of coffee roasters, all pretty much trying to compete within a space that has pretty much fulfilled it’s growth potential. These roasters are therefore in a position whereby they have to create substitute sales – ie customers buy their product instead of another company’s.
Added to this fact is the problem that, as supply increases, so does the downward pressure on pricing. The end result of this downward pressure is the commoditization of the product in question (read lower revenue and profitability).
To this end clearly the roasters need to do some strategic work to determine who they are, who their customer is and what they can do to gain and retain market share.
This is where it gets interesting, leaving aside the supermarket or direct to consumer sales of coffee beans. Roasters are in an interesting position whereby they create a product and then entrust it with another party, hoping that party does a good job with the product and thus delights the customer. Their customer arguably never actually makes a purchase from them but in fact purchases from the cafe to whom the roaster sells.
Just semantics you think? I disagree – given that the end consumer is the roaster’s customer, the roaster has to formulate ways to produce delight in the end consumer, such that they will be likely to return custom to the specific cafe possibly, but the coffee brand in question definitely. Roasters need to think of ways to add value for their direct customers, but also to add value to their indirect customers – those who actually make their business viable.