The sale of coffee labeled as fair-trade, is only certified by Fair-Trade Labeling Organizations International (FLO). To favor producers and workers who had reasonably been in need, fairtrade have made a policy to help them by giving guaranteed prices and poverty eradication suppot as far as possible. Fair-trade minimum price is a price that a fairtrade buyer has to disburse to its manufacturer organization so that in crucial times when market price falls the producers at least get minimum price. The price is set in such a way that the manufacturer gets a price that covers sustainable cost of production of its products. A fair-trade coffee is referred as a sustainable coffee that improves the sustainability of the producers by providing first-class price and superior benefits such as environmental and social advantages. It is not the only path to grow sustainable coffee while there are other coffees that equally contributes to sustainable development. There are three traits i.e. economic, social and environmental that are required for sustainability along with certain verifications. The organization was started to safeguard the poor farmers worldwide and promising unchangeable prices to the cultivator in spite of variable market prices.
Though it is a lucrative medium for the fair-trade farmers but non fair-trade manufacturers endure several problems. As stated above, fair-trade assure fixed prices to their producers in turn decreasing the market price of non fair-trade products. And a decline in the market price will force the non fairtrade producers to sell at lesser prices eventually contributing to poverty. Buying a fair-trade product does not mean that the buyers are helping in eliminating the poverty all over the world.It renders them to feel good about their purchase but will not make any difference. According to Allegra Strategies, “In our opinion, the big problem with Fair Trade, however well-meaning it may be, is that it does nothing to reward quality or discourage overproduction – and therefore does not promote long term, sustainable development.Plus, as it is pegged to the commodity market price, it does nothing to divorce coffee buying from the vagaries of market prices.”
In fact, WTO should make impartial rules to carry out business and also to enrich the life of the people globally. Another argument against fair-trade policy is that the fixed earnings will not stimulate the farmers to produce more and to improve the quality which may result in under-production.
Coffee is one of the most highly consumed commodities in the UK. Coffee is severely being embedded into the minds of the people. The coffee culture prolonged to be an affordable opulence where origin and quality are highly valued. Caffè Nero Group Ltd is one of the successful and leading coffee chains in the Great Britain. In 1997, Gerry Ford, the founder of Caffè Nero decided to bring premium quality and authentic Italian taste of coffee to the UK. It was established with the aim of providing people a feel of continental European coffee house. The philosophy of the Caffè is “Premium Italian coffee, a warm and welcoming atmosphere, good food and great personal service.” They make their own Italian coffee to give different taste to the people, with a purpose of generating friendly and relaxed environment in order to develop a comfortable place for their customers. Each outlet has been tailored according to the location kept in mind, delivering the same goals and values to the local people. The food team of the caffè is also working very hard to make some innovations while preparing delicious Italian dishes to delight their customers with fresh and new products.
MACRO ENVIRONMENT: SWOT ANALYSIS
This process helps in identifying the objectives as well as internal and external factors affecting the working of the company.
Being amongst the best coffee chain in the UK helps Caffè Nero to achieve its objectives. It is a multinational company, operating in more than 300 stores only in Europe. Serving high quality food and espresso coffee with Italian taste, is one of the major strengths of the Nero. The concept of providing a European atmosphere is quite exclusive from its competitors (Starbucks), forming one of its biggest strengths. The customer reward scheme and goodwill in the market are two powerful tools of the company. They have managed to improve and maintain the trust of their customers, hence resulting in strong relationship with them. The selection of their location is quite unique, in order to provide hasslefree and peaceful environment to their customers.
One weak point, that can harm the company’s progress and previously stated goals is - Caffè Nero does not sell fair-trade certified coffee. It might become a drawback in order to achieve their objectives of being the best in the market. They might lose a part of the market share because of not meeting the requirements of the ethical consumers (in favor of fair-trade certified products). Another weak point of the company is that they are dependent on their main product i.e. the retail of coffee. It is hard for them to expand and compete in the market.
The opportunities enables the company to acquire its affirmed objectives. Caffè Nero has entered into the Turkish market, that can be their biggest opportunity due to the high demand for coffee. They can open stores in areas that are not being targeted by Starbucks and other local coffee chains. Even in Europe the demand for coffee is endless. And high disposable income of the people can be beneficial for the Nero, as people can afford to pay higher prices for a cup of coffee.
Increasing competition in the market can be the main threat for the company. The major threat to Caffè Nero is Starbucks. It is a threat not only in UK but in other parts of the world as well. The market share of Nero might also reduce due to the new firm entrants. In turn, it might decrease their profits and revenues. Since it is expanding in Turkey, it might be a risk because of currency exchange regulations as well.
JUSTIFICATION OF CURRENT BUSINESS MODEL
In simple terms, a business model can be described as a strategy or a plan put into action by a company to generate revenues and make sufficient profits. A business model includes the entire details of all the
operations of the company. Since Caffè Nero is a big coffee chain in the UK, so it is also relying on a sound business model. The existing business model of Caffè Nero revolves around the following grounds:• COFFEE
The main objective of Caffè Nero is to serve finest quality Italian coffee to their customers by picking each coffee bean of high quality. The exact blend of coffee is a secret to the present exceptional espresso as it requires understanding of the beans to convert them into accurate, authentic and rich cream. The taste is carried for a long time, even after the coffee has been drunk. Special blend house are developed for different signature coffee by using traditional Italian roasts. All the machines work manually in the houses. To make excellent and ideal coffee depends on the skills of the baristas, which means that they can make customized coffee. After devoting significant resources and considerable amount of time and efforts, they are then successfully able to put forward high quality Italian espresso.
"We're riding on a lifestyle change here, that's moving away from pubs and towards sophisticated Continental drinking," says the founder Gerry Ford. The sole aim of the company is to create a continental style European coffee house atmosphere within their outlets. By offering a feeling of comfort, warmth and relaxation, the idea is to gain loyalty of the customers.
People includes both- its customers and employees. The company desires to formulate Caffè Nero as an ideal place where friends can meet comfortably, work on their laptops while grasping a bite and a place to relax and read a book. They seek to provide friendly and hassle-free atmosphere to all its customers. On the way to attract further customers they have decided to provide Wi-Fi facilities in British cafés. The company is also very indomitable towards its workforce. Behind every brand success, human resources play a major role. The Nero also believes that the internal development is one of the reasons of their growth and success. With the purpose of encouraging the members, the Nero group launched a health cash plan for the well being of their employees. They preferred “Westfield Health Foresight Plan” seeing as their straight forwardness and series of benefits. The Nero group provides wide scope to their employees to develop their career path. It confers substantial
alternatives to its personnel and endorses hundreds of people every single year. They are very dogged to make available career expansion opportunities to their people.
Last but not the least, the company offers a range of classic Italian food which is prepared using only supreme and fresh ingredients. With its collaboration with famous Italian chef Ursula Ferrigno the outlets tend to offer unique Italian dishes with authentic Italian taste which is hard to find at coffee houses in the UK.
The above mentioned attributes are the main factors of Caffè Nero. It focuses on the above grounds to upgrade the quality levels of their coffee and food and bestow European state of affairs in the air. There are other two facets where
Caffè Nero today is the third largest coffee chain in the UK after Starbucks and Costa coffee. In the beginning, when Caffè Nero entered the coffee market it targeted more often middle income set of groups. But at present, they are targeting all income level groups including vacationers and students. Started with only five retail stores in London, they moved to Manchester and other cities within a year. By the year 2000, Caffè Nero opened 31 stores in other parts of Britain and also won the best company identity award. After winning the ‘British design council’ award the Caffè was listed in the London stock exchange and became the largest coffee company in the UK. The company is going international covering Middle East and other European countries. Today this chain owns over 500 stores and in addition it has now spread its business globally. The company expanded its business into turkey in the year 2007 and in Middle East in the year 2009. With its current business plan of opening 45-50 new coffee houses every year within the UK, this chain have become a big threat for Starbucks and Costa Coffee. The table below illustrates the Caffè Nero progress chart year after year.s