The Migration of Caribou: Bringing Caribou Coffee to Germany

BADM 478: International Marketing

Northern State University
Professor Amber Mathern
Fall 2015
Don You Kim, Jazmine Myers, Sara Rider, and Alexis Ward
Table of Contents
Executive Summary . 4
Purpose of Study ..... 5
Method of Research .... 5, 6
Caribou Coffee. 6
Market Analysis ... 7
Entry Mode Selection..... 9
Target Market ... 10
Marketing Objectives.. 11, 12

Marketing Strategy...... 15
Conclusion .. 17
Recommendations .. 17
References .. 18
Appendix A: Final Project Guidlines..... 19, 20
Appendix B: Helpful Web Links for International Marketing Research.. 21, 22

Executive Summary
What does the world run on? Coffee. What does the world need more of? Consistently delicious
coffee. Caribou Coffee supplies consistently good coffee to many parts of the world already, and
our goal is to expand their reach into the German marketplace. We will start with major cities
and airport locations to ease into the already saturated-with-coffee market, develop a name for
ourselves that is already established in many other countries, and once success is found, we will
expand into more regions of the country. Our main objective through this plan is to analyze the
current market, prove the worth of Caribou, and show how we will achieve success in the
country that already believes in the power of coffee.

Purpose of Study
This study has been completed to provide the International Marketing class of the success that
will come with the migration of Caribou Coffee into the German market. The report was headed
by

Kim,

Myers,

Rider,

and

Ward,

also

known

as

Group

Four.

Method of Research
Research was conducted through internet research, as well as interviews with German foreign
exchange students from different parts of the country. Numerous interviews were held with each
referred student listed at the base of the report. All numeric information used throughout the
marketing plan are based on potential profits and expenses expected by such a business
endeavor.

Caribou Coffee
Lack of a Mission Statement
At Caribou Coffee, they do not share a public mission or vision statement, as they believe that
that is corporate speak -- something that does not fit the image Caribou has set out for itself.
Instead, they believe in aspirations, experiences and values and they are reaching to be the
community coffee vender that is constantly changing and adapting to best serve its customer base
through real, authentic, extraordinary experiences.

Profile
There are already coffeeshops internationally galore. From stop-n-go places to sit-in
coffeehouses and airport cafes. Because of the huge market saturation that is already evident,
what is it about Caribou Coffee that would bring people through the door, regardless of the other

potentially easier, faster coffee stops? The answer to this lies in the authentic, extraordinary
experience that Caribou guarantees: unlike most corporate shops, Caribou has a homey, relaxed
feel upon passing the storefront; even the specialty drinks bring a sense of coziness from the
Campfire Mocha to the Kids Silly Soda. These strategically named beverages are something
coffee-goers cannot easily forget, but the intense flavor behind the drinks are what will
ultimately keep people coming back.

Market Analysis
Historical development: Sold from USA to Germany
Caribou Coffee Company, Inc. is a privately held, neighborhood-based, specialty retailer of high
quality coffees, teas, bakery goods, and related merchandise. The Minneapolis-based company
operated 125 stores in six states at the beginning of 1999 and was estimated to be the second
largest company-owned and operated coffeehouse chain. Caribou Coffee is positioned to take the
leap from regional operator to national player in the rapidly growing gourmet coffee industry.

National Business Environment

The president of Caribou Coffee visits the many countries with Caribou store locations. As the
result of these visitations, he increases the overall companys reputation.

Market Size and Potential

Caribou Coffee is the second biggest corporation in the USA. They have several stores within the
seventeen states of America. And then they were a top in the chart of coffee corporations in 2014.
In their connected online site, they are still top in their coffee selling sales.
They are increasing stores within and outside of the country. So it will be more than possible to
develop brand awareness. It is already popular in the world, but they can be more popular than
now if they keep going like now and continue to expand into new markets -- including and
especially Germany.

Competitive Environment : It is very hotly contested to survive in coffee market.

Competition in the coffee market is becoming increasingly intense as relatively low barriers to
entry encourage new competitors to enter the market. The financial, marketing and operating
resource of these new market entrants may be greater than our resources. In addition, some of
our existing competitors have substantially greater financial, marketing and operating resources.
Our failure to compete successfully against current or future competitors could have an adverse
effect on our business, including loss of customers, declining net sales and loss of market share.

They also face intense competition in the expansion of their franchise program as the number of
franchising alternatives for potential franchisees increase. They will continue to seek franchisees
to operate coffeehouses under the Caribou Coffee brand in both domestic and international
markets. They believe that their ability to recruit, retain and contract with qualified franchisees
will be increasingly important to our operations as we expand. Along with our high-quality
products, our unique coffeehouse environment and our exceptional customer service, we believe

that our innovative development of the store within a store kiosk program will allow us to
differentiate ourselves from other franchise offerings.

Entry Mode Selection

Though there are many ways we could enter the German market, partnerships with already
developed businesses is where we believe we will find the most success. Similar to the Barnes &
Noble partnership with Starbucks Coffee Company, we will start out with locations in airports, as
well as other partner locations throughout large cities. This will allow us to run a low-risk
immersion into the German market and allow for a proper adaption period before expansion.

Target Market
The target market for Caribou Coffee in Germany are travelers, due to the location of the store
throughout the Frankfurt Airport. This will help travelers feel comfortable while traveling and
while in foreign environments. Travelers will also be able to have a pick-me-up while exhausted
from traveling with a familiar drink that can relax them. Also having the locations around
Germany will help people while they're traveling on vacation. They can take a break from being
a tourist and drink a familiar drink.

The other target market Caribou is aiming for are people or college students who are always on
the go. Having Caribou in the larger cities of Germany will attract students to meet up with
friends or do homework in the coffeehouses. Also, people who are on the go can stop into one of

the stores and grab a coffee on their way to work quickly via the commonly used Drive-Thru
window or through the actual physical entrance of the store.

Marketing Objectives
The main marketing objective of the company is to increase our presence within Germany from
two to three locations to eight locations within two years. In 2012 Caribou Coffee had 100
international locations, and as of last count (via their website) they had 125 international
locations. If their store growth of twenty five total stores was split between the three years from
2012 to 2015, the coffee chains international locations grew by 8.3 stores per year. Estimating
our additional five to six stores get built in two years, going with numbers similar to the above
breakdown we could logically build three a year to spread out the risk, or wait until year two and
build them all in one go. By increasing our presence, we can start to increase our market share
and become recognized by consumers who will then pull our brand to their city.

As Germany imports the most coffee beans and has the highest rate of coffee consumption in
Europe, gaining market share through the convenience of the stores, the exceptional flavor of the
drinks, and overall ambiance should be a successfully obtained objective in gaining market
share. In 2014, coffee was the number one most drank beverage in Germany, beating out mineral
water and beer. Pulling market share from other coffee shops could be an obstacle for Caribou
Coffee, but the positives of Caribou outweigh most generic coffee shops positives.

Marketing Strategy

Product
Coffee as an overall product is not innovative, as it has been around quite some time. Specialty
coffee in the last twenty years has become an innovative product but at this stage the only
innovations would be flavorings or the coffee beans themselves - how they are roasted, what
flavoring agents are used to achieve their final flavor profile, organic versus fair trade versus
non-organic, etc. Caribou coffee has the innovations for specialty coffee while providing other
types of drinks, both hot and cold, to satisfy any consumers palate. Depending on the store
location, a variety of food is available. For our introduction of Caribou Coffee into Germany,
bringing in the drinks and the food will be the best strategy, especially in the proposed airport
locations where time and convenience is key. The flavors and items available at each location are
easily adaptable to what items are best sellers or requested by consumers. Bringing in seasonal
flavors such as gingerbread, mint, or caramel apple would be easily done as the distribution
channel is already in place with the international stores located mainly in the Middle East.
Shipping the different flavors or swapping would take fewer steps (and less time) instead of
having to request the items from the main branch in the United States.

Compared to Starbucks, Caribou Coffees product line is fairly similar but with differences.
Flavor profiles differ, especially with certain seasonal products, along with the exact product line
offered. Starbucks has a stronger following from brand recognition and store locations, but
Caribou has the ability to be a fierce competitor. Caribou Coffees interior store ambiance is
more comforting than Starbucks dark colors and stark decor, which can lead to customers willing
to return due to the comforting surroundings and Caribou Coffee getting word-of-mouth
messages out throughout that customers network.

Pricing
For a latte at Caribou Coffee with no additions, it would be US $3.13 (2.95 Euros) before tax at a
typical US location versus being KWD 1.30 (approx. US $4.28, 4.03 Euros) in Kuwait City,
Kuwait. Products will have a slight markup (roughly $0.50 to $1.00 US average) in Germany
from the US price to help defray the costs associated with the stores and the distribution channel,
which is fairly in line with any of Caribou Coffees international locations. Compared to
Starbucks latte in the US at an average store the price of $2.85 (2.68 Euros) versus the price in
Kuwait City which is KWD 1.25 (US $4.11, 3.87 Euros), Caribou has a similar markup price
strategy in place.

Caribou Coffee has a perks program which allows loyal customers to build perks through their
purchases. The perks must be redeemed within an average period of 7 days once their level has
been reached, but for loyal customers the time restriction in which to use the perk would be no
issue. For the introduction of Caribou Coffee into the German market there could be additional
product discounts such as a half price muffin with the purchase of a regular priced drink in the
airport locations or a happy hour between 2-4 pm for US $1.00 (0.94 Euro) off of drink prices.

Promotion
To reach the target market a combination of paper and internet media will be used. Advertising in
travel magazines available on the flights in and out of the airport locations along with
billboards/advertisements within the airports will be used. Using social media such as Facebook,
Twitter, Instagram, or Tumblr for those specific stores with special promotion discount codes for

consumers to use would be another good promotion. Placing ads in local newspapers about the
grand opening and offering special promotional material (such as offering the discount booklets
to the first 100 people in line that the Aberdeen, SD Caribou Coffee location did at their grand
opening) would also be something to look into. Doing a buy one get one promotion around
heavy travel periods for the airport locations could be very rewarding profit wise as increased
foot traffic passing by could draw more customers.

For Caribou Coffee, personal selling is important for those new to a speciality coffee shop or
who are wanting to try something different from their usual cup of coffee, but for those who are
dedicated to the coffee lifestyle, it has little to no effect on what they will order as they know
what they want. Doing a sample tasting of different flavors may help pull more consumers in the
door and can gain us more of those loyal consumers who love a very specific cup of coffee that
we are able to provide the best quality and service on.

Compared to competitors promotions Caribou Coffee runs similar promotions to Starbucks with
the different buy one, get ones or even their perks programs. Both use TV ads and advertise on
various social media sites multiple times a day, not including the different types of print ads they
do. Caribou can really drum up business with their openings in Germany through social media,
especially doing giveaways for customers in the area for free products to get them in the door for
that first experience that will hopefully keep them coming back for more.

Distribution

Distribution would come in through the other international stores distribution channel which is
located in the Middle East, as it would be the closest already established distribution channel to
the new locations. Transportation to Germany via truck would require one ferry ride, but the
overall route is easily drivable. Depending on the cost of shipping from the distribution channel
to Germany alternative routes, such as shipping through railway, may be looked at. The
packaging of our product does not need to change as Caribous distinctive look is used both
domestically and internationally.

There may be a need to slightly change formulas for the various syrups or flavorings used
depending on the specific regulations of what does/does not pose a danger to consumer health,
but if the Middle East has certain stores who had similar requirements and changes needed, the
products have already been adapted to fit and more could be produced to cover Germanys
needed demand. Germanys import regulations generally do not require vendors of food products
to need any special registration or permissions. The only main requirement is that all
merchandise conforms with legal standards (Import Regulations) - which includes the labeling
or informational requirements along with the products overall safety towards a consumer.

Looking at Starbucks distribution channels, Caribou may see more expense since Starbucks
already has presence in Germany but if Caribou saw the presence and market share growth, these
costs could lessen and become profit over time. If Caribou was to continue to grow and expand
into other European countries, as long as they were EU members the food that complies with the
German food safety standards would be able to flow freely into those other countries due to
agreements within the EU.

Conclusion
Caribou Coffee has the opportunity to experience some serious international growth potential if
they pull off entering into the German market. While Caribou has fewer resources compared to
one of our biggest competitors, Starbucks, if this entry worked, Caribou could be seen as an even
larger international competitor. The store locations within the Middle East have been successful
enough to see a growth of twenty-five stores in three years that entering into a new segment of
the coffee market is an expected move that Caribou Coffee should take.

Recommendation
It would be our recommendation to expand Caribou Coffee into Germany. Not only would our
international presence grow (both in physical brick-and-mortar locations and in brand
recognition) but our market share in Europe (and internationally) would grow. The level of risk
in this entry is low, especially if we do a partnership with another existing company located in
the specific towns and regions suggested in the above marketing plan. Using a fairly similar
mark up price system that is already in place for the Middle Eastern stores will help keep our
overall costs lower while still providing a quality product for somewhat cheap.

References
Caribou Coffee (n.d.). Retrieved November 22, 2015, from http://www.cariboucoffee.com/
Caribou Coffee - Kuwait City. (n.d.). Retrieved November
http://www.talabat.com/kw/en/menu/4/141/caribou-coffee-kuwait-city

22,

2015,

from

Caribou Coffee Prices - Fast Food Menu Prices. (n.d.). Retrieved November 22, 2015, from
http://www.fastfoodmenuprices.com/caribou-coffee-prices/
Coffee: The Most Consumed Beverage in Germany. (2015, April 21). Retrieved November 22,
2015,
from
http://www.ixpos.de/IXPOS/Navigation/EN/Your-business-ingermany/Resources/news,t=coffee-the-most-consumed-beverage-in-germany,did=1221750.html
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McVoy
::
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(n.d.).
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