Case Study Espresso Lane to Global Markets

We are considering expanding Espressamente in the markets of Brazil, China, Germany, India, Japan, the United Kingdom and the United States. In order to prioritize the best potential market for growth, we conducted a country screening (exhibit 1) against economic, political, sociocultural and competitive forces in each market1 and identified numerous success factors2 (exhibit 2). Of these, the most important are coffee consumption, sales, and income per capita, as these imply use of disposable income in each market. We also developed a MPI with the data given to prioritize entry in the markets. (exhibit 3).

Per our analysis, the top 3 markets for Espressamente are the United States, Germany, and United Kingdom. In Exhibit 1 we have highlighted difficult forces that may impede success. As you can see, the US, Germany and UK show promise for growth with limited environmental forces deemed to be difficult to surmount.  Exhibit 2 shows these three countries rank top 3 for ease of doing business and GDP per capita. The US and UK rank top 2 in urbanization, income per capita of the top 10% of the population, coffee shop concentration, and Illy coffee sales, while Germany ranks 4th in these three categories. Germany also ranks #1 in coffee consumption per capita and #2 in coffee sales.

Although Brazil, China, Japan, and India have promising growth rates with increasing populations with purchasing power, the environmental forces shown in exhibit 1, such as complex nature of doing business, restrictions, bureaucracy and need for a local partner, may prohibit our success. Additionally, Illy has low sales in Brazil, India and Japan and zero in China. India and China rank lowest in coffee consumption, with Japan coming in the 4th lowest. Lastly, Brazil, India, and China rate poorly in ease of doing business.

As for entry mode, we suggest direct franchising in the US, UK, and Germany in urban areas with large middle to upper class populations due to ease of doing business, coffee consumption, and high Illy sales in these markets. Since we already have many franchise locations, this falls in line with our current business practices, allow us to retain control over the high quality of our coffee associated with our brand while gaining market share. Germany and UK’s proximity to Italy will be an advantage. However, we will need join the German Franchise Association to be regarded as a viable competitor.

Timing for expansion with regards to pace, rhythm and scope are to be considered as well. In Brazil, where consumption is high, but Illy sales are low, we should begin to develop relationships to understand the market and consider sequential franchising opportunities in the future. For China, Japan, and India, we should start identifying established brands and consider joint venture opportunities in the future since these markets are culturally different to Italy and coffee consumption is low. We will need to spend time focusing on marketing in these markets as well.