Malaysia Campus

Nottingham University Business School

MBA Programme

Course : Marketing
Course Code : N1DM04
Module Convenors : Nelson Oly Ndubisi

Assignment Title:
Exam Coursework : Marketing Plan For Starbucks VIA In Malaysia

ZHIJING, EU (UNIMKL-004151)
Date: 14th January 2010
COPY I

[Word Count : 2522 Words – Excluding Abstract , Section Headings , Table Headings
and Appendices]

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Abstract

The instant coffee market within Malaysia is an attractive market to enter

given the growing coffee culture locally. The market is currently
dominated by Nescafe and a few other domestic brands with specific
localised products. Starbucks has an opportunity to introduce a new
instant coffee product that is uniquely positioned against it’s competitors.
However the key risk that needs to be managed within the market mix is
the dilution of the brand identity as Starbucks has always been associated
with premium coffee and this is in contrast to the instant coffee market
which has traditionally been viewed as “down-market” of the gourmet
segment. Key areas of attention within the marketing plan to ensure
success would be the consistency in the promotional messaging strategy
and a development of appropriate distribution channels as Starbucks will
be entering a mature market as a late-comer.

[141 words]

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Contents

1.Introduction........................................................................................................4
2.Market Evaluation...............................................................................................5
2.1 Market Environment Analysis.......................................................................5
2.2 Competitive Landscape For Instant Coffee...................................................7
2.3 Market Trends..............................................................................................8
2.4 SWOT Analysis..............................................................................................9
2.4.1Strengths.................................................................................................9
2.4.2Weaknesses..........................................................................................10
2.4.3Opportunities.........................................................................................10
2.4.4 Threats.................................................................................................10
3.Marketing Strategy...........................................................................................12
3.1Brand Positioning.........................................................................................12
3.2 Target Marketing........................................................................................12
3.3 Marketing Mix.............................................................................................12
3.3.1 Product.................................................................................................12
3.3. 2 Place/Channel......................................................................................13
3.3.3 Promotion.............................................................................................13
3.3.4 Price.....................................................................................................14
3.4 Implementation of The Marketing Plan.......................................................15
4.Conclusion........................................................................................................17
5. References.......................................................................................................18
6. Bibilography.....................................................................................................19
6. Bibilography

List Of Figures & Tables

Figure 1. Mean Frequency of Beverages Consumed Daily By Population ( Norimah

et al 2008) 5

Figure 2. Coffee Consumption Relationship To Purchasing Power (Kendrik 2008)

5

Figure 3. Malaysia Coffee and Tea Markets 2005-2013 (BMI 2009)

6

Figure 4. Five Forces Analysis On Instant Coffee Competitive Landscape

7

Figure 5. SWOT Analysis On Starbucks For Instant Coffee Market

9

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Table 1. Marketing Plan Implementation Strategy Over Time
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1.Introduction
Starbucks in Malaysia is jointly owned by Berjaya Corporation and
Starbucks Coffee International and has enjoyed a healthy growth within
the Malaysian market since it’s first outlet opened in 1998. At present,
there are 119 stores thru out Malaysia (Starbucks Malaysia Website 2010).
In Berjaya corporation’s most recent 2009 Annual Report, it was stated
that there was a 14% increase in revenue from previous year due to the
continued growing acceptance of the brand and products as well as new
outlet openings.

This paper outlines the current state of the instant coffee within Malaysia
in context of a planned launch of “VIA”, Starbucks’s new line of instant
coffee thru the analysis of the potential market size, consumer
preferences, market segmentation and growth areas for the soluble coffee
market within Malaysia. The paper also analyses the local competition
scenario within the instant coffee market and recommends a marketing
plan to successfully launch and sustain the growth of VIA.

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2.Market Evaluation

2.1Market Environment Analysis

Malaysia has a strong hot drinks culture. A survey (Norimah et al 2008)
that showed that the average Malaysian drinks 1.58 cups of coffee daily.

Figure 1. Mean Frequency of Beverages Consumed Daily By Population ( Norimah

et al 2008)

Coffee drinking culture has been cultivated by the continued expansion of

retail cafe businesses of both international brands such as Starbucks ,
Coffee Bean & Tea Leaf that bring in the “cafe culture” from the West and
other domestic brands such as Old Town White Coffee that build on the
local “coffee-shop culture” (Euromonitor 2008).

Further research (Kendrik 2008) shows a positive correlation between the

GDP per capita and the amount of coffee consumed. This means that as
the economy of Malaysia grows, the market will begin to “thirst” for more
coffee products.

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Figure 2. Coffee Consumption Relationship To Purchasing Power (Kendrik 2008)

The coffee market is a sub-set of the “Hot Drinks” market sector which
can be further categorised into instant coffee and ground coffee.
According to a industry report (BMI 2009), total coffee sales in Malaysia
total to approximately 61 Mil USD in 2008 and is set to be a growth
market as seen in Figure 1

Figure 3. Malaysia Coffee and Tea Markets 2005-2013 (BMI 2009)

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2.2Competitive Landscape For Instant Coffee

Figure 4. Five Forces Analysis On Instant Coffee Competitive Landscape

Based on Porter’s Five Forces Analysis, the threat of substitutes is

high in the Malaysian market given the propensity of Malaysian drinkers
to prefer tea (Norimah et al 2008) and the wide alternatives available in
the form of malt or soy based drinks.

As the coffee bean commodity market is an mature open market, the

bargaining power of suppliers is low.

The threat of new entrants is high given that in the past few years,
many domestic players have entered into the instant coffee market.
Affordable pricing and localised products were identified by one industry
report (Euromonitor 2008) as key drivers for the increased prominence of
the domestic coffee brands.

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Industry rivalry is medium. Nescafe stands out as one of the major
competitors and is purported to currently command up to 70% of the local
Malaysian market share in the coffee segment (Adam 2009) and the
instant coffee market players have developed quite specific value
offerings based on the additional ingredients or style of coffee
preparation.

The bargaining power of consumers is high given that instant coffee

is readily available thru various distribution channels and both private
individual consumers and large wholesale buyers (E.g Food & Beverage
Outlets) have a very wide range of brands to choose from and will make
comparisons.

2.3Market Trends
The coffee market can be divided into consumers segment by where the
coffee is drunk , In-Home vs Out of Home ; and type of product , Soluble
(Instant) vs Ground coffee.

Three market trends worth noting are firstly the anticipated growth of the
out of home segment based on a recent study by Nestle (As reported in
Bernama Press 2009), where Malaysians currently spend 35 per cent of
their total food and beverage expenses out-of-home.

Secondly, instant coffee market caters quite specifically to local tastes.

This can be witnessed by the behaviour of Nestle , the market leader, who
in 2009 (Chan 2009) also introduced a range of instant hot drinks targeted
at local tastes to compete directly with other domestic brands who have
specialised in domestic flavours such as “White Coffee” or “Kopi-O”.

Thirdly, “health branding” is a prevalent in the sector. For example, the

anti-oxidant benefits of coffee have been actively promoted (Nescafe
Professional Website 2009) and other brands have also incorporated
herbal additives such as longifolia (Tongkat Ali) or healthier sweeteners
such as oligofructose.

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2.4SWOT Analysis

STRENGTHS:
•Market leader with
sector in Malaysia
•Establish brand rec
Figure 5. SWOT Analysis On Starbucks For Instant Coffee Market

2.4.1Strengths

with premium qual

Starbucks is the market leader in Malaysia. The brand equity of Starbucks
is high as it is perceived a premium quality brand and therefore this
should translate into a positive association with any product extensions

•Strong corporate i
such as VIA.

The core strength of Starbucks has been it’s ability to create a relationship
with the customer by marketing the “consumption experience”. As quoted

environmental stew
by the Howard Schultz, the CEO, Starbucks is not in the coffee business
serving people but in the people business serving coffee (Sellers 2005).
The challenge with VIA is whether the coffee “experience” can be mapped
onto a product which traditionally has been a low involvement product for

involvement
most consumers.

Starbucks also has upstream supply chain management expertise in

sourcing high quality raw ingredients from it's retail activities and enjoys a

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strong corporate image due to it’s efforts in ethical sourcing,
environmental stewardship and community event involvement.

2.4.2Weaknesses
Starbucks is a late entrant into the soluble coffee market as this is a
crowded brandscape where there are many other brands in the market
both from international competitors such as Nescafe and also domestic
firms such as Old Town Coffee.

Starbucks is also disadvantaged by it’s lack of direct experience in

managing the supply chain for instant coffee distribution. At the moment
it only markets roast coffee beans via it’s retail outlets.

The premium image of the Starbucks brand could also be a weakness as

price sensitivity in the instant coffee market is higher when compared to
the retail brewed coffee market and Starbucks may be perceived as a
highly priced brand compared to other local brands.

2.4.3Opportunities
The economic slowdown has not left Malaysia unaffected. Store on store
sales growth for Starbucks retail outlets were reportedly lower for the year
2009 and this trend is expected to be similar for the 2010 period (Berjaya
Corporation Annual Report 2009). Therefore the sale of instant coffee as
an alternative source of revenue for Starbucks can be viewed as an
opportunity for the firm to weather the crisis and at the same time extend
the product line.

The VIA brand positioning as an equivalent substitute for gourmet coffee

also potentially opens up new market segments. For example, price
conscious consumers may experiment with VIA and decide that they
would like to switch to gourmet retail brew. VIA could also spread brand
awareness quicker and grow demand in areas with a lower concentration
of Starbucks retail outlets.

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2.4.4 Threats
The launch of VIA carries the risk of jeopardizing the brand equity of the
core Starbucks brand as the growth of the soluble coffee market could
potentially cannibalise sales from Starbuck’s retail outlets who then go on
to switch to competitor instant coffee brands.

The extension of the product line into a new market may also cause a loss
of focus on the core business of retail brewed coffee if resources are not
balanced. This can be exemplified by the McDonald’s “McCafe” concept
store which has already been launched elsewhere in the Asia Pacific
region.

Furthermore , Nestle also stands out as a clear “global” competitor who

already has experience in other markets overseas in counter competing
with Starbucks (Andrejczak 2009 and Roe 2009) and may have a
retaliatory strategy ready.

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3.Marketing Strategy

3.1Brand Positioning
The launch of VIA will need to be consistent with the brand positioning
objective to market it as a new and exciting innovative product that is an
equivalent substitute for freshly brewed gourmet coffee for people on the
move or working in locations remote from Starbucks retail outlets.

3.2 Target Marketing

The initial target market sector for VIA will be the existing clientele of the
retail Starbuck outlets – middle to high income urbanites who place an
importance on taste, quality, ambience and the consumption
experience.Therefore VIA will focus on “creating” new demand from these
existing consumers who up till this point may not have tried “gourmet”
instant coffee.

3.3 Marketing Mix

3.3.1 Product
The taste and convenience aspects of the product will be critical.Research
should be conducted in the trial phase to understand what features
consumers would value. For example, would solubility in cold water be
important and what packaging would be the most convenient (E.g. Fits
neatly in shirt pockets)

The level of product information will also be reduced from usual Starbucks
packaged coffee beans as typically less is said about ingredient origins for
instant coffee. The packaging should also highlight the innovative
microground process.

Sizing should be via an easy to tear “stick” sachet with multi-packs sized
for travel. It will be unlikely that VIA will be offered in loose power “jar”
packaging as this does not fit the “on the move” image.

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Given that the only flavours available are Italian Roast and Colombia there
is a temptation to extend the flavours offered but a counter positioning of
simplicty in offerings could be used to address this issue.

3.3. 2 Place/Channel
Within Starbucks Malaysia, there is no direct merchandising or distribution
experience outside of the retail outlets .However Berjaya Corporation ,a
major shareholder in Starbucks Malaysia franchise, should be able to
leverage on it’s extensive businesses experience elsewhere within the
food and beverage sector to make headway into new distribution
channels.

VIA should adopt an exclusive distribution strategy thru the Starbucks

retail outlets. This allows for a very strong level of control and flexibility
during the initial launch of the product. A complementary tactic would be
to market VIA thru channels that fit with the on the move image such as
airlines or trains. For example in the US, VIA was marketed on United
Airline flights and in the UK, thru EasyJet.

Later in the growth stages, Starbucks may wish to consider partnering

with a premium supermarket chains or grocery stores who have a
complementary brand image of fresh foods to allow the sale of VIA at their
outlets.

3.3.3 Promotion
Initially, during the launch stage, secrecy and speed will be key to success
to avoid pre-emptive moves by other brands such as Nestle who would
already have developed retaliatory strategies elsewhere.

Instant coffee can be considered as a reasonably passive product in

contrast to the Starbucks brewed coffee which has a very strong service
element associated with it.Therefore an integrated marketing campaign
needs to be implemented to ensure a “customer relationship” can be built
via the use of online communities in the existing Facebook and Twitter
social networking sites.In addition to this, other strategies used in the US

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market (Shah 2009) to achieve this sense of coffee experience has been
the taste test and free samples.

Message consistency will be very important as VIA has to balance the

message that it is just as good as brewed coffee against the fact that
Starbucks still wants VIA consumers to frequent the retail outlets.

Further down the road, there is also a chance for Starbucks to leverage on
it’s corporate identity by integrating VIA into it’s larger scope of
environmental stewardship by creating a recycling campaign around the
product.

3.3.4 Price
At present, there are no equivalent premium instant coffee products at
which to benchmark a suitable price for Via. A cursory survey of prices at
local supermarkets seems to indicate that premium coffee tends to be of
the “roast and ground” variety.

The pricing strategy is a clearly a price skimming strategy with an

emphasis on setting a price that is high enough such it complements the
high quality. Therefore a skim pricing strategy could work as there is
currently no true “premium style” instant coffee product within the
market other than Nescafe’s Gold Blend . This product which currently
retails at RM12.95 for 20 sachets of 20g ,could serve as a reference
marker for the initial price setting.

A pricing strategy that offers rewards for loyal Starbucks customers would
work well to cement the relationship between the instant coffee and retail
brew sectors. This could be a simple modification of the loyalty card
system that is already in place at the retail outlets or this could work in
reverse where customers are offered complimentary drinks if they collect
enough VIA wrappers.

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3.4 Implementation of The Marketing Plan
The marketing plan is outlined briefly in the Table 1 below.
Stage Trial (0-3 mths)
• Conduct initial surveys based on
focus groups from existing
Starbucks clientele on most valued
Product features
• Survey the market to identify the
price ranges within the instant
coffee market
Price
• Maintain secrecy and speed of
the implementation to avoid
retaliatory attacks
Promotion
• Explore and develop distribution
channels available to the Berjaya
parent company
Place/Channel
• Time To Market
• Actual vs. Plan Pilot Trial Costs
Focus KPI-s
Table 1. Marketing Plan Implementation Strategy Over Time
Launch (3-6 mths)
• Emphasise the quality aspects
and the innovation in product
development
• Price skimming - Premium pricing
that will set it apart from other
economy pack brands
• Free samples in stores
• Taste tests
• Leverage on the online
community presence
• Exclusive Distribution - Offer VIA
exclusively at Starbucks retail
outlets
• Other channels should match the
"on the move" element
• Product Awareness
• Positive Consumer Online
Feedback
Growth (6-12mths)
• Maintain the quality
• Price skimming with potential for
discounts related to purchase of
main Starbucks products
• Consistency in messages and
monitoring impact on retail stores
• Selective Distribution - Offer at
"premium" supermarkets
• Sales Growth
Sustain & Defend (12mths
onwards)
• Introduce new flavours
• Reinvent the packaging
• Maintain the price skimming strategy
with flexibility for price changes
depending on competitor reactions
• Integrate the brand image of VIA
with the parent brand in terms of CSR
activities
• Maintain Selective Distribution
• Market Share
• Sustained Sales
• New Product Innovation
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The implementation of the plan relies heavily on the appropriate allocation of resources , monitoring of progress
and ensuring that there is sufficient flexibility to cope with the anticipated competitor reactions against the
introduction of VIA by either emphasing their lower prices , discrediting Starbuck’s claim of equivalent quality or
promoting their larger product flavour range.

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4.Conclusion
The instant coffee market within Malaysia is an attractive area for
Starbucks to enter into. However the key risk that needs to be managed
within the market mix is the dilution of the brand identity as Starbucks
has always been associated with premium coffee and this is in contrast to
the instant coffee market which has traditionally been viewed as “down-
market” of the gourmet market.

This issue extends to the issues of brand positioning and distribution

channels where Starbucks will be entering a mature market as a late-
comer whereas most of their competitors in th instant coffee sector have
already established their brand identity.

This move would develop the demand for gourmet coffee and capture the
instant coffee drinker market as well as serve as a revenue buffer for the
core business of retail brewed coffee. With the right marketing strategy,
there is the potential to capitalise on Starbuck’s brand equity to extend
the product successfully.

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5.References
• Adam ZR 2009, 18th June, Nestle: Coffee is good, thanks to the antioxidants,
Available From
<http://www.btimes.com.my/Current_News/BTIMES/articles/nescdf/Article/ind
ex_html> [ Accessed 13th January 2009]
• Andrejczak A 2009, 18th November , Instant-coffee war: Nestlé takes aim at
Starbucks, Available From <http://www.marketwatch.com/story/instant-
coffee-war-brewing-nestle-vs-starbucks-2009-11-18> [ Accessed 13th January
2009]
• Berjaya Corporation , Annual Report 2009 , Available From
<http://www.berjaya.com/annual2009.htm> [ Accessed 13th January 2009]
• Bernama Press 2009, 13th October, Nestle Seeks To Double Share In Out-Of-
Home Market , Available From
<http://www.bernama.com/bernama/v5/newsbusiness.php?id=446642>
[ Accessed 13th January 2009]
• Business Monitor International 2009 , Malaysia Food & Drink Report Q4 2009,
Available From <http://digitalibrary.mida.gov.my/equip-
mida/custom/indReports/agro/2009/FoodDrinkReportQ42009.pdf> [ Accessed
13th January 2009]
• Chan J 2009, 19th November, New range of Malaysian-style coffee launched ,
Available From <http://thestar.com.my/metro/story.asp?
file=/2009/11/14/central/5102621&sec=central> [ Accessed 13th January
2009]
• Euromonitor 2009 , Hot Drinks in Malaysia 2009 : Executive Summary ,
Published May 2009 , Available From
<http://www.euromonitor.com/Hot_Drinks_in_Malaysia?print=true>
[Accessed 13th January 2010]
• Kendrik F 2008,Nescafe Presentation To Investors, Available From
<http://www.nestle.com/Resource.axd?Id=B65395A2-C76C-42B2-A7D6-
6648A3A66BF5> [Accessed 13th January 2010]
• Nestle Professional Website : Health & Nutrition : Antioxidants, Available From
<http://www.nestleprofessional.com/Australia/en/Insights/HealthandWellness/
Pages/Antioxidants.aspx> [ Accessed 13th January 2009]
• Norimah AK et al 2008 , Food Consumption Patterns: Findings from the
Malaysian Adult Nutrition Survey(MANS), Mal J Nutr 14 (1): 25 - 39, 2008,
Available From:
<http://www.nutriweb.org.my/publications/mjn0014_1/mjn14n1_art2.pdf>
[Accessed 13th January 2010]
• Roe A. 2009, Jun 8 , Starbucks and Nestlé become instant enemies , Available
From <http://www.komonews.com/economy/47066722.html> [ Accessed
13th January 2009]
• Sellers P 2005 , “Starbucks , the next generation” Fortune 4/4/2005, Vol 151,
Issue 6 p20
• Shah A, 2009 , Inside The Mix - Starbucks strives for instant gratification with
Via launch, Available From <http://www.allbusiness.com/marketing-

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 advertising/marketing-advertising-channels/13550953-1.html> [ Accessed
13th January 2009]
• Starbucks Website 2010 , Starbucks In Malaysia , Available From
<http://starbucks.com.my/en-US/_About+Starbucks/Starbucks+in+
%28your+country%29.htm> [ Accessed 13th January 2009]

6. Bibilography
• Ching LH (1990), Coffee Products Sdn Bhd in JA Quelch, SM Leong, SH Ang
and CT Tan (1996) Cases in Marketing Management and Strategy- An Asian
Perspective , Prentice Hall Singapore
• Gbadamosi A. 2009, Low-income consumers’ reactions to low-involvement
products, Marketing Intelligence & Planning Vol. 27 No. 7, 2009 pp. 882-
899

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