After winning over coffee addicts in the UK, Whitbread announced in April this year that it plans to expand and take its Cost Coffee chain to France as it posted a jump in profits and rewarded shareholders with a 20 per cent rise in its dividend.
The FTSE 100 company which also owns the Premier Inn hotel chain said underlying operating profits rose 16.5 % in the year to 27 th February 2014 to £411.8m, thanks to demand for affordable rooms and takeaway lattes. Sales grew by 13% thanks to its growing footprint of hotels and coffee shops, while like-for- like revenues were up 4.2 %.
The group which has more than 2800 Costa stores across the world including 1,755 in the UK and 326 in China, trialled four owned stores in Paris last year and plans to open five more stores this year. “We have opened our own stores because we think France could be a big market. We have gone into Spain and have franchised there, whereas France we have gone in ourselves because we think it could be sizeable,” Chief Executive Andy Harrison said.
Costa total revenues were up 20.1% while premier Inn grew sales by 13.4% after opening a net 23 new hotels last year.
Whitbread said trading in the first two months of its new financial year had started well and that it was on track to reach its target of 75000 UK rooms by 2018 from 55000 and double Costa sales to £2bn. It also lifted full-year dividend by 19.9% to 68.80p.
You are hired as a Global Strategy Consultant by Whitbread Senior Vice President of Strategy to prepare a report that addresses the following issues.
1. Using an appropriate framework, critically analyse the coffee retail industry environment in France.
2. Evaluate and justify the most appropriate market entry strategy that Whitbread should employ in the expansion of its Costa Coffee brand in the French market.
3. Identify and discuss the major challenges that Costa Coffee will face in its operations in the French market and propose suitable recommendations for overcoming or mitigating the identified challenges.