Introduction of Coffee Brand or Plantation

Coffee as a potential export product within the framework of the trade policy. Coffee is an important commodity in the world economy, accounting for a trade worth approximately US$ 16.5 billion. World production in coffee year 2010/11 is estimated at 131 million bags (7.8 million tons). While consumption in calendar year 2010 is estimated at 135 million bags (8.1 million tons). Present work will focus on country screening and theoretical basis of export decision within a country

Coffee Production in Sri Lanka of Coffee Brand or Plantation

Sri Lanka is famous for its coffee cultivation. In past, it was wiped out by coffee rust fungus. The modern cultivation system is free from fungus issues, which increased coffee demand in international market. Local coffee brands are exporting coffee and tea in various geographical segments. Local brands are serving excellent homegrown coffee

Possible Countries to Export of Coffee Brand or Plantation

Below are the 15 countries that exported the highest dollar value worth of coffee during 2018.

·         Brazil: US$4.4 billion (14.1% of total coffee exports)

·         Vietnam: $3.3 billion (10.5%)

·         Germany: $2.5 billion (8.2%)

·         Switzerland: $2.4 billion (7.6%)

·         Colombia: $2.3 billion (7.5%)

·         Italy: $1.7 billion (5.4%)

·         France: $1.2 billion (3.7%)

·         Honduras: $1.1 billion (3.6%)

·         Belgium: $867.9 million (2.8%)

·         United States: $861.2 million (2.8%)

·         Ethiopia: $856.9 million (2.8%)

·         Netherlands: $825.9 million (2.7%)

·         Indonesia: $817.8 million (2.6%)

·         Guatemala: $812.4 million (2.6%)

·         Peru: $667.9 million (2.1%)

By value, the listed 15 countries shipped 78.9% of global coffee exports in 2018.

Among the above countries, the fastest-growing coffee exporters since 2014 were: Netherlands (up 56%), France (up 45.1%), Honduras (up 42%), and Guatemala (up 21.6%).

Those countries that posted declines in their exported coffee sales were led by Brazil (down -27.8%), Indonesia (down -21.3%), Belgium (down -12.8%), Peru (down -10.9%) and United States (down -10.2%).

Advantages of Coffee Brand or Plantation

The following countries posted the highest positive net exports for coffee during 2018. Investopedia defines net exports as the value of a country’s total exports, minus the value of its total imports. Thus, the statistics below present the surplus between the value of each country’s coffee exports and its import purchases for that same commodity.

·         Brazil: US$4.3 billion (net export surplus down -28.2% since 2014)

·         Vietnam: $3.2 billion (down -1.4%)

·         Colombia: $2.2 billion (down -9.7%)

·         Switzerland: $1.6 billion (up 7.2%)

·         Honduras: $1.1 billion (up 42%)

·         Ethiopia: $856.9 million (up 9.4%)

·         Guatemala: $811.8 million (up 21.6%)

·         Peru: $663.8 million (down -11.1%)

·         Indonesia: $662 million (down -33.3%)

·         Uganda: $428.2 million (up 9.1%)

·         Nicaragua: $419.7 million (up 5.4%)

·         India: $384.5 million (down -4.5%)

·         Mexico: $318.3 million (up 7.1%)

·         Costa Rica: $306 million (up 19.3%)

·         Kenya: $226.2 million (down -1.8%)

Brazil has the highest surplus in the international trade of coffee. In turn, this positive cash flow confirms Brazil’s strong competitive advantage for this specific product category.

Opportunities of Coffee Brand or Plantation

The following countries posted the highest negative net exports for coffee during 2018. Investopedia defines net exports as the value of a country’s total exports, minus the value of its total imports. Thus, the statistics below present the deficit between the value of each country’s coffee import purchases and its exports for that same commodity.

·         United States: -US$4.9 billion (net export deficit down -3.9% since 2014)

·         France: -$1.7 billion (down -10.1%)

·         Japan: -$1.2 billion (down -14.1%)

·         Germany: -$919.7 million (down -39.9%)

·         Spain: -$753.4 million (down -4.6%)

·         United Kingdom: -$725.1 million (up 61.2%)

·         Canada: -$702.2 million (down -16.1%)

·         South Korea: -$632.5 million (up 21%)

·         Russia: -$556.8 million (up 5.3%)

·         Netherlands: -$467 million (down -22.1%)

·         Australia: -$443.8 million (down -3.5%)

·         Austria: -$356.4 million (up 1.5%)

·         Sweden: -$274.3 million (down -23.1%)

·         Poland: -$250 million (reversing a -$4.5 million deficit)

·         Romania: -$236.8 million (up 29.1%)

The United States of America has the highest deficit in the international trade of coffee. In turn, this negative cashflow confirms America’s strong competitive disadvantage for this specific product category but also signals opportunities for coffee-supplying countries that help satisfy the powerful consumer demand.

World map of Coffee Consumption of Coffee Brand or Plantation

While the Scandis dominate the business end of the coffee-drinking table, the ranking of coffee-producing nations is very different. You can't grow coffee in northern Europe (obviously). 

Brazil is the world's biggest exporter of coffee, shipping a truly remarkable 5.7bn pounds of grounds each year, according to ICO. In fact, Brazil has been the world’s largest exporter of coffee for more than 150 years. It supplied around 80 percent of the world’s coffee in the 1920s, but that figure has fallen to around a third.

Coffee in Finland  of Coffee Brand or Plantation

•      Finland's neighbors are just as hungry for java. Norway, Iceland, Denmark, and Sweden also make the top 10 – it must be those long winters. 

•      The consumption of coffee in Finland averagely is 12 kg per capita.

Coffee Consumption in Finland By Years

The coffee consumption in Finland is shown in figure year wise. For example, least drinkers were in 2015, but in 2019, the coffee lover’s number increases.

Coffee Consumption in Norway of Coffee Brand or Plantation

•      Coffee consumption in Norway

•      9.9 kg per capita

•      Kaffee is served black

•      Coffee is served with

•      Cakes and pastries

•      Average drinking rate is 2 cups of coffee

•      36,472,000 kg in 2012

•      Rural Norway

•      The cocktail that is weakly brewed coffee

•      Coffee with moonshine and vodka

Coffee Consumption in Norway By Years

The coffee consumption in Norway is shown in figure years. For example, least drinkers were in 2015 but in 2019, the coffee lover’s number increases

Country Screening

Import of Coffee of Coffee Brand or Plantation

·         Finland imports coffee beans and ready to use coffee from many countries around the world.

·         Roasted coffee and coffee beans are imported from Kenya, Ethiopia, and Colombia.

·         Retail prices for the import of raw coffee material is €30 per kg to €67.70 per kg

·         Coffee import is increased from 69,000 tons to 80,000 tons from 2012 to 2016 (finnpartnership.fi, 2019).

External and Internal Environmental Analysis

·         The internal and external environmental analysis shows competitive strength of Finland coffee market.

·         Internal analysis of local brands (in Sri Lanka) shows that local brands are capable of delivering high-quality coffee (Fifield, 2012).

·         Sri Lankan coffee beans are world-famous because of quality and taste.

·         Currency rate differences are also a source of attraction for local brands    

The external environment analysis shows the opportunities for the company as well as the threats in the market which can affect the company business and market share. For this purpose, SWOT analysis was done to see what were the inter and external threats or see the strength or weaknesses of the company.

PESTLE ANALYSIS of Coffee Brand or Plantation

PESTLE analysis of Coffee export in Finland is presented below:

1. Political Factors of Coffee Brand or Plantation

The political situation in Finland is stable. Political relations between Sri Lanka and Finland are friendly. Political policies are supportive of international trade (Baker & Hart, 2016).

2.      Economic Factors of Coffee Brand or Plantation

GDP per capita is improved from 24,000 to 45,703 USD in 10-year duration. The inflation rate was decreased 0.84 in 2017. Consumer spending is increased to 277730 from 27482 in 2019. Thus economic condition is suitable for trade with Finland.

3. Social Factors of Coffee Brand or Plantation

In Finland, the coffee consumption trend is inclining. Population growth and tendency towards coffee products use indicate potential for new investors and export companies to export coffee in Finland market.

4.      Technological Factors of Coffee Brand or Plantation

Technological factors are in favor of Sri Lankan local brands. Brand positioning and marketing are possible in Finland by social media and modern digital marketing system. E-commerce platforms can be introduced for export of coffee in Finland.  

5.      Environmental Factors of Coffee Brand or Plantation

Environmental standards for food quality are high in Finland. Local companies of Sri Lanka need to consider environmental standards of food quality.

6.      Legal Factors of Coffee Brand or Plantation

Law and regulations are strict for international trade. Brands need to consider practical laws and tax regulation systems for trade-in Finland (www.gov.uk, 2019). Contract law and intellectual property laws are also strict for businesses and international trade in Finland.

Porter Five Forces Analysis of Coffee Brand or Plantation

By applying porter five forces model the company was able to identify the bargaining power of suppliers, buyers, threats at the time of penetration, and what kind of alternatives can be as well as the real competition in the market.

1. Bargaining Power of Suppliers: The bargaining power of suppliers is high in Finland, as many companies from different countries are serving coffee products. Suppliers have the strength to bargain and change prices  
2. Bargaining Power of Buyers: buyers have many alternative offers, and they are concerned with high quality and taste. Buyers can bargain to lower prices.
3. Threats of substitutes: Low __ substitutes such as beverages, soft drinks, and tea are available, but demand for coffee is high. The switching cost is high.
4. Threats of New Entrants: Moderate_ new international companies are developing trade relations with local companies in Finland. High profit and sales growth are attractions for new entrants while barriers are limited which causes to increase threats from new entrants.
5. Industry Rivalry __ High competitors have a high level rivalry. Prices and quality standards have influence on companies' strategies (Baker & Hart, 2016).    

Pricing and Costing Problems of Coffee Brand or Plantation

·         Poverty, inflation, and limited consumer buying power cause pricing issues.

·         Competitive forces and substitutes also encourage to keep prices lower

·         In Finland prices for 1kg coffee are between 28-67 euros.    

·         Costing problems are linked with wastage management practices, transportation, and inventory management.

·         Taxes on international trade will also increase the cost of operations.

·         Cost issues are also caused by the extra testing process to meet international standards of quality and taste (Baker & Hart, 2016).

Theoretical Model of Coffee Brand or Plantation

Theoretical models show justification for country screening decisions. According to Johansson 2008, international entry evaluation process includes country identifications and market screening (Johanson, 2008).  Preliminary screening includes currency stability, economic stability, barriers to entry, domestic level consumption, and competitor forces. Finland's country screening by PESTLE and other analysis cover all these areas. Country policies for international and national trade are important for decision making and understanding operational outcomes. 

According to the theory and literature review, internal and external environmental analyses are essential for the selection of right and most suitable markets for a product. PESTLE analysis covers important external factors that can draw impact on business (Baker & Hart, 2016).  PESTLE analysis also represents political forces and chances of influence on business. Economic analysis shows purchasing capability and overall economic condition of country, which enables the companies to make better decisions about prices.  

Competitive analysis is important to understand competitive strength of a country at the time of investment or business start-up.  A competitive analysis shows opportunity for new business. Substitute and alternative products can draw impact on price strategies. Porter's five forces analysis shows risk associated with targeted market. Import and demand analysis is important in decision making process to understand market potential for offered products (Fifield, 2012).

Budget and TimeLine of Coffee Brand or Plantation

The budget consists of three possible segments including upper end, lower end, and middle-end considerations. The price markups are based on the price of coffee, supply chains, and final products. 

The retail price of budget divided into three segments such as Upper end (From approximately $30 per kg to $67.90 per kg)

, Middle end (From approximately $ 12 per kg to $29 per kg ), Lower end (From approximately $ 6 per kg to $ 12 per kg) 

•      The price markups of supply chain

•      20% change in producers and exporters

•      Budget consider the exemplary coffee prices in retail

Timeline of Coffee Brand or Plantation

In the very first two months, the company did complete the analysis on the market and the environments using SWOT analysis, PESTEL and Porter five forces model. Next two months the planning for budget was done as well as the essential budget had been assigned to the different departments for the production and conduction of business. May to July company had spent a large number of resources on advertising as well as the campaign to set a new trend in the country for drinking coffee. August to September company did also analyze what the requirements of the customers. Then openly they did start to play in market.