TABLE OF CONTENTSChapterTitlePage1.0EXECUTIVE REVIEW12.0MARKET REVIEW2.1TREND OVERVIEW22.2MARKET SEGMENTS22.3TARGET MARKET33.0COMPETITIVE REVIEW44.0PRODUCT OR SERVICE REVIEW55.0SWOT ANALYSIS5.1 STRENGHTS65.2 WEAKNESSES65.3 OPPORTUNITIES6 - 75.4 THREATS76.0GOALS AND OBJECTIVES87.0STRATEGIES7.1 PRODUCT97.2 PRICING97.3 PLACE/DISTRIBUTION107.4 PROMOTION107.5 PEOPLE117.6 PROCESS117.7 PHYSICAL EVIDENCE/PACKAGING117.8 POSITIONING118.0ACTION PLAN AND IMPLEMENTATION129.0EVALUATION1310.0CONCLUSION14REFERENCES & BIBLIOGRAPHY15 - 16

1.0 EXECUTIVE OVERVIEW

Sunbucks in Malaysia is jointly owned by KK Corporation and Sunbucks Coffee International and has enjoyed a healthy growth within the Malaysian market since its first outlet opened in 1998. At present, there are 119 stores thru out Malaysia. In KK Corporations most recent 2003 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 Malaysian context of a planned launch of VIA, Sunbuckss 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.

2.0 MARKET REVIEW

2.1TRENDS OVERVIEW

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, 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 behavior of Nestle, the market leader, who in 2009 also introduced a range of instant hot drinks targeted at local tastes to compete directly with other domestic brands who have specialized in domestic flavors 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 and other brands have also incorporated herbal additives such as long folia (Tongkat Ali) or healthier sweeteners such as Oligo Fructose.

2.2MARKET SEGMENTS

Malaysia has a strong hot drinks culture. A survey that showed that the average Malaysian drinks 1.58 cups of coffee daily.

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. Further research 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.

The coffee market is a sub-set of the Hot Drinks market sector which can be further categorized into instant coffee and ground coffee. According to an industry report, total coffee sales in Malaysia total to approximately MYR 198.25 Mil in 2013 and is set to be a growth market.

2.3TARGET MARKET

The initial target market sector for VIA will be the existing clientele of the retail Sunbuck 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.

3.0COMPETITIVE REVIEW

Based on Porters Five Forces Analysis, the threat of substitutes is high in the Malaysian market given the propensity of Malaysian drinkers to prefer tea and the wide alternatives available in the form of malt or soy based drinks. As the coffee bean commodity market is a 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 localized products were identified by one industry report as key drivers for the increased prominence of the domestic coffee brands. 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 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.

4.0PRODUCT OR SERVICE REVIEW

Sunbucks purchases and roasts high-quality, whole bean, specialty coffees and sells them along with fresh, rich-brewed, Italian style espresso beverages, a variety of pastries and confections, coffee-related accessories and equipment. Sunbucks produces and sells bottled Frappuccino coffee drinks, Sunbucks Double Shot coffee drink. Sunbucks has an exclusive line of Sunbucks Barista home espresso machines, coffee brewers and grinders. Sunbucks offers a line of innovative premium teas produced by Tazo Tea Company. Sunbucks also has a line of super-premium ice cream, premium chocolate, sandwiches, and salads. Coffee mugs, compact discs and assorted gift items. The Sunbucks Card a reloadable stored-value card. The Companys objective is to establish Sunbucks as the most recognized and respected brand in the world.

5.0SWOT ANALYSIS

5.1STRENGTHS

Sunbucks is the market leader in Malaysia. The brand equity of Sunbucks is high as it is perceived a premium quality brand and therefore this should translate into a positive association with any product extensions such as VIA. The core strength of Sunbucks has been its ability to create a relationship with the customer by marketing the consumption experience. As quoted by the KK Chan, the CEO, Sunbucks is not in the coffee business serving people but in the people business serving coffee. The challenge with VIA is whether the coffee experience can be mapped onto a product which traditionally has been a low involvement product foremost consumers. Sunbucks also has upstream supply chain management expertise insourcing high quality raw ingredients from its retail activities and enjoys a strong corporate image due to its efforts in ethical sourcing, environmental stewardship and community event involvement.

5.2WEAKNESSES

Sunbucks is a late entrant into the soluble coffee market as this is a crowded brands cape 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. Sunbucks is also disadvantaged by its lack of direct experience in managing the supply chain for instant coffee distribution. At the moment it only markets roast coffee beans via its retail outlets. The premium image of the Sunbucks 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 Sunbucks may be perceived as highly priced brand compared to other local brands.

5.3OPPORTUNITIES

The economic slowdown has not left Malaysia unaffected. Store on store sales growth for Sunbucks retail outlets were reportedly lower for the year 2013 and this trend is expected to be similar for the 2014 period. Therefore the sale of instant coffee as an alternative source of revenue for Sunbucks 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 Sunbucks retail outlets.

5.4THREATS

The launch of VIA carries the risk of jeopardizing the brand equity of the core Sunbucks brand as the growth of the soluble coffee market could potentially cannibalize sales from Sunbucks retail outlets who then go onto 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 McDonalds 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 Sunbucks and may have a retaliatory strategy ready.

6.0GOALS AND OBJECTIVES

The goals and objectives of Sunbucks are to open 50 more outlets from 2015 to 2018 and to gain 75% of market share within the period. Increase market revenue by 5% each year. Increase brand awareness and gaining 1000 to 3000 number of new customers within the first month. Capturing 5,000 or more Facebook likes within the first two months and 30% number of returning customers in 1 year. Lastly, becoming a super brand in Malaysia in 5 to 7 years.

7.0STRATEGIES

7.1PRODUCT

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 Sunbucks packaged coffee beans as typically less is said about ingredient origins for instant coffee. The packaging should also highlight the innovative micro ground 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. Given that the only flavors available are Italian Roast and Colombia there is a temptation to extend the flavors offered but a counter positioning of simplicity in offerings could be used to address this issue.7.2PRICING

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 Nescafes 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 Sunbucks 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.

7.3PLACE/DISTRIBUTION

Within Sunbucks Malaysia, there is no direct merchandising or distribution experience outside of the retail outlets .However, KK Corporation, a major shareholder in Sunbucks Malaysia franchise, should be able to leverage on its 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 Sunbucks 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, Sunbucks 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.7.4PROMOTION

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 Sunbucks 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 market 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 Sunbucks still wants VIA consumers to frequent the retail outlets. Further down the road, there is also a chance for Sunbucks to leverage on its corporate identity by integrating VIA into its larger scope of environmental stewardship by creating a recycling campaign around the product.

7.5PEOPLE

We will be hiring social, positive attitude and skilled staffs. We will also provide training to our staffs. We will ensure that our staffs will provide an excellent customer service to our customers in order to meet their satisfactions.

7.6PROCESS

We will be providing a quick and efficiency service to our customers. Customized cups with name in case of serving customer with the wrong drinks. We will also be collecting suggestions and feedbacks from our customers in order to improve ourselves into the next level.

7.7PHYSICAL EVIDENCE/PACKAGING

Our outlets will be installing with modern furniture to let our customers feel trends and comfortable. Our uniforms for our staffs are tidy and smart. Sign boards, none smoking zone, smoking zone, kids play area and music also will be providing in all outlets in order for our customers feel that it is not just an ordinary coffee shop.

7.8POSITIONING

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 Sunbucks retail outlets.

8.0ACTION PLAN AND IMPLEMENTATION

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 emphasizing their lower prices , discrediting Sunbucks claim of equivalent quality or promoting their larger product flavour range.

StageTrial (0-3mths)Launch (3-6mths)Growth (6-12mths)Sustain & Defend (12mths onwards)

ProductConduct initial surveys based on focus groups from existing Sunbucks clientele on most valued featuresEmphasize the quality aspects and the innovation in product developmentMaintain the qualityIntroduce new flavorsReinvent the packaging

PriceSurvey the market to identify the price ranges within the instant coffee marketPrice skimming - Premium pricing that will set it apart from other economy pack brandsPrice skimming with potential for discounts related to purchase of main Sunbucks productsMaintain the price skimming strategy with flexibility for price changes depending on competitor reactions

PromotionMaintain secrecy and speed of the implementation to avoid retaliatory attacksFree samples in storesTaste testsLeverage on the online community presenceConsistency in messages and monitoring impact on retail storesIntegrate the brand image of VIA with the parent brand in terms of CSR activities

Place/ChannelExplore and develop distribution channels available to the KK parent companyExclusive Distribution - Offer VIA exclusively at Sunbucks retail outletsOther channels should match the "on the move" elementSelective Distribution - Offer at "premium" supermarketsMaintain Selective Distribution

Focus KPI-sTime To MarketActual vs. Plan Pilot Trial CostsProduct AwarenessPositive Consumer Online FeedbackSales GrowthMarket ShareSustain SalesNew Product Innovation

Table 1. Marketing Plan Implementation Strategy over Time

9.0EVALUATION

On average, a Sunbucks outlet costs about MYR350, 000 to set up. In 3 years the total estimated cost for 24 outlets is MYR8, 4000, 000. By year 6, MYR11, 206, 000 in income minus MYR8, 500, 000 will be MYR2, 706, 000. Therefore it would take Sunbucks a little under 6 years to pay off this investment. Every year following year 6 would generate MYR3, 000, 000 of Post-Tax Disposable Income for Sunbucks.

10.0CONCLUSION

The instant coffee market within Malaysia is an attractive area for Sunbucks to enter into. However the key risk that needs to be managed within the market mix is the dilution of the brand identity as Sunbucks 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 Sunbucks will be entering a mature market as a late-comer whereas most of their competitors in the 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 Sunbucks brand equity to extend the product successfully.

References & Bibliography

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