Caffe Nero

By John Dudovskiy
November 17, 2012

Caffe Nero Due to the rapid growth in coffee sector in United Kingdom which was triggered by a trend in social culture and a growth in household expenditure boosted the growth of Caffe Nero which has opened its branches in over 135 cities and 300 branches all over the world.

Caffe Nero, based on Italian brand has been successful on capturing the larger share of market slice both in UK and other European countries despite of a intensified competition. However, it has the risk of going head to head with other coffee giants which is a threat to the company.

Strengths of the company which helped to capture a huge share of the market from its competitors which resulted in:

  • Profits nearly doubled by the year end (2008)
  • About 8% growth on sales on certain months on consistent basis
  • Market share nearly tripled over 2 years

Environmental analysis for Caffe Nero

Marketing oriented firm places the customer and satisfaction of the customers’ needs and wants, at the centre of all corporate thinking.

He further mentions that a marketing oriented firm identifies the needs and wants of the customer and produce the goods to satisfy them rather than producing first and offering it to customers later. Although the needs and wants of the customers are clear and understandable, it is not always possible to achieve the desired results as there are other factors which affect the decision made by the company and they are known as environmental factors which are micro and macro environmental considerations.

Caffe Nero


Micro-environmental factors

Micro-environment is the forces close to the company that affect its ability to serve its customers-the company, market channel firms, customer markets, competitors and publics.

Here are the actors in the micro-environment:


The company

In this part, the company top management should set the company’s mission and vision statements, objectives to achieve them, and broad strategies and policies.


And in the case of Caffe Nero, company and its directors are trying to create a continental coffee house atmosphere, creating a friendly place rather than a fast food experience. Moreover, the company intends to integrate into the local environment and culture, where customers feel comfortable meeting friends and working on the computer.



Caffe Nero are alone amongst the big chain coffee shops in that they are the only chain which does not roast it’s own coffee; instead, Coburg coffee roasters do it for them. Starbucks has its own roasters, Costa has coffee roasted for them by another branch of the Whitbread group which is essentially the same company. She also mentions that Caffe Nero being famous for its independent secret blend and roast, still pays for an outsider company to supply the goods to them.

Caffe Nero



The customers of Caffe Nero are all coffee lovers and according to the following research carried out by Allegra Consumer Group, Caffe Nero has been found as an overall winner in all criteria of customer satisfaction. However, the trend in coffee drinking culture is a very vulnerable to change as the consumers taste towards coffee may change.


Caffe Nero is subject to an intensified competition and the main competitors are Sturbucks and Costa Coffee. All the competitors are offering almost the same facilities and food, coffee as Caffé Nero is offering, such fine coffee, Italian sacks and sandwiches, muffins and cookies, friendly atmosphere, internet access and a good customer care. However, Starbucks has more market share than any other players in the industry representing overall of over 25% of market share whereas Caffe Nero has only over 11% of relevant market share which is still good proportion in the whole market.



As public anger is increasing over junk food, the more pressure is being put on fast food chains, however, the coffee shops are the exceptions as they tend to offer healthier options.


SMART Objectives for Caffe Nero

The aim is to expand into new markets for further growth and to spread the risk of business to avoid vulnerability to the overall economic circumstances. The chosen market isRussiaas the Russian market is not fully utilised by any other single major coffee shop and the coffee culture is new and seems to be very attractive.

Therefore, the objective is to capture 5% of the market share in the first year by acquiring already operating coffee shops and then eventually increasing it by 3-5% on an annual basis.


Market Segmentation for Caffe Nero

As already mentioned above the aim it to capture the Russian market as it is a new market and is not fully utilised. Therefore, the following steps will be taken to satisfy the segmentation process:

GeographicalThe main key area for the market entry will beMoscow, the capital city in the first year as the demand for coffee shops tend to be higher in capital cities based on experience in European countries and moreover, the capital cities are much busier giving the possibility of more customers.

Demographic– The demographic segmentation will be focused on middle aged people and busy professionals and majority of them are women, as mentioned by Townsend (2009).

Psychographic Segmentation– The coffee is mainly consumed by busy professionals; therefore,Moscow is an ideal place to meet this demand.


Analysis of 7Ps for Caffe Nero

 Product Caffe Nero seems to have well balanced range of products to diversify away the risk, however, still needs to introduce and update its offerings as people’s tastes are changing.

Place – The chosen new location has been decided as Moscow, Russia as it helps to capture not only Russia itself, but also former USSR countries.

Promotion – One of the best channels of promotion for Caffe Nero will be broadcasting its advertisements within family programs on TV. Moreover, as the name is already famous, it will benefit from brand recognition, however, needs to spend heavily  in the early stages of market entry.

 Price – As the price is very sensitive factor which may affect the overall sales revenue that can be generated, Caffe Nero seems to be quite reasonable in terms of pricing in Europe, therefore same pricing strategy is expected.

Moreover, as the brand name and the quality of the product is already generated very good goodwill for the company, Caffe Nero can capitalise it through price skimming as it is an appropriate pricing strategy for the industry.

Physical layout – the design of the Caffe Nero shops should be of high quality and create friendly atmosphere that can attract customers and should be worth the price it is charging for its products.

Provision of customer service – Customer service lies in the heart of retail, therefore, it is an essential part of the business. Caffe Nero should offer top quality and friendly customer service to its customers.

Processes – Caffe Nero should handle customer complains positively and should identify the needs and wants of customers inRussia through detailed marketing research to offer the service and products customers want.


Control and Evaluation of the Marketing Plan 

After carrying out the following stages of Marketing Management, now is the last stage to test the successfulness of the implemented marketing paln.

  • Planning
  • Research
  • Implementation
  • Control
  • Evaluation

The effectiveness of the marketing plan can be identified by carrying out a marketing research to find out if the customers are happy with the service and are eager to pay the required price for the products the company is offering.

Moreover, this can also be tested by the revenue being generated as it was part of the overall marketing plan where the marketing Department was responsible to carry out a forecasting for sales revenue. And the company may compare the actual to the budgeted, actual to the industry average.


Category: Strategy