Abstract
This paper follows the path of nine studies of U.S. consumer markets: Men’s Shaving Gel, Beer, Shampoo, Shredded/Grated Cheese, Refrigerated Orange Juice, Men’s Razor-Blades, Women’s Razor-Blades, Toothpaste, and Canned Soup.Porter associates high market share with cost leadership strategy which is based on the idea of competing on a price that is lower than that of the competition. However, customer-perceived quality—not low cost—should be the underpinning of competitive strategy, because it is far more vital to long-term competitive position and profitability than any other factor. So, a superior alternative is to offer better quality vs. the competition.In most consumer markets a business seeking market share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality better than that of the competition: at a price somewhat higher, to signify an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run. Quality, however, is a complex concept consumers generally find difficult to understand. So, they often use relative price, and a brand’s reputation, as a symbol of quality.In 2008 the U.S. retail sales for the Coffee market were $3.78 Billion. The market featured five varieties of coffee: Ground, Soluble (Instant), Whole Bean, Liquid, and Flavored. We have focused our analysis on Ground Coffee which had a 70% share in 2008.In 2008 the Ground Coffee market leader was the Folgers brand family with a market share of 21.8%, followed by the Maxwell House brand with 11.6%. The pack sizes varied from 1.3- to 52oz, with the 10-13 oz packs being the most popular. So, we have focused cluster analysis on this pack.The Ground Coffee market was highly competitive. In 2008 it had 450 brands.Using Hierarchical Cluster Analysis, we tested two hypotheses: (1) That the market leader is likely to compete in the mid-price segment, and that (2) Its unit price is likely to be higher than that of the nearest competition. Employing U.S. retail sales data—for both 2008 and 2007—we found that the results did not support our hypothesis that the market leader would be a member of the mid-price segment. Instead, the results show that both the market leader, the Folgers flagship brand—and the runner-up Maxwell House—were members of the economy segment, although Folgers’ unit price was higher than that of Maxwell House, as we have hypothesized.This implies that both Folgers and Maxwell House were following the cost leadership strategy based on lower price than better quality, and treated coffee as a commodity to gain market share. This is truly a stunning result! In all similar nine studies preceding this one, not a single market leader—or runner-up—competed in the economy segment! The spectacular success of Starbucks demonstrated in no uncertain terms that the consumers were no longer content to treat coffee as a run-of-the mill drink—but rather something special—that deserved to be relished, and for which they were willing to pay a premium price.Finally, we discovered five strategic groups in the industry.
Highlights
This work follows the footprints of nine studies of U.S consumer markets: Men’s Shaving Gel, Beer, Shampoo, Shredded/Grated Cheese, Refrigerated Orange Juice, Men’s Razor-Blades, Women’s Razor-Blades, Toothpaste, and Canned Soup (Datta, 2012, 2017, 2018a, 2018b, 2018c, 2019a, 2019b, 2020a, 2020b)
The conquest of India by the East India Company (EIC) was under way where the country concentrated on growing tea rather than coffee
We present the results of cluster analysis of 28 Ground Coffee brands with sales >$5 million. For both 2008 and 2007 we found that the results did not support our hypothesis that the market leader would be a member of the mid-price segment
Summary
This work follows the footprints of nine studies of U.S consumer markets: Men’s Shaving Gel, Beer, Shampoo, Shredded/Grated Cheese, Refrigerated Orange Juice, Men’s Razor-Blades, Women’s Razor-Blades, Toothpaste, and Canned Soup (Datta, 2012, 2017, 2018a, 2018b, 2018c, 2019a, 2019b, 2020a, 2020b). The strongest opposition against London coffeehouses came from the British housewives, who, unlike their French counterparts—as we have mentioned above—were excluded from this all male society One of their complaints was that excessive coffee drinking by men was contributing to their impotence While Brazil provided three-quarters of American coffee imports in 1914, but by 1919 this share had dwindled to half 9.3 Robusta Coffee Invasion Lowers Quality Standards in America After World War II a much-weakened British government granted independence to India and many other countries in Africa. As we have noted earlier, the coffee industry ignored the formidable threat posed by Coke and Pepsi, who were aggressively wooing the young baby boomers Another factor is the invention of High Fructose Corn Syrup (HFCS) that accelerated the growth of the carbonated soft drinks market. Within the two decades after WW II, American coffee became even worse: from a state of mediocrity, coffee went from ‘safely middling’ to awful” (Pendergrast, p. 236, Olshan, Note 8)
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
