This document discusses Cafédirect, a UK-based fair trade coffee company. It provides an overview of Cafédirect's history and business model, which focuses on supporting small coffee farmers through fair trade practices like minimum prices and premiums. The document also outlines several marketing theories and applies them to Cafédirect's growth strategies over time, such as expanding distribution channels, increasing product varieties, and emphasizing quality and ethical sourcing in communications. Cafédirect's success demonstrates how a social enterprise can compete in mainstream markets while achieving social goals.

1. The Story of Cafédirect
Social Enterprise Marketing

2. Agenda
Introduction
Social Enterprise
Fair Trade
Cafédirect
Theories
Corporate-Reputation Quotient
Kano Model
Product/Market Grid
Case Application
Learning Insights
1

3. Agenda
Introduction
Social Enterprise
Fair Trade
Cafédirect
Theories
Corporate-Reputation Quotient
Kano Model
Product/Market Grid
Case Application
Learning Insights
2

4. S
ocial Enterprise
Social enterprises
social mission driven organizations which trade
in goods or services for a social purpose.
Social Enterprise Commercial business
To generate profit to further their To maximize shareholder value
social and environmental goals
e.g. Cafédirect e.g. The Body Shop
3

5. 4
ocial Enterprise
S

6. What is Cafédirect?
Cafédirect is a UK-based alternative trading organization and it is
currently one of the largest fair trade hot drinks companies in the
world.
Fair trade?
„is a trade partnership, based on dialogue, transparency and respect,
that seeks greater equity in international trade.
„contributes to sustainable development by offering better trading
conditions to, and securing the rights of, disadvantaged producers and
workers - especially in the South.
„is usually conducted by alternative trading organization (ATOs), which
have often been founded particularly for the purpose of fair trade
5

7. How fair trade work?
A minimum price, which always be paid even if the world market
price falls below this point.
A price premium of a given percentage, which is paid when the
world market price rises beyond the minimum price.
Pre-financing of 60% of the total order to allow smallholders to
buy raw materials.
Training in quality control and marketing know-how to build the
capacity to also trade on the world market independently of fair
trade.
6
Sources: see Littrell and Dickson, 1999; Mayoux,2001; Tallontire, 2001a

8. C
The History of Cafédirect
afedirect
2007
„Cafédirect was voted
as the most
recommended brand in
1994
2004 the nation in a survey of
• Sales of
• Cafédirect 2,000 companies
Cafédirect start
become a
increasing
publicly listed
dramatically
company
1991
• Cafédirect
was born
1989
• Collapse of the
International
Coffee
Agreement 7

9. Timeline (1989-1993)
Cafédirect knew that they could not depend upon the fair
trade message alone to convince buyers.
In order to compete, they would have to deliver real value
to the consumers and meet the needs of the supermarket
buyer.
8

10. Timeline (1989-1993)
Increase of products quality
At the very beginning, the company focus purely on charity rather than
quality, which led to an dissatisfaction towards its products.
After Penny Newman stepped onto the company’s MD, she
accelerated the organization’s shift from charity spin-off to ethical
business venture, by pushing for more customer focus and repositioning
Cafédirect as a high quality coffee brand.
9

11. Sales Growth (1992-2000)
10

12. Timeline (1995-present)
The success of Cafédirect
Changes of communication approach
Old communication approach:
Advertising 1993-1995
• focus on the fair-trade message
• emphasize on producer advantages.
11

13. New communication approach
C
Advertising 1996-1998
afedirect
• address the quality coffee story
• focusing as it does on how to
make the perfect cup
• the producer still remained the
central theme of these
campaigns.
Advertising 1999-2001
The picture of a smiling Machu Picchu
conveyed products qualities-its smell, its
freshness, and its exotic origin.
12

14. C
afedirect
Increase of distribution channels
Original
Oxfam’s over 600 shops
Traidcraft’s mail-order catalogue
In 1993,
Gained national distribution in the Co-op and other supermarkets.
Later stages,
Offering its products through vending machines
Expanding its products distribution channels to overseas
13

15. Source: Marketing Relationship, Helen Peck, Chartered institution of Marketing
14

16. C
afedirect
Increase of products varieties
15

17. C
Today
afedirect
– 39 grower organizations across
13 developing countries
– 260, 000 farmers and directly improving
the lives of more than 1.4 million people
-- In 2007, the company's market share for hot drinks equated to 34%, 32%, and 14%
respectively of the UK's Fair-trade coffee, tea, and drinking chocolate markets.
-- In the overall market, Cafédirect is the 5th largest coffee brand and 7th largest tea
brand in the UK.[
16

18. 17
afedirect
C

19. Agenda
Introduction
Social Enterprise
Fair Trade
Cafédirect
Theories
Corporate-Reputation Quotient
Kano Model
Product/Market Grid
Case Application
Learning Insights
18

20. Theory 1
Corporate Reputation Quotient
• Six drivers of the corporate reputation quotient
Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations
19

21. Theory 1
Corporate Reputation Quotient
Products and Services
– To guarantee high quality
• Cafédirect controlled the products delivered
• It also invested heavily in training producers on the ground
– Key achievements in 2000 demonstrated Cafédirect’s success in
attaining high quality
• “Best coffee” by Best magazine, awarded 5 stars by Prima magazine
• Voted “ favorite coffee” by the UK’s leading consumer magazine
– Fair trade Direct trade
• By providing long-term contracts and producer education, direct trade allows
importers to obtain high quality coffee ‟ year in and year out
• While most large coffee importers buy coffee beans on the spot market, direct trade
has a built-in supply chain for reliable high-quality gourmet coffee.
20

22. Theory 1
Corporate Reputation Quotient
Vision and leadership
– Ian Lepper: Cafédirect’s first CEO.
• After he left, Cafédirect went through some turbulent stages:
– The partnership between the four founding ATOs was being stretched.
– Overall sales in 1998 increased by only 8%.
– Penny Newman:
• Bring Cafédirect from charity spin-off to ethical business venture
• New vision: reposition Cafédirect as a high quality coffee brand
– Anne MacCaig: Cafédirect’s new Chief Executive
• She has a wealth of business and marketing experience
– She has an economics degree from the University of Birmingham.
– In the past 20 years she has worked with major brands here in the UK and
abroad, including Persil and Rolls-Royce plc.
21

23. Theory 1
Corporate Reputation Quotient
Workplace environment:
– For Cafédirect, employees are their producers (small-holders in the third world)
– Several benefits are provided to its producers (this is also how fair trade works)
• A minimum price, which will always be paid even if the world market price falls
below this point.
• A price premium of a given percentage, which is paid when the world market
price rises beyond the minimum price.
• Pre-financing of 60% of the total order to allow small-holders to buy raw
materials.
• Training in quality control and marketing know-how to build the capacity to also
trade on the world market independently of fair trade.
22

24. Theory 1
Corporate Reputation Quotient
Social responsibility:
– Cafédirect’s mission statement:
• At Cafédirect our mission is to change lives and build
communities through inspirational, sustainable business.
We focus our social and economic impact in the
developing world.
23

25. Theory 2
Kano Model
Satisfaction
“Didn’t know I
wanted it but I
like it.”
Satisfier
One Dimensional
Desired Quality
Delighters
Excited Quality
Service Service
Performance Performance
Dissatisfier
“Cannot increase
Must-be
my satisfaction, but
Expected Quality
can decrease.”
Dissatisfaction
24
Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-48

26. Theory 2
Kano Model
3 categories of quality attributes influence customer satisfaction:
„ Basic Factors
Dissatisfier , Must be’s ,‟Cost of Entry, Basic needs
„ Performance Factors
Satisfier, More is better, Competitive, Performance
„ Excitement Factors
Delighter ,‟Latent Need, Differentiator, Surprise
25

27. Theory 2
Kano Model
Factors KANO Category How to do better
Sanitation & Safety Basic Needs
Have to keep the customers
above the average
Quality Basic Needs
satisfaction level
Taste Performance
Package Performance
Sustaining improve on to
gain more return
Distribution Performance
Sales Promotion Surprise
Dig and focus on
Brand Surprise
Kano Model applied to Food&Beverage industry
26
Source: Noriaki Kano(1984), Attractive quality and must-be quality, The Journal of the Japanese Society for Quality Control, April, pp.39-48

28. Theory 2
Kano Model
Quality
- Clients were usually concerned citizens for whom the charity aspect of fair
trade prevailed over product quality.
- Penny Newman-reposition Cafédirect as a high quality coffee brand
- Direct Trade(long-term contracts and producer education built-in supply chain
for reliable high-quality gourmet coffee)
Sanitation & Safety
- Government report - Product Recall of Cafédirect product (found small pieces of
glass)
- Hazard Analysis Critical Control Point, or HACCP, is a standard of food
safety management system for any food producer wanting to sell into the
UK and other European markets. Now it is for all parts of the supply chain
Basic factors
27

29. Theory 2
Kano Model
Distribution
- Charity, Church & Fair-trade world shops
- Target the mainstream distribution channels such as supermarkets, catering,
and coffee bars
Taste
-quot;Some batches tasted very good and others tasted very poor. That
generated a lot of negative reaction in the UK to Cafédirect in the first years.quot;
(Hudghton, 2002, interview)
- Cafédirect's Gold Standard Programme - Train growers to professionally taste
their own products, helping them to improve quality and understand market
value
Performance factors
28

30. Theory 2
Kano Model
Package
- Pure for charity (poor people & slogan for sympathy)
- Cafédirect undertook a major brand relaunch in 2006 to help unify the
brand look and aid it competitiveness
Performance factors
29

31. Theory 2
Kano Model
Brand
- 8 Awards in 2008
- August 2008: Cafédirect triumphs in Great Taste Awards
- In a survey of 2,000 global brands Cafédirect ranks No. 1 as
the most recommended brand
Social Enterprise concept
- Combining taste, price, ethics, and availability
- 良心消費主義 (ethical consumerism)
Excitement factors
30

32. Theory 3
Product/Market Grid
Source: Cafédirect annual report 2006-2007
31

33. Theory 3
Product/Market Grid
Ansoff Matrix
Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124
32

34. Theory 3
Product/Market Grid
Cafédirect use 3 major approach
Encourage current customers to

buy more
Attract competitor’s customers

Try to change incidental clients

to regular clients
Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124
33

35. Theory 3
Product/Market Grid
Tesco increased its Cafédirect offering by another five products in 2006

Morrison’s expanded Cafédirect range, adding Medium Blend, Organic

Decaffeinated, Machu Picchu and Palenque Roast etc in 2006
At the beginning of 2007, Co-op increased the number of their stores selling

Cafédiret’s products. They have agreed a strategy to encourage customers to
buy more Cafédirect products this year. (annual report 2007 p.21)
Costa coffee shops decided to sell Cafédirect’s products.

Keep high quality products

Emotional approach

34

36. Theory 3
Product/Market Grid
When the current product is
launched in a new market,
there are three approaches to
develop the market:
1. Expand distribution channels.
2. Sell in new locations.
3. Identify the potential users.
Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124
35

37. Theory 3
Product/Market Grid
Cafédirect introduce existing
products in foreign market
Hong Kong
Listing with a major supermarket
chain “Parknshop” (50 stores)
Ireland
Now available in all their major
supermarket and many
independent stores
Sales increased by 19% in 2005
Singapore
Cafédirect Annual report 2005-06
36

38. Source: Cafédirect annual report 2006-2007 37

39. Theory 3
Product/Market Grid
Cafédirect Annual report 2005-07
38

40. Theory 3
Product/Market Grid
Originally, coffee, later, hot
chocolate
When a new product is launched in
the current market, the intensive
growth strategies could be to:
1. Develop new features.
2. Develop different quality levels.
3. Improve the technology.
Igor Ansoff, Strategies for diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957,pp. 113-124
39

41. Theory 3
Product/Market Grid
Cafédirect Annual report 2005-06
40

42. Agenda
Introduction
Social Enterprise
Fair Trade
Cafédirect
Theories
Corporate-Reputation Quotient
Kano Model
Product/Market Grid
Case Application
Learning Insights
41

43. Corporate
Reputation
Nike vs. child labor in the 90s
Quotient
application
Source: Charles J. Fombrun, Cees Van Riel- Fame and Fortune: How Companies Build Reputations
42

44. Corporate
Reputation
Quotient
application
People criticizes:
•“Nike’s success story is not based on good name
and advertising alone but also attached to it is the
tears of tortured workers and child labor.”
•“Nike has the habit of hiding behind its good
public image and its effective means of promotions
and advertising. “
Stock price 1992 Nov, US$79.51
1993, Sep. US$ 41.98
reduced 47.2%
43

45. Corporate
Reputation
Quotient
application
Nike’s solution
– Code of Conduct,1992
– Minimum age for employment, 1998
• Footwear(18), others(16)
• Apply Occupational Safety and Health Administration
(OSHA) standard
– Nike set up a Corporate Responsibility and
Compliance Department, 2000
• Join the Global Alliance for workers and communities and
Fair Labour Association
44

46. Corporate
Reputation
Quotient
application
Nike’s Current Code of Conduct
– Prohibition of forced labor
– Prohibition of child labor
– Compensation:pay at least the minimum total compensation
required by local law
– Benefits :comply with all provisions for legally mandated
benefits
– Ensure overtime payment
– Ensure a health and safety working environment
– Environment: continuous improvement in processes and
programs to reduce the impact on the environment
– Maintain on file and documentation to demonstrate compliance
with this Code of Conduct, and to make these documents
available for auditor's inspection upon request
45

47. Kano Model
application
46

48. ✴ Active Links
Kano Model
✴ Legibility
application
✴ Safety
47

49. ✴ Storage
Kano Model
✴ Upload speed
application
✴ Tag & Search
48

50. ✴ Photo Editing
Kano Model
✴ Community
application
✴ Fun
49

51. Photo
Editing
50

52. Photo
Editing
51

53. Community
52

54. Community
53

55. Fun
54

56. Fun
55

57. Fun
56

58. Product/Mar
ket Grid
application
„Aggressively expanding the number of stores in Japan
„Strengthening the group’s core brands and maintaining
flexibility with regard to distribution channels and retailing
formats
57

59. Product/Mar
ket Grid The result was a 2.2% increase in net sales to 136,312 million yen
application
58

60. Product/Mar
ket Grid
application
„Business Expansion in the Asian and American Markets
„Overseas sales increased 17% year on year 2007 due to
the business expansion on China, Taiwan and South Korea.
59

61. Product/Mar
ket Grid
application
2006, Perfume containing natural fragrances
Skin care series featuring natural fruit extracts
60

62. Agenda
Introduction
Social Enterprise
Fair Trade
Cafédirect
Theories
Corporate-Reputation Quotient
Kano Model
Product/Market Grid
Case Application
Learning Insights
61

63. New Cafédirect Old Cafédirect
Business Idealistic
Style
Sales, Marketing Intellectual
Skills
Commercial but ethical Non-commercial
Values
Professional Semi-volunteers
Staff
Performance-based,
Democratic, Political
Structure clear responsibilities
From Cafédirect’s case, we learn that
1. SE should keep long-term relationships with small-holders and set high
standard of quality
2. SE should market itself just like commercial organizations
3. Guarantee basic factors, improve performance factors and make
Learning “Social Enterprise” identity as the excitement factor
4. Expand to mass market by increasing distribution channels
Insights
62

64. The Divine Chocolate
• One of the fairtrade organization selling chocolate
bar in UK
• Owned by South African cocoa farmers co-orpeative
• Their chocolate bar was sold through charity and fair-
trade channels (e.g Worldshops) before 1997.
Learning
Insights
63

65. The Divine Chocolate
Go for mainstream market
• In 1997, the cocoa farmers decided to invest in a chocolate bar of their
own. They decided to produce a mainstream chocolate bar to compete
with other major brands in UK.
Product innovation and good quality
In October 1998, Divine Fairtrade milk chocolate, made from its own best
of the best fairly traded cocoa beans was launched and by Christmas, had
made it onto the supermarket shelves .
 Continuous quality improvement/control and innovation had made Divine
successfully enter the mainstream market.
Learning
Insights
64

66. The Divine Chocolate
Good quality/ Good company image
Beans mean Business
In a ferociously competitive chocolate market worth almost £4 billion in the
UK alone, as so many people adore delicious chocolate, the potential for
Divine's success is huge.
Divine has been developed to appeal to the British public's palate, and it
tests favorably against all the market leaders. The UK has one of the
highest per capita levels of consumption of chocolate in the world and
therefore, even capturing a small proportion of this market translates into
Learning real benefits for cocoa farmers.
Insights
65

67. The Divine Chocolate
• Profit goes back to the farmers(i.e the smallholders)
In 2006, one of the organization’s founder The Body
Shop made the brilliant decision to donate its shares in
the Company to the cocoa farmers in South Africa- so
now the farmers' cooperative has an even bigger
stake in Divine.
Learning
Insights
66

68. The Divine Chocolate
Learning
Insights
67

69. The Divine Chocolate Divine Partners
(Smallholders in South African)
Learning
Insights
68

70. Q&A

71. Backup

72. F
air Trade
Global Fair trade Sales
2007 $2,381,000,000
2006 $1,623,000,000
2005 $1,141,570,191
2004 $831,523,066
2003 $554,766,710
2002 $300,000,000
2001 $248,000,000