Problem Definition
Our client, Coffee Kingdom, is Italy's leading coffee brand -- with a 37% share of the Italian coffee market. They are still processing all their coffee in Italy and importing beans from various regions to blend their different mixes. Coffee Kingdom does not have significant international presence.
The client has always spent heavily on marketing and is known as a trendsetter in the coffee market. They rejuvenated the image of the "Italian Espresso", making it a popular social moment for young people. The client cares very much about being at the forefront of innovation and new trends in the coffee market. When capsule machines took off, they were first to launch their own line.
Coffee Kingdom's processing capacity is 180M kg of coffee beans per year, of which 80% is used to create their roasted beans, ground coffee and capsules. The remaining capacity is currently unused.
Given the saturation of the Italian market and fierce competition from other domestic brands for the business of local espresso bars, the client is currently considering entering new markets. We are working for the client's strategy department, and assisting them in assessing the attractiveness of new markets and deciding which (if any) to enter.
When entering a new market, the client expects to start selling on-trade (i.e., in bars and restaurants) to establish its brands, before selling off-trade (i.e., in retail stores and to businesses).
How would you determine which new market Coffee Kingdom should enter?
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- The client's goal is to gain a dominant market position within 3 years in whichever region/segment they decide to enter - "dominant" is defined by the client as > 20% market share
- By 'market', the client is primarily interested in new geographies -- though may narrow down to product segments within geographies. The client is only looking to enter one new market, not several
- The client would like both to identify the best market to enter and determine whether it should focus on specific segments within such a market
- The Italian coffee market is growing at a rate of 1.6% per year, and is currently ~$4.5B in size
- Exhibit 1 can be shared at any point if a candidate is keen to learn more about the relative market share of the client
Exhibit 1Italian Coffee Market: Current Market
| Company | Market Share |
|---|---|
| Client (Coffee Kingdom) | 37% |
| Illy | 20% |
| Segafredo | 16% |
| Cafe Vergagno 1882 | 9% |
| Nespresso | 8% |
| Others | 10% |
Source: Coffee Kingdom case file
Question 1Structuring
How would you structure your approach to the question?
Hint · Structuring
Build 3–4 branches that are specific to this client and question, not a generic framework. Check they don't overlap and together cover the problem.
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-
Opportunity size
- a. Market size (Population, percent of coffee drinkers, average consumption)
- b. Growth rate (Due to demographic, economic, and aesthetic trends)
- c. Margins
-
Potential share
- a. Competitive intensity
- b. Customer tastes
- c. Fit with our brand and products
-
Ability to serve
- a. Distance from our factories
- b. Access to on-trade distribution channels
- c. Taxes and duties
- d. Skills required
- e. Manufacturing capacity
What the interviewer is looking forShow guidanceHide guidance
Allow the candidate to develop their own framework. A strong answer will cover market attractiveness, competitive dynamics, and the client's ability to serve the market.
Question 2Numeracy
The client had gathered the following information on the five most promising markets [share Exhibits 2 and 3]. Looking at these exhibits, which two countries seem to be most attractive, based on the expected market size in 3 years?
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
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- Steer candidates to eliminate clear low-priority countries early on, before running a 3-year growth calculation on each
- To simplify, the candidate may skip compounding effects when calculating growth by year
Exhibit 2Five Potential European Markets
| Country | Population (Millions) | Expected market growth per annum over next 3 years (MKg) | On-trade distribution |
|---|---|---|---|
| Sweden | 10 | -1% | Large chains |
| United Kingdom | 60 | 2% | Large chains |
| France | 65 | -5% | Many small independent cafes |
| Poland | 38 | 1% | Large chains |
| Netherlands | 17 | 5% | Many small independent cafes |
Source: Coffee Kingdom case file
Exhibit 3Current Annual Coffee Consumption/Capita (kg/person)
| Country | Consumption (kg/person) |
|---|---|
| Sweden | 10.1 |
| Italy | 5.6 |
| Netherlands | 9 |
| France | 2 |
| United Kingdom | 2.8 |
| Poland | 2.5 |
Source: Coffee Kingdom case file
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Based on a common-sense check, France and Sweden could be eliminated due to declining growth.
Determine market size: # inhabitants (M persons) x Consumption/capita (kg/person)
- United Kingdom = 60M persons x 2.8 kg/person ~ 168Mkg, plus 2% growth
- Poland = 38M persons x 2.5 kg/person ~ 95Mkg, plus 1% growth
- Netherlands = 17M persons x 9 kg/person ~ 153Mkg, plus 5% growth
Let's eliminate Poland due to being the smallest of the remaining three. Let's then determine the market size in 3 years to see if there's a clear winner.
The Netherlands:
- Size today ~ 150Mkg
- Growth/year (next 3 years) ~ 5% ~ 7.5Mkg
- Low-end estimate (not compounding) ~ 150Mkg + 3 x 7.5Mkg = 172.5Mkg ~ 175Mkg
United Kingdom:
- Size today 168Mkg
- Growth/year (next 3 years) 2% ~ 3.4Mkg
- Low-end estimate (not compounding) ~ 168Mkg + 3 x 3.4Mkg = ~ 178Mkg
Based on this analysis, United Kingdom and The Netherlands are the most attractive countries from a 3-year market size perspective, but I'd like to evaluate more qualitative factors about each market to determine a final priority.
What the interviewer is looking forShow guidanceHide guidance
Share Exhibits 2 and 3 with the candidate. Guide them to first eliminate countries with negative growth before doing detailed calculations.
Question 3Judgement & Insights
Of these two countries, which would you prioritize?
Hint · Judgement & Insights
Read the exhibit title, axes and units first. Lead with the ‘so what’, then back it with one or two numbers.
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- The candidate may use their own external knowledge to support their reasoning
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The Netherlands seems like the most attractive option:
- It offers superior growth rate (5% vs 2%)
- Its on-trade distribution is based on independent cafes, which will do a better job of building up our brand than large chains, which typically only carry their own brand
However, breaking into the Dutch market will require a large local sales force, or a Partnership with another supplier of independent cafes with an existing sales force (e.g., drink vendor).
What the interviewer is looking forShow guidanceHide guidance
There is no single correct answer. Evaluate the quality of the candidate's reasoning and their ability to weigh qualitative factors beyond the numbers.
Question 4Numeracy
Your colleague has gathered some market data on the types of coffee products in The Netherlands and their relative market share, both now and in 3 years. [Exhibits 4 and 5] Which market segments would you prioritise for entry, based on this data?
Hint · Numeracy
Write the formula before you plug in numbers, keep units and zeros explicit, and sanity-check the order of magnitude at the end.
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- Even if the candidate prioritised United Kingdom, mention that while it's a perfectly reasonable suggestion, the client has prioritised the Netherlands for further consideration
- If asked, please share that cold brew is the latest trend taking over the coffee drinking world. Cold brew coffee is made by soaking coffee grounds in water overnight. To ride this wave, the client is willing to launch a cold brew dedicated line of business
Exhibit 4Segment by Type, Current (Netherlands)
| Segment | Market Share |
|---|---|
| Ground coffee | 40% |
| Roasted beans | 30% |
| Capsules | 29% |
| Cold brew | 1% |
Source: Coffee Kingdom case file
Exhibit 5Segment by Type, Year 3 (Netherlands)
| Segment | Market Share |
|---|---|
| Capsules | 50% |
| Roasted beans | 25% |
| Ground coffee | 15% |
| Cold brew | 10% |
Source: Coffee Kingdom case file
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Market size Netherlands Now: ~ 150Mkg Market size Netherlands Year 3: ~ 175Mkg
Illustrative analysis of exhibits:
| Segment | Now Market share by segment | Segment sizes (Mkg) | Year 3 Market share by segment | Segment sizes (Mkg) | Growth (~) |
|---|---|---|---|---|---|
| Ground coffee | 40% | 60 | 15% | 26 | -50% |
| Capsules | 29% | 43.5 | 50% | 87.5 | 100% |
| Roasted beans | 30% | 45 | 25% | 43.75 | -3% |
| Cold brew | 1% | 1.5 | 10% | 17.5 | 1000% |
Cold brew and capsules are growing segments; together, they have a total potential market size of 87.5Mkg + 17.5Mkg = 105Mkg in 3 years with very strong growth rates.
The client's objective to attain a 20% market share within 3 years and has a current capacity of 180Mkg and utilization of 80%. This means 20% * 180Mkg is free capacity = 36Mkg.
To achieve a market share of 20% in the targeted segments, 20% * 105Mkg will be needed = 21Mkg.
This means a utilization of: (Current utilization) + (additional utilization) / total capacity
- Current utilization = 80% * 180Mkg = 144Mkg
- Additional utilization = 21Mkg
- Total capacity = 180Mkg
- (144Mkg + 21Mkg) / 180Mkg = 165Mkg / 180Mkg ~ 90%
90% utilization is still feasible. However, at the current rate, the ability to grow further in the Netherlands is limited, since more than 90% utilization may put stress on the plants and cause delays.
Alternatively, prioritizing Capsules and Roasted Beans yields a Y3 market of ~130M kg. Capturing 20% of these markets would require 26M kg, pushing utilization up to 170/180, or ~95%. It may also be harder to gain market share in a shrinking segment (Roasted Beans) as customers are more likely to already have brand preferences than in a new category.
What the interviewer is looking forShow guidanceHide guidance
Guide the candidate to calculate segment sizes using the total market size previously determined, then identify growth segments and assess capacity constraints.
Question 5Creativity
As part of its growth strategy, and in addition to international expansion, your client is considering brand extension (i.e., using its brand to enter adjacent types of products and services) in its home market. What brand extension ideas do you have?
Hint · Creativity
Brainstorm in buckets (e.g. internal vs external, short vs long term) so ideas stay structured and you can see gaps.
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Coffee-related accessories
- a. Coffee machines
- b. Cups & cutlery
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Other hot drinks
- a. Chocolate
- b. Teas
-
Food
- a. Coffee desserts
- b. Coffee snacks
-
Hospitality
- a. Cafe chain
- b. Catering
- c. Hotels
-
Lifestyle
- a. Clothing
- b. Perfume
What the interviewer is looking forShow guidanceHide guidance
Look for creative but realistic ideas that leverage the Coffee Kingdom brand. Strong answers will cover a range of categories with logical connections to the core brand.
Question 6Synthesis
Based on the information you have reviewed, how would you advise Coffee Kingdom?
Hint · Synthesis
Answer first: the recommendation, two or three reasons with numbers, then risks and next steps.
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Coffee Kingdom wanted to know which market they should enter next in order to find higher growth than they will experience in their core Italian market.
Based on the current analysis, I recommend that Coffee Kingdom enters the Dutch coffee market, specifically within the capsules and cold brew segments. My reasons for this are:
- The Netherlands has the fastest growing coffee market at 5%, and a large market size compared to the other countries considered.
- Capsules and cold brew are growing very quickly, and cold brew is a unique opportunity for an innovative company like Coffee Kingdom.
- The additional product volume required to meet the client's target 20% market share within 3 years is within Coffee Kingdom's current production capacity of 180Mkg.
In addition, we believe there are many brand-extension opportunities for the company in its home market, including launching a range of coffee desserts and snacks, and their own chain of cafes.
In terms of next steps, we would like to look at the efforts required for entering the Dutch market, and prioritize brand extensions opportunities.
Contributed by CaseDrill practice community
What the interviewer is looking forShow guidanceHide guidance
Evaluate whether the candidate can synthesize all findings into a clear, structured recommendation with supporting evidence and next steps.