Enactus Coffee Marketing

Project Team A market feasibility study prepared to assist the Evangel

University administration and Aladdin Food Service

executives to evaluate the potential for developing an

on-campus coffee shop

Evangel University

Coffee Shop Market

Feasibility Study

Evangel University Enactus

Coffee Marketing Project Team

February 27, 2015

TABLE OF CONTENTS

Executive Summary 1-2

Scope of Work 2-3

Coffee Marketing Survey Report Items:

1. Purchase coffee more than once a month 3-4

2. Dollars spent 4

3. Primary reason to visit 4

4. When visited 5

5. Length of stay 5-6

6. Number of visits 6-7

7. Main reasons for choosing 7-8

8. Purpose of visit 8

9. Best location 9

10. Likelihood to patronize on-campus coffee shop 10

11-12. Impact of Crusader Bucks 10-11

13-15. Demographics 11

1

EXECUTIVE SUMMARY

This market feasibility study was developed to assist the Evangel University administration and

Aladdin Food Service executives to evaluate the potential to develop an on-campus coffee shop.

The study has been prepared by a team of students as a project of the Evangel University Enactus

student group. Enactus formed the Coffee Marketing Project Team to complete the project.

The study began by conducting two small focus groups of students who purchase coffee off

campus at least twice each month. The results of these focus groups led to creating an online

student survey designed to evaluate the requirements for and feasibility of developing an on-

campus coffee shop. The survey was sent via email to 1,362 traditional undergraduate students

(TUG). We received 606 valid responses (44% response rate). The gender, classification, and

living status of the students who responded was representative of the entire TUG group.

The student survey confirmed the conclusive feedback from the initial focus groups that an on-

campus coffee shop would need to have a unique atmosphere and offer competitively priced

premium coffee as well as a wide selection of specialty drinks. The Enactus Coffee Marketing

Project Team has reached the following conclusions based on an analysis of the survey results:

There is a sufficient number of students who regularly purchase coffee off campus to make a

coffee shop financially feasible. The 606 students who responded make over 6,200 visits to off

campus coffee shops each month. 53% visit 5-14 times per month and another 21% 15-30

times. The average number of visits is 10.9.

The primary reason for choosing a coffee shop is not related to a particular brand image (7%).

The primary reasons for visiting off-campus coffee shops are good quality beverage (46%) and

preferred social atmosphere (40%). A price/loyalty program was 7%.

87% of the students said that they would be most likely (62%) or likely (25%) to patronize an

on-campus coffee shop that had a unique atmosphere and offered competitively priced

premium coffee choices, as well as a wide selection of specialty drinks. Only 5% were unlikely

or very unlikely.

68% of the students said that Crusader Bucks would motivate them to make more frequent

purchases at an on-campus coffee shop and 26% said they may be motivated to purchase a 19

meal plan in order to be able to pay with Crusader Bucks.

The on-campus coffee shop would have to provide access that meets the needs of the

students. 33% of the students visit an off-campus coffee shop on a weekday night, 27% on a

weekend night, and 23% on a weekday day (other than morning).

The size, atmosphere, and services would have to be competitive with off-campus sites to meet

the students’ desire to socialize and study at a coffee shop. Out of every 10 visits, students

said their primary purpose is to socialize (37%), grab & go (31%), and study (30%). 73% of

these visits are “sit-down” with 36% being for 2+ hours. The Mudhouse and Potter’s House are

the competitors most often visited for study and socialization on weekday and weekend nights.

Starbucks is getting nearly 50% of the weekday “day” visits, 19% of the weekday “night” visits,

and only 5% of the weekend night visits.

The on-campus location is not as big of an issue as the distinctive atmosphere of the coffee

shop. Students were given an opportunity to rank the student union, library, an academic

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building, or an identified “other” as a preferred location. 64% of the students ranked the

student union as 1 or 2, 55% ranked the library as 1 or 2, and 49% ranked an academic

building as 1 or 2.

This student survey explores only the traditional undergraduate student market. An on-campus

coffee shop with a unique and distinctive atmosphere, excellent service, and competitive pricing

may also attract faculty, staff, and adult students in the degree completion and graduate programs.

A coffee shop that is visible and easily accessible may also attract students from other campuses

who are seeking Christian fellowship.

The Enactus Coffee Marketing Project Team strongly recommends that Aladdin Food Service and

The Evangel University administration explore the development cost and financial feasibility of

establishing the on-campus coffee shop as described in this study.

SCOPE OF WORK

The Enactus Coffee Marketing Project Team has been researching the market feasibility of

developing an on-campus coffee shop during 2014-2015 school year. This activity evolved out of

independent initiatives in the 2013 school year by Enactus and the Student Government

Association to explore starting an on-campus coffee shop. Each organization was approaching the

administration and Aladdin Food Service independently. After some meetings to collaborate, the

groups concluded that Enactus students may be more suited to conduct the feasibility study.

Subsequent meetings of the administration, Aladdin, and Enactus in the fall 2014 concluded that:

1. The operation of an on-campus coffee shop would be most likely be sustainable if operated by

Aladdin under its food service contract with Evangel University.

2. If feasible, Aladdin offered that they would consider providing the initial financial investment

needed to develop an on-campus coffee shop with those funds being recovered over time

through an extended food service contract under mutually agreeable terms.

3. The Enactus team would serve as Aladdin’s “voice of the customer” by becoming an ongoing

marketing advisor to Aladdin with some potential financial benefits to support Enactus projects

if the coffee shop met and exceeded financial projections.

The first step was for Enactus to form the Coffee Marketing Project Team to prepare a market

feasibility study. The team was led by Sheila Grammo and Emily VanderMolen. Kirren Siewert

and Brittany Johnson were also active members of this team. Brittany graduated in December. Mr.

Bernie Dana served as the Enactus project advisor. In October, the team established a process

to interview focus groups with 6-8 students each. Students selected for the focus groups purchase

coffee off campus at least twice a week and represent different gender and class status. The

project team developed an interview process and questions for the focus groups. They "vetted" the

questions with persons who have operational expertise (Aladdin’s Mr. Todd Lanning and Mr.

Charlie Liming) and focus group expertise (Dr. Denny Wubbena and Dr. Jeff Fulks).

In November, the team conducted two focus groups and documented the results. One group

ended up being all male, one was all female, and the answers to some questions were not

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consistent between the groups. The team considered having an additional focus group, but then

learned that a group of 10 students in a Principles of Marketing course were voluntarily conducting

a “mystery shopping” project of area coffee shops and would provide their findings to the team.

In December, the team analyzed the focus group results and concluded that the information is

sufficient to design an appropriate campus-wide, online survey. The team also advised the

administration and Aladdin that its original intent to conduct the survey in the fall semester would

be delayed until the beginning of the spring semester since it would not be effective to develop and

administer the survey during final exams. Bernie Dana provided a briefing email on the focus

group results and the status of the project to Linda Allen, Evangel’s Vice President of Business and

Finance, and Todd Lanning and Charles Liming, executives with Aladdin Food Service. In mid-

December, the team met to review and revise the draft survey developed by Brittany Johnson. The

revised survey was forwarded to Lanning, Liming, Wubbena, and Fulks for feedback. This group

provided feedback that led to further revisions.

After school resumed in January, the team met to review the feedback from Dr. Fulks and Todd

Lanning. Final changes were made to the survey. The team decided to request Enactus funds to

offer fifteen, $10 Andy’s gift cards as the incentive and developed an action plan to move the

project forward. The survey was launched on January 26 via mass email and promoted by chapel

announcement, access to laptops in the cafeteria, and Mr. Lanning’s assistance to encourage

students to complete the survey. The survey was closed on February 3 after another mass email

reminder encouraging students to participate.

The Coffee Marketing Project Team met February 11, 16, and 23 to analyze the results and

complete the market feasibility study. The analysis included examining the preliminary report of a

coffee shop “mystery shopping” activity and student survey conducted as a voluntary class

exercise by a group of students in Dr. Dennis Wubbena’s Principles of Marketing course. This

report included the results of a survey with 93 students responding. Their survey produced similar

conclusions about the purchase of coffee at off-campus coffee shops.

After removing spam, 612 students completed surveys. The Enactus Coffee Marketing team

decided to remove the surveys that had less than four questions completed because they were not

providing sufficient information for the feasibility study. As a result, this analysis incudes 606 valid

surveys. Not everyone answered every question. The range was 586 to 606.

Following is the team’s analysis of each of the survey questions.

COFFEE SHOP MARKETING SURVEY REPORT

1. Do you make a purchase at a coffee shop more than once a month?

# Answer

Response % 1 Yes

493 84% 2 No

93 16%

Total 586 100%

A significant number of students who responded (84%) say they do make a coffee purchase more

than once a month. This is a positive response even when they have to drive off of campus and go

4

get the coffee. Analysis of the “No” responses indicates that these students responded to almost all

of the questions in the survey including questions about frequency, dollars spent, and preferences.

The data suggests that this group of 93 students are a part of the target market and may represent

a segment of the market that is also embedded within the “Yes” responses. The data suggests

that these are students who purchase coffee less frequently and that their purchases are usually

related to an event or socialization. For this reason, the data related to this group of “No”

responses is included in the analysis. Where relevant, notations are made regarding the

differences in the “No” and the “Yes” responses to this first question.

2. On average, how many total dollars do you spend per month at coffee shops?

Students responded wide a wide range of amounts that they spend per month. This data may be

flawed and understated. The overall question asked about monthly spending, but the response

was associated with a scale that said “dollars per week.” An analysis of the frequency of visits

(Question #6) shows an average of 10.9 visits per month. Given the average cost of coffee, this

would produce a much higher

average per month and a much

lower amount per week.

The data collected from the 16%

that answered “No” to the first question states that the average amount spent on coffee in a given

month will be $3.34. This might be an accurate amount per month if they purchase coffee less

frequently than once a month.

3. What is the primary reason that you to go to a coffee shop?

As shown in the chart below and this

graph, the analysis of all survey

responses and those who answered

“Yes” to the first question shows that

the beverage itself is a significant

reason that they go to a coffee shop.

Studying and socializing are

within one percent of each other and

remain a significant reason for going to

a coffee shop. In fact, these two

combined exceeds “the beverage

itself.” It seems apparent that students

will want a coffee shop with a versatile

atmosphere and service. The

responses to question #4 provide further support for this conclusion.

Answer ALL % YES % NO % To study 154 26% 134 27% 14 16% To socialize 170 28% 126 26% 39 45% The beverage itself 276 46% 232 47% 34 39%

Total 600 100% 492 100%

# Average Dollars

Standard Deviation

Responses

ALL survey responses 17.08 13.9 569 “YES” responses to #1 19.98 13.6 461 “NO” responses to #1 3.34 4.0 90

5

4. When do you most frequently visit coffee shops?

The survey responses and graph below indicate some variance in when students visit particular

coffee shops. Students most frequently go out to coffee shops on weekday evenings, The next

highest is weekend nights followed by weekday daytime.

The segment that responded “No” to question #1 lean more to “socialization” as a primary reason

for going. However, this group also indicated that they were less likely to stay for 2+ hours than

the group that answered “yes” to question #1.

The most frequently visited establishment is Starbucks. Surprisingly, Starbucks is only 3%

above Mudhouse which is nearly equal to Potter’s House.

Not included in the data below is the specific data for students who answered “No” to Question #1

about frequency per month. This group has a much greater focus on weekend nights (35%) which

confirms that there is a segment of students who purchase coffee primarily as part of social activity.

Coffee Shop Weekday Day

Weekday

Night

Weekend Day

Weekend

Night

Weekday

Morn.

Total Visits

% at this

Shop Mean

Starbucks 259 145 69 33 37 543 24% 1.98

Mudhouse 39 167 43 203 4 456 20% 2.93

Potter's House 32 177 24 199 1 433 19% 2.91

Kingdom Coffee 69 75 67 51 12 274 12% 2.50

Coffee Ethic 59 86 73 62 6 286 13% 2.55

Hebrew's Coffee 65 100 54 70 4 293 13% 2.48

Total Visits at this time 523 751 330 619 64 2,287 100%

Percent of All Visits 23% 33% 14% 27% 3% 100%

5. How long do you stay?

The survey combined questions 4 and 5 so students were simultaneously identifying when they

visited the various coffee shops and how long they spent there.

The most frequently visited shops were Starbucks with 26%, Mudhouse with 22% and Potters

House with 21%. 36% of the students spend 2+ hours in the coffee shops they visit and most of

6

this is at Mudhouse, Potter’s House, and similar shops. 73% of the visits are “sit down” events

(other than “grab & go”) of which half are more than 2 hours. It appears that Mudhouse and Potters

House is where students preferred to spend more time. Starbucks was chosen more in the quality

of beverage category.

The graph and responses suggest that an on-campus coffee shop will be most successful if it can

combine the beverage quality, service, and environmental benefits of coffee shops like Starbucks,

Mudhouse, and Potter’s House. The on-campus location should help capture the significant “grab

& go” business now going to Starbucks if the quality of the coffee and pricing is comparable.

6. Estimated Number of visits to each shop per month

This survey data tells us that over 90% of the students responding go to Starbucks at least once a

month and nearly 44% of all of the monthly visits are to Starbucks. The other visits are spread out

among the coffee shops where students may tend to spend more time. Over 60% of the students

also visit the Mudhouse and Potter’s House monthly.

Question Grab and go 1 Hour or

less 2+ Hours

Total Responses

% at this Shop

Mean

Starbucks 302 126 109 537 24% 1.64

Mudhouse 48 207 177 432 20% 2.30

Potter's House 43 162 211 416 19% 2.40

Kingdom Coffee 70 105 90 265 12% 2.08

Coffee Ethic 70 110 94 274 12% 2.09

Hebrew's Coffee 65 103 115 283 13% 2.18

Total Visits 599 814 796 2,209 100%

Percent of All Visits 27% 37% 36% 100%

7

The primary coffee shops and the percent of total visits identified in the “other” category are

European Café (1.2%), Classic Rock (0.5%), Big Momma’s (0.5%), and Brick & Mortar (0.6%).

The total number of visits (6,200) is analyzed in the table below. 25% of the students are

purchasing coffee off campus 15 or more times per month. 53% are purchasing between 5-14

times a month. The average number of visits is nearly 10.9.

7. Main reasons for choosing that shop

Purchasing a good quality beverage is a primary driver for most of the visits to coffee shops (46%).

It is by far the primary reason that students go to Starbucks along with the price/loyalty program

and brand image. Students identify preferred social atmosphere as the primary reason for visits

40% of the time. Mudhouse and Potter’s House are the primary locations for the preferred social

atmosphere. The other coffee shops seem to be drawing business because of a more equal mix of

quality coffee and social atmosphere. Brand image and price/loyalty program were less than 15%

combined and these were mostly focused on Starbucks. This data does not differ significantly

when reviewing the results for students who are purchasing coffee less frequently (answered “No”

on question #1).

2,736

1,076

911

372

391

408

335

43.9%

17.3%

14.6%

6.0%

6.3%

6.6%

5.4%

- 500 1,000 1,500 2,000 2,500 3,000

Star-bucks

Mud-house

Potter's House

Kingdom Coffee

Coffee Ethic

Hebrew Coffee

Other

Total

Star-bucks

Mud-house

Potter's House

Kingdom Coffee

Coffee Ethic

Hebrew Coffee Other

Total number of visits 6,228 2,736 1,076 911 372 391 408 335

% of visits to each cafe 100% 43.9% 17.3% 14.6% 6.0% 6.3% 6.6% 5.4%

Total responses

570 516 402 360 159 176 174 87

% of students who visit each 100% 90.5% 70.5% 63.2% 27.9% 30.9% 30.5% 15.3%

Frequency Analysis:

Average visits per month 10.9 5.3 2.7 2.5 2.3 2.2 2.3 3.9

Max visits in range

89 40 30 17 20 10 17 20

>30 times a month 4% 23 1 - - - - - -

15-30 times a month 21% 118 43 7 5 2 - 2 2

5-14 times a month 53% 301 170 57 40 16 23 22 20

1-4 times a month 22% 128 302 338 315 141 153 150 65

100% 570 516 402 360 159 176 174 87

8

Question Good

Quality Beverage

Preferred Social

Atmosphere

Price/Loyalty Program

Brand Image

Total Responses

Mean Std. Dev.

Starbucks 260 46 85 75 466 2.39 1.64 Mudhouse 134 203 8 5 350 2.29 1.05 Potter's House 81 255 10 2 348 2.57 0.90 Kingdom Coffee 87 50 2 7 146 1.92 1.19 Coffee Ethic 89 48 7 5 149 1.92 1.19 Hebrew's Coffee 90 54 5 11 160 2.04 1.29 Other 50 26 4 7 87 2.06 1.47 Total per reason 794 683 121 112 1,710 % per reason 46% 40% 7% 7% 100%

8. Estimate the following: Out of every 10 visits to an off campus coffee shop, how many

times do you go for each of the following purposes? Total must equal 10.

Answer Average

Value Percent

Study 2.87 30% Socialize 3.52 37% Grab and Go 2.93 31% Other 0.19 2% Total 100%

Students responded that 67% of the time their purpose for visiting a coffee shop is to socialize or

study. “Grab & go” is identified as the purpose 31% of the time. It is interesting to note that the

focus groups interviews that were used to develop the survey projected that “grab & go” was not a

key category. In identifying other purposes, ten students listed the quality of the drink, four listed

devotionals or church meeting, and three listed items such as coffee date, read a book, and check

it out.

0% 10% 20% 30% 40%

Other

Grab and Go

Socialize

Study

9

9. The location of a distinctly designed, on-campus coffee shop relates to preference and

feasibility (cost to develop). Rank order your preference for location below with 1 being

most preferred and 4 being least preferred. Rank at least 3.

The location data is important to the market analysis. The focus groups overwhelmingly agreed

that an on-campus coffee shop would need to be distinctly designed so that it provided the unique

atmosphere of an off campus coffee shop that students frequent. The focus groups also

expressed a strong preference that the coffee shop should not be located in the Student Union.

However, we did not engage the focus groups in any discussion about the need for the cost of the

coffee shop development to be balanced with personal preference. In developing the survey, we

decided to ask students to consider the cost to develop when responding to their preference for a

location. The survey results indicate that the student union would be an acceptable location (rank

1 or 2) for 64% of the students and the library for 55%.

For other locations, 23 students recommended Riggs Hall, 19 want a separate building, 15 listed

“dorms” or a specific dorm, 13 identified the joust, 10 listed the fine arts building, four listed

Zimmerman hall/computer lab, four listed the Chapel lobby, two suggested the gym, one each

recommended the library or a stand-alone cart. We are not able to easily determine if the 13 that

identified the joust in the other category are viewing this as a separate area from the student union.

Answer Rank

1 %

Rank 2

% % 1+2 Rank

3 %

Rank 4

% Total

Student Union 272 46% 107 18% 64% 101 17% 113 24% 593 Library 129 22% 197 33% 55% 150 25% 116 24% 592 An Acad. Building 87 15% 202 34% 49% 223 38% 81 17% 593 Other 105 18% 87 15% 32% 119 20% 172 36% 483

Total 593 100% 593 100% 593 100% 482 100% -

Statistic Student Union Library An Academic

Building Other

Mean 2.09 2.43 2.50 2.74 Variance 1.38 1.07 0.82 1.34 Standard Deviation 1.18 1.04 0.90 1.16

10

10. Imagine that an on-campus coffee shop were developed that had a unique

atmosphere and offered competitively priced premium coffee choices, as well as a wide

selection of specialty drinks. How likely would you be to patronize this new on campus

coffee shop?

Knowing whether students would

patronize an on-campus coffee shop is

critical to the market analysis. The

question clearly states that the on-campus

shop will be competitive in beverage

quality, atmosphere, and price. As

indicated in the pie chart and the table of

data, students responded very positively

to this proposal (87% very likely or likely).

Only 5% were unlikely or very unlikely.

For students who make purchases less

frequently (answered “No” to question #1), the positive responses dropped to 63% and the

negative responses increased to 14%. This suggests that those who make coffee purchases

primarily as a special event may be more inclined to go off-campus.

Answer

% “ALL”

Response “ALL”

% “NO” Response

“NO” Very Likely

62% 377 35% 32 Likely

25% 153 28% 28 Maybe

8% 47 17% 17 Unlikely

2% 12 6% 6 Very Unlikely

3% 17 8% 8

Total 100% 606 100% 91

“Crusader Bucks” Questions:

Survey items 11 and 12 below were designed to address issues that relate to how the meal plan

choices of students and willingness to make purchases from an on-campus coffee shop may be

affected by the use of “Crusader Bucks.” The responses to survey item #11 included an analysis

of those who purchase coffee less frequently (Answered “No” to question #1). The responses of

the “No” group to survey item #12 was not significantly different from the “Yes” group.

11. The ability to pay with Crusader Bucks...

Answer % ALL % YES % NO May motivate me to purchase 19 meal plan 26% 153 27% 129 18% 16 Would not affect my current meal plan choice 35% 207 34% 165 38% 34 N/A – I already have a 19 meal plan 39% 232 39% 185 44% 40

Total 100% 592 100% 479 100% 90

Standard Deviation 0.80 0.80 0.75

11

12. The ability to pay with Crusader Bucks would...

Answer

% Response Motivate me to make more frequent purchases from the on campus coffee shop

68% 408

Not affect how often I make a purchase from the on campus coffee shop

32% 195

Total 100% 603

Demographics Questions:

Students were asked to provide demographic data. The mix of gender, classification, and living

status (Survey items 13-15) indicates that the students who responded to the survey include an

adequate representation of the campus as a whole.

13. Gender:

Answer

% Response Male

29% 174 Female

71% 426

Total 100% 600

14. Classification:

Answer

% Response Freshman

20% 119 Sophomore

26% 157 Junior

31% 184 Senior

23% 140

Total 100% 600

15. Living Status:

Answer

% Response Residence Hall

86% 517 Commuter

14% 83

Total 100% 600