Home Appliances Company : Strategy for Coffee Maker Business

Current Market

The market size of coffe maker industry is $498.80 MM as of 2003 growing 5.3% from $473.0 MM in 2002. A survey report1) tells that 47% of coffee drinkers drink at home, 25% at work, 3% in a coffeehouse, 3% in a restaurant and 10% on the go. It also shows about how they made coffee that 8% used percolators, 3% hand drips, 56% electric drips, 1% French press and 4% espresso machines. The other report2) says most of the electric drip models examined were of little variance in overall ratings of convenience and design. In terms of price, espresso machines which are different in making process from drip types and percolators were the most expensive. But as the coffee industry expands, consumers tend to more care about quality and brand. This trend implies there will be increasing needs of higher quality and strong brand.

Creation of New Market

New products should meet needs of high quality while maintaining or upgrading the current convenience level. High prices of espresso machines can be limited in expanding across the segments. Drinkers want to drink Starbucks at their home. They want a “coffee pod” like the Apple’s iPod that created a new segment in media player. High quality and reasonable prices can be realized by innovation in technology. Companies who have built technology strategy are more likely to be in the lead. A main quality point in coffee is formation of froth which is mostly attributed to pressure, water temperature and rate of mixing.

New products may not need a new distribution channel if the companies have already bargaining power. Big retailers such as Wal-Mart, Target and Costco can be main off-line distributors and Amazon.com can continue to generate on-line revenues. With technological barriers, the companies can possibly