Costa sets out a new marketing strategy

Costa Coffee, Marketing Week’s Engage Awards Brand of the Year, recently restructured its global business to create three separate divisions each focusing on individual growth and marketing strategies. Jim Slater, former marketing director for the group, and now managing director of its Enterprises division, talks to Marketing Week about the growth and marketing plans the business has.

Marketing Week (MW): Why has Costa restructured in the way it has?

Jim Slater (JS): Costa has built incredible momentum, with total compound annual sales growth running at over 30% for each of the last three years. The time is right to capitalise on this momentum and transform Costa into a genuine global company. There are now four business units, each fully resourced with its own, focused, business objectives.

MW: What will be the focus on the Costa Enterprises business you’ll be heading and what are the major growth opportunities?

JS: Costa Enterprises currently represents over half the cups of Costa coffee sold in the UK – including Costa’s corporate franchise stores, our “Proud To Serve Costa” proposition and Costa Express [the recently launched convenience vending brand]. The future will see Costa Enterprises pursuing our strategic goal of converting Costa from the UK’s best loved coffee shop into the world’s best-loved coffee brand. To do this we must accelerate growth in new channels.

MW: Aside from Costa Express, what are the other brand partnerships and high growth areas you’ll be heading up?

JS: We have a number of fantastic existing brand partners, across a variety of sectors. We will continue to build these partnerships, as well as developing new ones both in the UK and overseas.

MW: How will your own marketing background influence the direction of the division?

JS: I have always been focused on aggressive commercial goals – seeing marketing as a means to an end rather than an end in itself. I want to ensure that there is a healthy focus on customer needs, along with great team engagement and an increase in shareholder value.

MW: How important do you think it is for an MD leading a business to have marketing understanding?

JS: It is important for an MD to have a strong understanding of his or her customers, as business strategy needs to be grounded in customer insight. However, without commercial acumen and a decent understanding of the financials, any MD is in for a rough – and potentially short – ride.

MW: What are the growth projections for the overall Costa business and Costa Enterprise?

JS: About 25% of Costa’s profit (before interest and taxes) growth is forecast to be delivered by Costa Enterprises.

MW: In the latest figures sales had slowed, how can marketing counter this and what kind of clever marketing does Costa need to do to reverse this?

JS: Our latest trading statement showed that Costa’s total sales are up 23.3% versus last year, which is not too shabby. We have an exciting bank of initiatives which we will roll out in appropriate markets over the next year.

MW: How will the whole Costa business maintain the Costa brand over the four divisions?

JS: The overall Costa MD – John Derkach – is also a former marketer, having enjoyed great success at P&G, Pepsi and Whitbread before moving into general management. The two of us will have ultimate responsibility for brand purity across the four divisions. We are incredibly proud of the brand, and are not going to allow the high standards that we have developed to slip.

MW: How will Costa look to extend the coffee club into the Express business?

JS: This is on the long “to do” list! The Costa Coffee Club has worked very well, having a particularly positive impact on consumption frequency. It would be great to incorporate it into our Costa Express machines.

MW: Last year you talked about taking a more emotional approach to marketing after taking an aggressive strategy – how will this play out in marketing this year?

JS: The “agitation and education” advertising strategy that we developed with Karmarama has been an incredible success. We have now reached the point where all independent surveys point to us being the nation’s favourite coffee shop, with the best tasting coffee.

We had to be aggressive in our communication to arrive at the truth so quickly – and now that we have arrived, we need to become a little more emotional in our communication style. There are a lot of very positive, emotional, components of the Costa brand that are compelling to our customers and which we can amplify as the brand develops.

MW: Will Costa do more TV?

JS: We are currently in the luxurious position of having over 90% brand awareness, a clear market leading quality perception and our highest net promoter score yet – without having been on TV for over a year! That said, our last TV burst coincided with a scorching period of sales growth, so it is one of a number of strong media options open to us.

MW: More generally, as a marketer, what are the kinds of things you think are important at the moment and what is on your mind?

JS: Top quality product, fantastic customer service, consistent profit growth and wondering if Martin O’Neill can get Sunderland into Europe this season are the main things on my mind at the moment.