Kuzminblog

Changing the world for better… at least the world of gas stations)

Costa Coffee: supply chain as a growth factor

When traditional logistic models and the organization of the supply chain have jeopardized the dynamic growth of the company, the owners of Costa Coffee went all-in. The company completely changed the leadership, adopted a new strategy for the organization of supply, hired a new logistics operator, and also introduced a new enterprise software to provide a new level of benefit from the telemetry component of its system. We believe that the final result speaks for itself.

Author’s note
When I was preparing this article, i was surprised by how similar problems had to be solved in RusHOLTS around the same time. An illustration of the similarity could be invention of the rad by Marconi and Popov. The problem is in the air and solution comes to those who are looking for it. Only RusHOLTS had to be tis own “new” logistics operator because of the lack of worthy proposals. No “regional partners”, no services outsourcing – only our own trained and well-managed structures that guarantee the high quality of work.

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Developed by RusHOLTS experts ADR system, smart monitoring of coffee machines and analytics on customer request, a customer service of our own and the creation of the Monitoring Centre – are the details that make up the effectiveness of the coffee business.

Given Russian distances, poor road quality and penetration of the Internet in the regions, our experience of conquering Russian realities by telemetry is no less rich and interesting. And as you can see, quite in the style of the world’s leading coffee industry players!

Moving at a high-speed and operating 24 hours a day, the world has become dependent on coffee to maintain this pace of work. Do we run into the coffee shop or brew a cup of invigorating drink on our own in the office, staying overtime in the university library or in the hospital cafe, on the road or on vacation, we always look forward to the same level of quality of the drink, the familiar taste and adequate cost.

Costa Express brand was created by one of the largest operators in the HoReCa and owner of Costa Coffee – Whitbread Group in 2011, in order to promote self-service coffee, both as the company’s growth platform for the future work in general and as a the whole coffee industry in particular. We’ve already written about this in more detail.

The good performance of the first year of operation confirmed the reality of the ambitious plans of Costa Express to increase the number of machines at least to 3000 to the end of 2016.

Life without a supply chain manager

In the first months after the launch in 2011, the company’s business was in many respects like a blown horse. The existing fleet of coffee machines was transferred from under the Coffee Nation brand under the brand of Costa Express and some new partners have joined their servicing. The company worked to the point of exhaustion and under tremendous pressure to quickly get impressive dynamics of growth and justify the investment * of Whitbread. (* Approx. volume of project investment amounted to £ 60 million).

By April 2012, the company realized that in order to achieve the planned growth it will have to make some changes in the organization of the supply chain. At the time of making this decision, the company did not even have the position of supply chain manager. Traditional for the industry logistics and purchasing operations were distributed among employees of the financial unit and the engineering department.

At the first stage the staff of the company’s new business unit identified three fundamental functions of the supply chain, on which the business Costa Coffee should be based.

1. Management of ingredients replenishment for coffee making at the sales point
2. Providing sales points with spare parts for coffee machines.
3. Effective management of the delivery process of new Costa Express machines and their preparation for installation on the sales points.

The most critical for the entire business proved to be the first point, which will be discussed further.

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Delicious coffee with the minimum human involvement. Costa Express – white starts and wins

Vending as a sales technique is good – but only when it comes to newspapers, chocolates and chips, as well as personal care products. He who presses the button is the one who got the goods. Just pushed it – and continued their own way. Coffee beverages vending business now comes with minimum human involvement.

Coffee vending tend to vary in terms of product quality from “Lord, what is this ???” to “Well, okay.” Why is that? Because making of coffee – is a complex process with a thousand of nuances. No exceptions. The only thing that differs very much from a good “vending coffee» to a vending of a bad coffee” – is a chain Costa Coffee called Costa Express Company.

Costa Express Coffee – is an unexpected example of the coffee business in terms of a combination of indicators varying from “country of origin”. How this company was able to appear in the UK, a country of a totalitarian tea cult – it is a mystery. Nevertheless, it was there in 1971 when this brand appeared, which not only takes a confident second place in the World after Starbucks but represents today the very notion of “premium coffee vending” that tend to vary in terms of product quality, from “Lord, what is ???” to “Well, okay.” Why is that? Because making the coffee is a complex process with a thousand nuances. Virtually no exceptions. The only thing that is very distracting from the association with «vending coffee –is a vending of a bad coffee” – is a chain called  in Costa Coffee.

Different business segments have a “turnkey project” of their own

The company covers a variety of segments and locations: vending machines Costa Coffee are available at railway stations and bookstores, in Marriott hotels, Odeon cinemas, retail chains such as Waitrose, Debenhams and Tesco, and even in Pizza Hut pizzerias and Beefeater pubs. Of course, service stations Moto and RoadChef also were not left behind.

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Project Marlow – сoffee GOELRO* plan

In 2011, Costa Coffee, the second largest chain of coffee shops, decided to expand its portfolio and hit the vending area.

The movement in the new direction began with the acquisition of the Coffee Nation chain – thus Costa Express brand was born. Costa decided not to lose time and quickly started to transform the quality of vending coffee to new heights.
The main tool for the breakthrough was going to be a new approach to the implementation of the vending machine itself to make it an example of all that people usually invest in the concept of “innovation”.

Brewing high-quality coffee “from-grain-to-the-cup” via the vending machine – it’s a constant challenge. At some stage it was even a challenge to the very common sense. Getting a consistently high level of quality in the long run was not allowed by the specific historical moment’s technology.

Meanwhile, people got used to the quality level of coffee as “brewed by barista” and such a request could not be canceled. Costa had to ensure quick brewing of high-quality coffee, considering the relevant requirements as to its temperature and as to the level of freshness of milk that is added in some particularly popular drinks. And of course not to forget about such “trifles” as hygienic and sanitary requirements, economic feasibility and reliability of the machine in terms of different operating conditions, that goes without saying.

It’s just how they joked once in the late 90s KVN stand-up playing with Russian word for “the lungs” which is synonymous to the adjective “easy” – “Now that’s the task coming from the bronchial tubes! – Yes, of course, it’s not one of the lungs!”.
Well, what else can it be but not easy? The owners of the company aimed to the conquest of international markets. Making it with a trivial device that’s present in any business center or shopping mall from Lisbon to Vladivostok is impossible – how you will be different from what is already present in the local markets?
Thus “Project Marlow” was born aiming at a complete revision of the whole coffee vending in the direction of “intelligent supervending”, how the company puts it.

The

The “Marlow Project” team

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People are buying coffee not because of its price

The price for a cup of coffee can be set at any level? That’s a trick question! Because right away one is tempted to distract the attention to other topics. What kind of coffee will you be able to sell cheaply? Remember, we are talking about the delicious coffee!
Coffee market experts usually get confused when answering this question, because they know that the price of a cup of coffee ingredients is 20-25 rubles at the most. Espresso or Americano do not require the use of milk so their cost is even lower. Selling a mass product with retail margin of 1000% – is a good business, which is being guarded by its “locals” in a very tough manner. Coffee makers position on this one – a “good cup of coffee can’t cost more than 50 rubles“.
I understand that it will be followed by an ironic question: “But you do not offer coffee for 50 rubles at gas stations!”. Gas stations’ cafes and shops offer impulse demand goods, so their price is not exactly built on the principle of the discounter. But just think about why the stations are so often to tempt you with «free coffee» offerings?

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Nobody gets surprised by a sign on a cafe’s facade: «Business lunch + coffee for 50 rubles», that’s for sure.
But in addition to the gas stations and Moscow’s city center there are still many places where the coffee business can develop and there are good examples of discounter’s format. For example, in 2015, St. Petersburg COFiCO (Coffee Fix Company) was launched that sells everything at the same price – 50 rubles. By year’s end, the chain owners were going to have 50 outlets in Moscow and St. Petersburg. Now according to their page on VKontakte, from June 1, 2016 there are three coffee shops where everything goes “for 59 rubles“.
In 2016 the time has come for a large-scale experiment. Finally an «enfan-terrible» company emerged which is going to work in a “hard discounter” mode, selling coffee for 50 rubles. Israeli Cofix reports that it found a partner to open 1000 outlets in Russia. The first phase stipulates opening of three Cofix own cafe, the second – 300 franchising outlets in Moscow, the third – additional 700 throughout the country.

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“The human factor” and “The little man” at the gas station

Colleagues have repeatedly reproached me for the sentence: “My hobby – to come up with tools that reduce harm of the human factor”. Like, you do not like people, Alexander …
Alas, it is impossible to love all the people in a crowd, but when I argue about the “dangers of human factor”, it does not mean that I blame every gas station operator, or an entire category of staff for the negligence. In the great multitude of people there are always responsible and proactive employees, and there are those who will not do as much as lift a finger. There are those who are trying to comply with all instructions, and there are devil-may-cares, and there are also some “jacks of all trades” who could get inside of everything without having any need or reason to do so.

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The gas station operator is a kind of “pillar” of the station’s business on whom lots of things depend, and on the other hand you can’t exactly say that this is a prestigious profession. This is the broadest category of staff at the gas stations, their work is a long series of simple repetitive operations, so these positions are takenby the people with minimal training. They have a modest salary, which is the cause of a large staff turnover, graduates of prestigious universities do not apply for this kind of job. In addition, ordinary employees of gas station have to work with the flow of customers – an additional stress factor. So being a filling station operator implies hard work, and any additional responsibilities you can think of – whether it’s making coffee or cleaning toilets –don’t add any reasons to be optimistic.

In what cases control can actually motivate the employees?

Drawing the conclusions – the “human factor” has a lot of prerequisites to ensure that ordinary staff will execute the assigned job in a poor manner. Methodical and mass checks of the operation of each station are not possible because of the distance. Bias control by “mystery shoppers” employed from thе street reduces staff’scustomer-oriented approachby several times. The seller cannot smile sincerely only because of the fear of penalty. So we need to have the control, but a reasonable and, most importantly, an objective one. Here modern IT solutions for remote monitoring come to the aid providing a truly objective monitoring of the implementation of the prescribed regulations.

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Fuel for drivers. Why G-Drive does everything right

Savvy marketing does not always help, but it certainly never hurts. The universal rule that brings to life an infinite number of brands, promotion campaigns and rebrandings of virtually anything around us. It works in the fuel segment, too – the most striking example of it is the G-Drive: a brand under which merged a premium fuel for cars and an energy drink. Any fan of “Zenith”, as well as any active Internet user was faced with a G-Drive advertising campaign: the famous Hulk during training sessions performs exorbitant power tricks – tears the ball apart, or does the same to the net, then makes his colleagues looks like extras in game situations.

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It’s all done in a spectacular way, with humor and enthusiasm. I think many were under the impression of these excellent viral clips and discovered G-Drive energy drink, having tried it at least “just for fun”. And it is very representative: at the basis of an integrated approach to the promotion lies absolutely correct idea, or rather a few ideas.

First one – the driver and the car as a whole – if you feed your “iron horse” with fuel, which increases its performance, leading it to the next level, you yourself need to be fit as its “rider” which has to tame the roaring engine and reckless wheels during the long journey. Therefore, everything is simple and logical: filled your iron horse with some super fuel? Fill yourself with the same super-fuel, otherwise it’s a dissonance.

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Life after oil. The transformation of the gas station

«Life After Oil» is one of the most quoted events held during the St. Petersburg International Economic Forum. “For our country the oil is everything, it is 25% of GDP. So to imagine the structure of our economy without the oil which has not only a direct impact, but also an indirect contribution to GDP by attracting investment through consumption, is probably impossible”,- quote from a speech by Herman Gref.
Accepting this new reality is difficult not only to Russia. In Canada they also believe that country’s status as an energy superpower is under threat because of the more rapid speed of decline of the era of fossil fuels on the market than it was thought previously.
We’ve told you already about the history of the financial relationship of David Rockefeller and company Exxon Mobile.
David Rockefeller-Sr., the grandson of the founder of the dynasty, said he had lost faith in Exxon Mobil and donated its shares, which he’d got directly from his great-grandfather, to a non-profit Rockefeller Family Fund, which deals with environmental issues.
For non-fuel gas station businesses this trend has some good news in it. The modern driver’s need for a cup of coffee and some rest occurs more frequently than his car runs out of gasoline. This can easily be confirmed by the figures. Shell in 2015 had an operating loss from the core operations in the tune of $5.7 billion, but profits from “auxiliary” businesses, including retail, have grown over the past year three-fold to some $10.2 billion. Source >>
Therefore i consider an interview of Istvan Kapitani, executive vice president and Head of Retail businesses in Royal Dutch Shell, to be an essential one.
Istvan Kapitani joined the company in 1987 as a manager of filling station in Hungary, namely at his homeland. Today he leads the direction, which includes more sales outlets than Starbucks or McDonald’s. 43 000 gas stations, 500 000 employees and 25 million customers in 70 countries every day.

The future of fuel retail
Many of the current problems of fuel retailers today can be reduced to one thorny challenge – how exactly gas stations should be transformed in the light of the needs of the world with constantly falling oil prices, growing environmental requirements and the upcoming emergence of unmanned vehicles.

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Auto purchases, CRM-system for competitive tenders and directories in the clouds

To simplify the work of purchasing department? To avoid hundreds of competitive tenders for each item? To gather together the information on the balance and delivery schedules? Easy.
“ADR” system developed by RusHOLTS has been solving these problems since 2011, making the work of gas station staff and managing companies much easier.
Auto purchases for retail
Solutions that automate procurement processes are actively developing in certain retail segments. A striking example – restaurants and shops at gas stations chains.
Product range in gas stations’s cafes and shops includes about 3 000 commodity items. At the same time, according to the established standards, the station may make an order starting from 500 rubles which, taking in the account the Russian distances, is simply ruinous for the suppliers that have no consolidation tools for trade flows, – Says Alexander Kuzmin, CEO of RusHOLTS – a company which is engaged in supplying on-fuel products for gas stations.
The situation is complicated by the fact that the large chains of filling stations are being built via buying incorporating the smaller ones, each of which uses their own accounting systems: Excel spreadsheets, “1C” and others. This makes it impossible to use standard solutions, so RusHOLTS developed and successfully introduced a number of services: “ADR”, coffee machines remote monitoring and other technological equipment.
As a result an online system for automated collection of information on all products at gas stations was created, on which are based the reports on the need for a particular product at a particular station on a daily basis. Gas station employees are using these documents to place orders with suppliers or service organizations that serve gas stations.
The system eliminated the need for holding hundreds of competitive tenders for each of the goods, increased the transparency of the process and the level of control. To the customer it is simply enough to select one or more operators, which will continue to provide comprehensive management services for the supply of goods and services within the contractual terms.

Full article >> http://www.b2b-center.ru/zakupki/analytics/resheniya-v-sfere-zakupok/

McCafe vs Starbucks business models – a difference that does not exist!

RBC TV tried to find out whose coffee business is better – McCafe’s & Starbucks’? Classic children’s question: “Who is stronger, an elephant or a whale?” And a boring grown-up answer: “Two subjects must be compared on common parameters”. It is strange that none of those present in the studio have not identified these “common parameters”, having lost sight of that in the competition between the two world HoReCa market leaders we observe frontal confrontation between players using virtually the same automated technology of coffee preparation and not the difference in the “approach to the consumer”.

It makes no sense to compare the two opposing leaders by the value of their brands, or the number of sales points – it would be better to assess the potential of their respective business models. At the modern coffee market there are only two such models: first, the so-called “Thread-Process” which involves automatic coffee machine, the other – “manual” coffee brewing, when the barista makes the drinks. The first model is used by both world leaders in question, the second – by “traditional” coffee houses, which make the majority in our country. So far they do …

“Thread-process” technology model of making the coffee beverages is focused just on reducing the human impact on the final result. No “copyright drinks”, “masterpieces in every cup” or “individual brews!”. Strict technological template and standard formulations that are the same for all points of sale. Following these technologies both the “Good Old Starbucks” and “Coffee appendage of McDonalds” equip their establishments exclusively with automatic coffee machines. Therefore, to the program with such a topic of discussion it is logical to invite the manufacturers of coffee automatic equipment, specialist in in-line models of the coffee business, integrators of IT solutions for process automation, not restaurateurs and especially the representatives of coffee roasting companies.

Drop of IT in every cup of coffee

Starbucks uses almost the same model of automatic coffee machines that simulate the “manual” brew around the world, McDonalds sets the equipment of several leading manufacturers, but in any case, both networks acquire coffee superautomatic macines exclusively from automatic coffee equipment market leaders, so they can not win the fight for the buyer against each other only at the expense of coffee machines’ technical perfection.

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Excise stamps for all food products

Rospotrebnadzor (Federal Service on Surveillance for Consumer rights protection and human well-being) has developed a “Strategy for raising the quality of food products in the Russian Federation by 2030».

It’s really a big deal they are about to start – after all it is necessary to create a single unified information system, which will track the movement of food products – from components to finished products. Plus, they’ll have to introduce compulsory state registration of the basic kinds of food additives. “Excise stamp” on the whole range of food production, cool, #whythehellnot!
Dealing with grand challenges is a profitable endeavour, because while you’re fighting for peace around the world no one will ask you about the devastation in your own WC. We haven’t yet figured out the simple issues, which one won’t have time to do within this large-scale project or vice versa, and now it is a good time to identify the specifics. For example, how do you enter the legislative amendments that will help to distinguish the coffee beverage prepared from the so-called “coffee material”?

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