Aveneu Park, Starling, Australia

Expanding Costco……………………………………………………………………………………….. 6 Figure 5: Taiwan’s Domestic Demand Underperforming

Expanding Lee’s Coffee into Taiwan

 

Prepared For:

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Bernard Nuesa

President and Chief Strategy Officer

Lee’s Coffee

 

Prepared By:

Dien Ha

Sales Director

Lee’s Coffee

December 11, 2017

Table of
Contents

 

Page

 

Executive
Summary…………………………………………………………………………………………………          iv

Lee’s Coffee Goes International –
Opens First Shop in Taiwan……………………………..         iv

Why Taiwan?…………………………………………………………………………………………………         iv 

Implementation Strategy………………………………………………………………………………….       iv

Introduction……………………………………………………………………………………………………………            1

Lee’s Sandwiches Background &
Lee’s Coffee Description…………………………………            1

            Taiwan: Country Analysis……………………………………………………………………………….            1

Conclusion………………………………………………………………………………………………………………            1

Purchasing Power Parity and Economic Growth………………………………………………………….            2

 Purchasing Power Parity (PPP)………………………………………………………………………            2

Nominal
Gross Domestic Product (GDP) Per Capita…………………………………………             3

Economic Transformation………………………………………………………………………………………..            3

Decreasing Agricultural Goods………………………………………………………………………..          3

Rising Demand for U.S. Agricultural Goods Imports………………………………………….            4

High Demand with Convenient and Instant Product and
Services………………………………….            4

Strategy& Recommendation…………………………………………………………………………………….            5

Manufacturer………………………………………………………………………………………………..          5

Partnership………………………………………………………………………………………………….            6

Franchise……………………………………………………………………………………………………..            6

Summary………………………………………………………………………………………………………………..            6

References……………………………………………………………………………………………………………..            7

Appendix A: Taiwan’s Domestic Demand Underperforming…………………………………………            8

Appendix B: GDP Growth Contribution in Taiwan………………………………………………………..            9

 

Illustrations

Page

Figure 1: Purchasing Power Parity per Capita, Selected
Countries (2016)………………………………
2

Figure 2: Nominal Gross Domestic Product per Capita,
Selected Countries (2016)………………….
3

Figure 3: Costco around the World……………………………………………………………………………………
6

Figure 4: Lee’s Coffee at Costco………………………………………………………………………………………..
6

Figure 5: Taiwan’s Domestic Demand Underperforming
(2017)……………………………………………
7

Figure 6: GDP Growth Contribution in Taiwan (2011)………………………………………………………….
8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive
Summary

The purpose of this report is to analyze the potential and
opportunities of introducing the Lee’s Coffee into the country of Taiwan.

Lee’s Coffee Goes
International – Opens First Shop in Taiwan

“Taiwan represents the first step in Lee’s Coffee’
expansion into international markets. 
There is tremendous opportunity for us in Taiwan.  We believe that with our partnership with
HOYII Life Co., Ltd. and our combined experience, Lee’s Coffee will become one
of Taiwan’s leading international brands,” said Chieu Le, CEO of Lee’s
Sandwiches International, Inc. (Cision PR Newswire, 2015).

Why Taiwan?

Tea had a long and classical upbringing in China that was
naturally transplanted to Taiwan. However, Taiwan’s coffee culture dates back to
the colonial days when Japan occupied Taiwan from 1895 to 1945. Over the years,
coffee has become a part of life in Taiwan, and has replaced tea as the
people’s most popular drink (Quartly, 2015). Additionally, while Taiwan’s
climate is suitable for growing coffee, the output is too small, so the island
nation imports the majority of its coffee from other countries in Asia, Africa,
and Latin America. In 2015, Taiwan grew 900 tons of coffee and imported 30,000
tons (Yahoo Finance, 2017). Lee’s Sandwiches International, Inc. should take
this opportunity and introduce Lee’s coffee to the Taiwan market.

Implementation Strategy

The implementation strategy will focus on three parts:
manufacturer, partnership and franchise. First, Lee’s Coffee should manufacture
its products in Vietnam rather than the U.S. to avoid high labor costs and
decrease transportation costs. Second, it has to form a strong partnership with
some large convenience chain stores on the island, such as 7-Eleven, FamilyMart
or Hi-Life to provide multiple locations for consumer purchase. Finally, it
needs to look for opportunities to sell its franchise in Taiwan.

Introduction

Lee’s Sandwiches
Background & Lee’s Coffee Description

Founded in 1983 in San Jose, California, Lee’s Sandwiches
International, Inc. is fast food restaurant chain with over 60 locations in
Arizona, California, Nevada, Oklahoma, Oregon, Texas, Virginia. From its
beginnings as a food truck, Lee’s Sandwiches is now best known for its fresh
and high-quality Euro-Asian sandwiches and gourmet coffee, among other products
(Lee’s Sandwiches International, Inc., 2017).

Lee’s Coffee of Lee’s Sandwiches International, Inc. offers
freshly roasted beans directly to customers where they can discover and
experience a variety of the finest beans from Asia to Central & South
America (Lee’s Sandwiches International, Inc., 2017).

Taiwan: Country
Analysis

Taiwan, formerly known as Formosa, is an island in East Asia;
located some 112 miles off the southeastern coast of mainland China across the
Taiwan Strait. The island’s economic transformation, purchasing power parity
growth and its economic performance over the past decade have influenced the
fast changing lifestyle and consumption habits of Taiwanese that focusing on
products and services with high-quality and time-efficiency standards. The
country has earned a global reputation for its electronic products, good food
and motorcycles. But less is known abroad about the island nation’s booming
coffee scene (Yahoo Finance, 2017). With Taiwanese economic conditions and
appreciation for such ideals, Lee’s coffee can successfully develop a market on
this island.

Conclusion

With a fast-growing economy, Taiwan’s consumption habits have
changed a lot and followed new trends. Busy Taiwanese people are focusing on
adapted products and services that amplify convenience and provide instant
results. Lee’s coffee of Sandwiches International, Inc. should expect a warm
welcome. Lee’s coffee will excite local customers with a unique coffee
experience and engage with master roasters to choose special blends for their
enjoyment and to form a deeper connection with Lee’s Coffee Roastery style.
Moreover, Lee’s coffee will redefine the convenience of coffee without
sacrificing quality.

Purchasing
Power Parity and Economic Growth

Bringing Lee’s coffee to Taiwan can mature Lee’s Sandwiches
International, Inc. because Taiwan is benefitting from both the increase in
economy and purchasing power parity which in turn will result in more consumer
purchases in upcoming years.

Purchasing Power Parity
(PPP)

Compared with these European countries, Taiwanese economic
performance in terms of PPP level and growth appears to be especially
outstanding. After building its potential during the 2000s, the PPP of Taiwan
not only caught up with Japan in 2007, it marched to catch up with that of the
U.K. and France in 2010, of Germany in 2015, and is expected to catch up with
that of the Netherlands in 2016. Taiwan’s PPP level is even poised to converge
on that of the U.S. after 2020.

Figure 1 shows the trend of GDP per capita measured by the PPP for Japan,
the United States, South Korea, Taiwan, Singapore, China, India and four
advanced European economies which are the United Kingdom, Germany, France, and
the Netherlands (The Diplomat, 2016).

 

 

 

Nominal Gross Domestic Product (GDP) Per Capita

Figure 2 shows nominal GDP in U.S. dollars of the same eleven
countries shown in Figure 1. The Taiwanese economy is not only doing well but
exceptionally well, as compared with other nations. Taiwan economy is expected
to grow steadily. Even compare it to the growing Chinese economy, there is no indication that
China will catch up with Taiwan anytime soon, and it may never catch up with
Taiwan. “Barring unforeseen political disturbances and economic disaster, we
may expect that the Taiwanese economy will continue to grow and surpass other
developed countries,” said Frank Hsiao, professor of Economics, University of
Colorado (The Diplomat, 2016).

  

Economic
Transformation

Decreasing Agricultural
Goods

Over the past decade, Taiwan has transformed itself from a
light-industry, manufacturing base to a global center for the production of
high technology products. Taiwan’s services industry has been growing steadily
from about 50% of GDP in 1988 to 65% of GDP in 2013.  At the same time, agriculture goods have been
decreasing and now represent only 1.6% of GDP, respectively.  Taiwan’s major exports are industrial goods
while major imports are agricultural products. The specialization in high
value-added production, coupled with a limited supply of arable land and one of
the more densely populated regions in the world has forced Taiwan to
increasingly import agricultural goods (Food Export, 2015).

Lee’s coffee can meet the demand of Taiwan’s import by
offering a diverse range handcrafted coffee beverages, such as Espresso, Pour
Over, Traditional Vietnamese Filter, and Cold Brew (Lee’s Sandwiches
International, Inc., 2017).

Rising Demand for U.S.
Agricultural Goods Imports

In 2014 U.S. exports of consumer-oriented agricultural
products grew 5% to nearly US$1.4 billion, about 40% of the agricultural
total.  Top processed export products
imported by Taiwan in 2014 included other processed foods, ingredients and
beverage bases, protein concentrate, French fries, mixes of nuts and fruits,
chocolate, bottled drinks, baked snack foods, etc. Taiwan’s densely populated
consumer market is becoming increasingly attractive to U.S. exporters.  Taiwanese consumers are welcoming North
American-style foods, such as ready-made products, with various consumer groups
adopting eating habits reflective of North American and European markets.  Consumer demands are accommodated through
Taiwan’s growing modern retail food sector and foodservice industry (Food
Export, 2015).

With the Vietnamese American coffee style, Lee’s coffee
values will be appealing to Taiwan consumers. “The new store will excite
local customers with a unique coffee experience and engage with master roasters
to choose special blends for your enjoyment, and to form a deeper connection
with our Lee’s Coffee,” said Mr. Chieu Le, CEO of Lee’s Sandwiches
International, Inc. (Cision PR Newswire, 2015).

High Demand
with Convenient and Instant Product and Services

Borrow library books, buy train tickets, pick up online
orders or even eat dinner with friends – Busy Taiwanese people are focusing on
adapted products and services that amplify convenience and provide instant
results. The island has the world’s highest density of convenience stores, with
more than 10,000 in total – which translates to one store for every 2,300
people. The density of convenience stores in Taiwan hit the highest level in
the world ahead of Japan, while sales in the local convenience store sector are
expected to continue to grow to top US$9.32 billion in 2016, according to the
Ministry of Economic Affairs (Straits Times, 2017).

Lee’s Coffee remains relatively affordable and valuable to
busy Taiwanese consumers seeking convenience and quality by delivering a cup of
coffee within seconds without sacrificing quality. PourOver coffee of Lee’s
coffee is redefining the convenience of coffee without sacrificing quality.
Pour over hand-brewed coffee is coffee lovers’ biggest secret, gaining
popularity in coffee hubs due to its innovation between artistry, quality and
convenience. Another product is the 16oz frozen bottled concentrate of Lee’s
Coffee can make about three servings of Vietnamese iced coffee drinks and can
also be used to make a variety of cold and hot drinks including lattes and
mochas. It is a “Barista in a Bottle (Lee’s Sandwiches International,
Inc., 2017).”

Strategy &
Recommendation

To enter the Taiwanese markets Lee’s Coffee will have three
main focuses on its implementation strategy: manufacturer, partnership and
franchise.

Manufacturer

Lee’s Coffee should manufacture its products in Vietnam
rather than the U.S. to avoid high labor costs and decrease transportation
costs. Many factories of Lee’s Coffee which were formally established in the
U.S have been moving to Vietnam to take advantage of lower labor costs. These factories
already have well-established systems and processes. So staff can be up and be
running very quickly at a high-efficiency level. Moreover, Vietnam’s proximity
to Taiwan makes transporting goods rather convenient.

Partnership

Due to Lee’s Coffee’s success and
popularity at Costco in the United States, Costco Taiwan has introduced Lee’s
Coffee at all of Costco Taiwan’s thirteen locations.

 

 

 Lee’s Coffee also has
to form a strong partnership with more large convenience chain stores on the
island, such as 7-Eleven, FamilyMart or Hi-Life to provide multiple locations
for consumer purchase.

Franchise

The chain operator of Lee’s Coffee currently runs more than
60 stores in several states in the U.S. market, such as California, Arizona,
Oklahoma, Oregon and Texas (Lee’s Sandwiches International, Inc., 2017).
Franchise operations in Taiwan are blooming for fast food restaurants,
convenience stores, health and drug stores, organic products stores (Tacpa,
2010). In order to succeed in the Taiwan market, Lee’s Coffee should provide
considerable support to their local partners, including best practices, systems
integration, personnel and customer service training, and consistency in
product quality.

Summary

Lee’s coffee should be brought to Taiwan by manufacturing its
products in Vietnam, partnering with local companies and selling its franchise.
High Taiwan’s economic performance, the coffee culture, lifestyle, consumption
habits of Taiwanese will allow for products of Lee’s coffee to grow in this
island. Since the Taiwanese are focusing on products and services with
high-quality and time-efficiency standards, Lee’s coffee maybe the best choice
for them. Lee’s Coffee has the ability to deliver a cup of coffee or espresso
within seconds without sacrificing quality.

References

Lee’s
Sandwiches International, Inc.. (2017, August 8). Lee’s Sandwiches opens first
Lee’s coffee Roastery in Orange County, California. Retrieved from https://leescoffee.com/shoponline/news.php?id=852

Quartly, J.
(2015,January 15). Taipei Coffee Culture: Rich, Robust, and Satisfying. Retrieved
from https://topics.amcham.com.tw/2015/01/taipei-coffee-culture-rich-robust-and-satisfying/

Yahoo Finance.
(2017, January 17). Taiwanese take coffee culture to new level. Retrieved from https://au.finance.yahoo.com/news/taiwanese-coffee-culture-level-190113145.html

WordPress.(2012,September
12). The Taiwanese Coffee Scene. Retrieved from https://coffeeintaiwan.wordpress.com/the-taiwanese-coffee-scene/

Focus
Taiwan.(2016, October 10). Taiwan consumes 2.85 billion cups of coffee in 2015.
Retrieved from http://focustaiwan.tw/news/aeco/201610100011.aspx

Taiwan
Today.(2009, February 13). Coffee becoming king of beverages. Retrieved from http://taiwantoday.tw/news.php?unit=6,23,45,6,6=8431

Straits
Times.(2017,January 30). Taiwan’s convenience stores raise their game.
Retrieved from http://www.straitstimes.com/asia/taiwans-convenience-stores-raise-their-game

Cision PR
Newswire.(2017,August 08). Lee’s Sandwiches Opens First Lee’s Coffee Roastery
in Orange County, California. Retrived by https://www.prnewswire.com/news-releases/lees-sandwiches-opens-first-lees-coffee-roastery-in-orange-county-california-300501080.html

Lee’s Sandwiches
International.(2008, November 18). PourOver Coffee. Retrieved from https://leescoffee.com/shoponline/pourover.php

Cision PR
Newswire.(2015, August 15). Lee’s Sandwiches Goes International – Opens First
Shop in Taiwan. Retrieved from https://www.prnewswire.com/news-releases/lees-sandwiches-goes-international–opens-first-shop-in-taiwan-300123768.html

11-Tacpa.(2010,
December 20). Japan’s Era in Taiwan: Effects of Assimilation. Retrieved from http://tacpa.org/column/Articles/JapanInTaiwan.html

The Diplomat.(2016, July 22). How ad is Taiwan’s Economy.
Retrieved from https://thediplomat.com/2016/07/how-bad-is-taiwans-economy/

Food Export,(2015, May 31). Taiwan Country Profile. Retrieved
from https://www.foodexport.org/get-started/country-market-profilesOLD/taiwan-country-profile

 

Appendix A:
Taiwan’s Domestic Demand Underperforming

Figure 5: Taiwan’s Domestic
Demand Underperforming (2017)

Figure 5 displays data from 2017 of Taiwan’s Domestic Demand
Underperforming, the rolling correlation between manufacturing and domestic
trade is around 1, indicating near-perfect correlation, but it has gradually
fallen and currently hovers around 0.8. Wage growth is notoriously low and
stagnant, and youth unemployment is a stubborn problem. The unemployment rate
peaks at 12.6% for people age 20 to 24 years old before declining steadily for
each bracket thereafter.

 

 

 

 

 

 

Appendix B:
GDP Growth Contribution in Taiwan

As shown in Figure 6, the slower growth in 2H10 suggests
Taiwan’s economy is undergoing a V-shaped transition – its economy is turning
from a cyclical rebound to a normal growth. Although the economy will likely
slowdown in 2H10 as net exports moderate, the government’s projection suggests
net exports are expected to remain as the growth driver in 2011. Therefore,
investors should not be overwhelmed by the temporary growth slowdown as the
economy will likely regain momentum next year. The chance of a double-dip
recession is very low.

Figure 6: GDP
Growth Contribution in Taiwan (2011)

 

 

 

 

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