# coffee sold in the university coffee shop

Question

Could you please provide some feedback on this case solution?
Case: calculate the # of coffee bought by students in the Astana Coffee Shop in the university?

# of students in the university: 7000

Structure:
Total number of units sold yearly = Population of Uni (7000) * # of students drinking coffee (75% → 3 out of my 4 friends drink coffee) * % that drinks in the Astana Coffee Shop (20% → I'm not sure about this number) * Average number of coffee bought (~80 cups → Low Consumer (10%) consumes once a month, Medium Consumer (80%) consumes once a week, High Consumes (10% once a day → 10%*12 + 80%*52 + 10%*365=79,3) => 89600 cups yearly.

I'm not sure about: % that drinks in the Astana Coffee Shop. There are 5 coffee shops in the university, but assuming that each coffee shop has equal market share might be biased. How to tackle this issue?

Answer 1

Hi,

The top-down approach you have suggested more or less makes sense. I assume that you have created this sizing question yourself and that it's based on your actual university campus. If I as an interviewer were to ask this question, I would expect you to:

Be able to come up with a logical structure (which generally you have)
Come up with reasonable assumptions
Do the right math

Regarding point #2 above, for many of these types of sizing questions, you have to know that interviewers are often not expecting you to come up with one specific ‘correct’ answer for assumptions. Rather, you need to be able to justify your assumptions and rationale. In your case, there are various ways of potentially thinking of where the weightage of market share may lie (e.g. from what you have observed; based on store size; based on store location etc).

Regarding volume of coffee consumed, I feel that your numbers are probably abit low. In my experience, you are either a coffee drinker, or not a coffee drinker. Sure there are some ‘casual’ drinkers, but because caffeine is relatively addictive and does create some sort of dependence, I would think the average coffee drinker probably drinks at least 1 cup a day.

Lastly, you could also consider a bottom-up approach for this. If that were the case, you could probably come up with reasonable assumptions on the capacity & utilization of the store given what you've observed.

Hope this helps!

Answer 2

Hi Alnur,

Top down does not make any sense here. Be careful and please recognize that you need a fundamental mindset shift and reset in how you think about market sizing.

You're making up numbers here. Market sizing is not guessing numbers.

Low consumer and medium consumer is totally made up!

This is best solved using a bottom-up approach.

It's funny you have this example as this is one I love to use in my coaching!

THE RIGHT APPROACH

This question has to be done bottom up. To do this, you need to think about the throughput of that coffee shop.

Coffees per hour TIMES number of hours

To get coffees per hour, you can use the baristas (speed of making coffees), cashiers (speed of taking orders), entrance (# people entering).

You can NOT use the # of people in the store or the # of people in line as this is not throughput.

Here's a practice exercise where you can see both top-down and bottom-up approaches for the same question: https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

Answer 3

Hi Alnur,

I would be happy to share my thoughts on it:

From my perspective, approaching this market size estimation top-down isn't meaningful. Instead, I would advise you to approach it bottom-up by estimating the number of coffee mugs sold per hour and then multiplying it by the number of hours.
Moreover, while it is hard to actually estimate the market size without an interviewer providing input, I would advise you not to randomly guess the numbers.

If you would like a more detailed discussion on how to address your specific situation, please don't hesitate to contact me directly.

Best,

Hagen