Hara Coffee Co's innovative coffee subscription model

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Upon performing calculations, candidates should identify that:

• Option 2 is more profitable for the business and also generates better footfall, which might come in handy if we add new revenue streams
• The main driver of profitability here is the cross-selling opportunity. The actual subscription is generating negative profitability.
• We assumed the highest possible cost in our model (subscribers getting the maximum amount of coffee per day every single day). It would be interesting to see what the utilisation rate is, as that might influence how often customers will re-order our product.

Our decision should not be based solely on financial variables, but also on non-financial ones. A cheaper, more accessible price, for instance, could increase the product's popularity and increase demand by triggering a halo effect. 

These are some of the potential solutions you could have thought of for this case. 

1. Maximize cross-selling opportunities

1.1. Products

• Increase variety. Offer new flavors (vanilla, hazelnut, etc.) and preparation methods (iced, frappe, etc) for our existing products. Offer completely new products (bakery items, mochas, teas).
• Launch complementary products. Introduce merchandise (t-shirts, mugs, etc), offer brew at home products (teas / coffee packets).

1.2. Services 

• Host community coffee nights, offer coffee tasting sessions, offer coffee brewing classes.

2. Utilize assets to generate new revenue streams

2.1 Locations. Rent location during business hours (corporate or private events) or outside of business hours (e.g., co-working space). Add an ATM cash or Bitcoin machine, add a parcel drop-off service, offer luggage storage.

2.2 Brand. Launch our products in supermarkets, start a franchise, lease our brands to catering companies.

2.3 Coffee expertise. Offer digital barista masterclasses, start a YouTube channel focused on coffee sourcing, offer business classes on the retail sector. 

The purpose of this analysis is to determine whether the increase in profits generated by the additional subscribers and increase in cross-selling profits is greater than the costs incurred by offering smoothies 1/3 of the time. 

Upon performing calculations, candidates should identify that:

• Introducing smoothies brings an additional £175k in profits for the business.
• Cross-selling revenues are the primary driver of increased profitability, so perhaps by implementing some of the previously suggested strategies to increase revenues, we can increase profits even further.

Our calculations assume that people get a smoothie 1/3 of the time, however, if people were to choose a smoothie more often, this will further decrease our profits.  

Based on the current analysis, I recommend that Hara Coffee Co. launches a beverage subscription that includes both coffees and smoothies at a price of £15 per month.  My reasons for this are: 

• Offering a subscription at a cost of £15/m will generate an additional £1m for the business, mainly from cross-selling revenues
• Offering smoothies as part of the subscription will attract even more clients and will increase our bottom-line by another £175k
• In addition, considering that the majority of the revenue seems to be coming from cross-selling, I believe there are many brand-extension opportunities for the company, including [your answers for Q3].

Some of the risks associate with this process revolve around our ability to manage the digital aspects of launching the subscription, such as being able to prevent account sharing and protect customer data. In addition, we should also take into account the impact of this move on our brand, as the increased costs might make it more expensive for difficult for us to maintain our ESG commitments.

In terms of next steps, I'd like to examine the costs associated with maintaining and marketing the subscription, as well as conduct a more in-depth analysis of each of the revenue-boosting ideas we identified to determine how well they align with the overall brand and customer preferences.