Brand localisation to Japan: Costa Coffee

I was surprised to learn that Costa Coffee has entered the Japanese market.

I'd seen the dark red logo all over London and dismissed it as just another coffee shop. I must have missed the brand equity.

Founded in 1971 by siblings Sergio and Bruno Costa, Costa Coffee is the largest coffee brand in the UK, accounting for a third of the UK’s £10 billion branded coffee shop market. The company has a strong global presence, with 4,000 shops in 32 countries. In 2018, it was acquired by Coca-Cola for £3.9 billion, a move designed to tap into the £0.4 trillion global coffee market, which is growing at an annual rate of 6%.

The only Costa Coffee shop in Japan is the Ginza Loft (for a limited time), and other face-to-face sales are limited to a few kitchen cars. On the other hand, Costa Express, a self-service coffee machine, is available in about 180 locations, and bottled coffee has been on sale since late April 2021.

In Japan, a safe country, vending machines are everywhere, totalling around 2.3 million (2020), and Coca-Cola Bottlers Japan Inc. has the largest share - about 40%. Circa 20% of Coca-Cola's market is made up of coffee drinks, and this time, the company is aiming to position itself as a premium coffee, targeting the 64 million people who do not normally consume ready-to-drink (RTD) coffee and prefer to drink one served by humans. The pricing is in line with this positioning.

While the current pandemic is expected to increase demand in this market, the barriers to enter the production of coffee drinks themselves are low and differentiation will come from brand strategy and supply chain.

Coca-Cola acquired not only the brand, but also the intellectual and material assets, including the coffee knowledge and their scaled self-sufficiency. In other words, the company is focused on maximising the know-how, economies of scale and infrastructure of the coffee chain, while leveraging the value of the Costa Coffee brand. Noting that coffee can enter consumers' lives in a variety of formats (shops, beverages, capsules, coffee bean sales, etc.), the company has joined forces with Costa Coffee to enhance its strengths in vending machine sales and RTD beverages.

The Costa Coffee shop and kitchen cars in Japan were part of a sales promotion to extend the brand experience, and not a key business format as I had initially imagined.

Differentiation through brand story

One of the brand assets that Costa Coffee has leveraged is its story.

Costa Coffee's copywriting in the Japanese market are "originated in Europe", "authentic", "passion for coffee and commitment to quality for over 45 years" and "loved by many customers around the world". Costa Coffee has a history - a story that is genuine.

Stories contribute greatly to brand awareness. There is a main character with his/her own personality and ideas, often moving forward with a purpose, a mechanism that attracts not only children but also adults, making it more memorable. In other words, the message is not a list of words, but structured and connected, so that the listener can understand it more deeply.

In the TV commercial, for example, Costa Coffee kept its philosophy tied to its story, and applied the logo and brand name as they are used in the UK to the Japanese market.

As a side note, the general brand association for the UK is 'tea', not 'coffee'. However, the positive associations that Japanese people have with Europe (Italy, Spain, France, etc., where coffee is consumed in bars and cafes), where the UK is included, may have overcome this and created a brand positioning that sparks interest and contributes to raising awareness.

Changing distribution without changing brand value proposition

Costa Coffee operates under the brand purpose of 'More cups of great coffee, to more people, more often'.

In the UK, the brand's tagline is 'The Nation's Favourite Coffee Shop', and the main reason, i.e., brand value proposition for this is presumably Costa Coffee's accessibility, as there are 2,861 shops in the UK, almost three times as many as Starbucks. (Meanwhile, Costa Coffee is clever enough to promote itself in Japan as if its favourite reason is 'premium coffee').

So, what are the most frequent channels of contact with consumers in the Japanese market?

They are the vending machines and RTD market, which has been Coca-Cola's strength.

In the RTD market, where people have a drink for a break at work or on the go, the key value for customers is easiness of access, rather than taste or the experience created by baristas and shops. And this is skillfully aligned with what Costa Coffee and Coca-Cola are good at.

If Costa Coffee, as a coffee chain, had gone head-to-head with Starbucks, the market leader in Japan, it would have meant jumping into a fiercely competitive market. Japanese people have a more sophisticated palate than non-Japanese, as shown by the fact that they are 20% more likely to have a good sense of taste, so Costa Coffee would have had to invest in the quality of its coffee much more. It would also have needed to invest in developing a menu for the Japanese market, such as the Matcha Frappuccino as Starbucks did.

Costa Coffee has also maintained brand consistency at a global level by offering the same brand value proposition and protecting its brand assets. Accompanying this is the clever use of localisation to optimise the marketing mix.

In addition to the traditional 4Ps (product, price, distribution and promotion), it is worth highlighting that customer experience can also be looked into as it plays an increasingly important role in differentiation.

Other examples of global brands that entered Japan

• Dove, part of Unilever, chose to enter Japan with a foaming face wash rather than a facial soap bar, as it had done when entering other markets, because Japanese people do not wash both the face and body with a single bar of soap.

• Domino's Pizza is priced between £13 and £20 for a medium size (23cm) pizza in Japan, which is in the price range of high-end pizzas, but in other countries it is in the price range of fast food.

• Through its sales promotions, KFC has established a culture that Westerners would find hard to believe: eating KFC fried chicken at Christmas.

• Slack, a team communication tool, has adapted its use of witty phrases, references and quotations from English-speaking countries to suit Japanese norms and tastes.

The first step in localising a brand is to understand its mission and the challenges given. Then, the business and competitive environment, the different tastes and lifestyles of the target group, and the cultural, social and psychological context are researched and analysed.

You can then work out how to reduce the distance between the consumers and the product and service, how to build a relationship with them, and how to make them familiar with and feel attached to the product.

Most importantly, the core of the brand strategy - the brand's purpose, value proposition, personality and philosophy - is the starting point from which the product, price, distribution, promotion and customer experience are adjusted based on the local variances.

Reference:

Allegra world coffee portal, 2019

Beverage Daily, 2019

Shokuhin Sangyo Shinbunsha, 2021

PR times, 2015