Warung Kopi Merapi: Investors Business Perceptions from A Marketing and Financial Point of View
Riska Yustisiana1*, Bintang Andhyka1*
1 Faculty of Economics and Business, Universitas Pancasila, Jakarta, Indonesia
*Corresponding Author: [email protected], [email protected]
Accepted: 15 February 2021 | Published: 1 March 2021
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Abstract: The culture of drinking coffee in Indonesia since ancient times has become part of today’s lifestyle and stimulates the emergence of the downstream coffee business, coffee shops with various concepts that exist in many regions in Indonesia. It is a potential and attractive business for investors interested in coffee products. This research uses a qualitative approach which aims to see the factors that trigger the success of one of the coffee shops in Yogyakarta, Indonesia, namely Warung Kopi Merapi, from an investor’s point of view that focuses on marketing and financial aspects. The techniques of data collecting are interviews, observations, and documents. The results of this study show that two factors affecting the success to run a coffee business are the location and the accessibility to raw materials. To lower the initial capital required to run the business, the location which offers stunning wonder does not have to be in a strategic place and easy access to raw materials to make the purchasing price lower is needed.
Keywords: coffee shop, marketing, finance, investors
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1. Introduction
Indonesia has retained its status as the world’s fourth-largest coffee producer after Brazil, Vietnam, and Colombia with its production reaching 565 thousand tons, which is dominated by the Robusta coffee variant (70%). Indonesia is also the world’s second-largest coffee consuming country after Brazil, with domestic coffee consumption reaching 288 thousand tons.
In terms of international markets, Indonesia is the world’s ninth-largest coffee bean exporter or fulfills 2.9% of global needs, while in terms of processed coffee exports, Indonesia ranks second in the world or supplies 8.7% of global needs (International Coffee Organization, 2019).
The Indonesian government has implemented several strategies to keep the coffee industry sector sustainable and growing, especially during the current global pandemic. They conduct trade negotiations in various forums, launch the Kudagang e-learning, which is a digital-based training, do trade promotion and expansion of coffee exports, make application of the Warehouse Receipt System (SRG) as a safety net and simplification of export procedures for quality and traceability, and launch Digiku, a digital credit platform for Micro, Small and Medium Enterprises (MSMEs) including coffee MSMEs.
The culture of drinking coffee in Indonesia is a habit that has been practiced since the Dutch colonial era. Currently, it is not just a habit and routine, but a part of a lifestyle. A contemporary coffee shop is a term for a coffee shop that not only sells coffee drinks, coffee-processed products, and various side dishes as a complement savory for drinking coffee, but also offers a
comfortable atmosphere for socializing, taking selfies to upload on various social media, and functions as a co-working space needed by office workers.
The downstream coffee business is increasingly booming in Indonesia with the proliferation of coffee shops in many regions. This attracts both business people and investors. From the financial side, initial and working capital are things that need to be prepared to start and run a coffee shop business. The amount of capital required will vary depending on the scale of the coffee business and it also determines the course of the coffee business. Another thing to consider is the marketing side of the coffee business such as 1) place (a strategic location can make it easier to reach customers even though it requires a relatively large initial investment capital), 2) products (various product variants and availability and easy access to raw materials determine product quality), 3) price (adjustability based on the segment and target market), 4) promotion (media used to determine the success of a business and also the investment required in the business).
This study discusses the phenomena that occur at Warung Kopi Merapi according to the investor’s point of view from a financial and marketing perspective. It also addresses the uniqueness of Warung Kopi Merapi located in Yogyakarta, Indonesia, especially in terms of the location of the business and the initial investment required to run a coffee shop.
2. Literature Review
Marketing Focus: (Place, Promotion, Product, and Price)
According to Alma (2003) in Supriyanto and Taali (2018), a place means where the location, how the distribution channel, how many channels, and how the conditions of the distributors needed. In this case, there are 3 types of interactions that affect the location, as follows: 1) customers come to service providers (companies), so it means that the location is very important, 2) service providers come to customers, in this case, location is not very important, but service delivery must remain of high quality, 3) service providers and customers do not meet directly, which means that they interact through certain means such as telephone, computer, or mail. Promotion indicators include: a) easy to reach public transportation facilities, b) the traffic, c) a spacious and safe parking space, d) safe and comfortable surroundings, e) close to other public facilities, f) the location is on the main street of the city.
According to Kotler and Armstrong (2001) in Nugroho and Japarianto (2013), a place includes company activities that make products available to target customers. It refers to the location of the company, marketing channels, collection, and location arrangements, supplies, and transportation. In the service industry, a place mainly refers to the location and distribution that can make it easier for customers to obtain company services. It is usually measured by how strategic the location, how many facilities can be obtained by potential customers, and how easy to access the location. Location and sales funnel decisions include considerations about how the product is delivered to customers and where the product should be placed.
According to Tjiptono (1996) in Selang (2013), a place affects the dimensions of strategy such as flexibility, competitiveness, positioning, and focus. The flexibility of a location is a measure of the extent to which a company can react to changes in the economic situation. The decision in choosing a location is related to a long-term commitment for capital-intensive-based aspects so the company must consider and select a location that is responsive to the economic, demographic, cultural, and competitive situation in the future. Meanwhile, Hurriyati (2010) concludes that choosing a place or location requires careful consideration of several factors as
follows: 1. Access, for example, a location that is easily accessible to public transportation. 2.
Visibility, meaning the location can be seen clearly from the side of the road. 3.Traffic, where there are two things to consider, namely: a) the number of people passing by can provide a great opportunity for impulse buying, b) traffic congestion which can turn into a barrier, 4.
Spacious and safe parking space, 5. Expansion, there is sufficient space for business expansion in the future, 6. Environment, namely the surrounding area that supports the services offered, 7. Competition, namely the location of competitors, 8. Government regulations.
Christine (2016) in Zeth (2019) states that choosing a location requires careful consideration of several factors. Those factors are 1) access, for example, roads that make it easier for customers to reach the place, 2) visibility, for example, a location that can be seen clearly from the roadside, 3) parking lots, the company has its own parking space/land or uses public parking spaces, 4) expansion, there is sufficient place for business expansion in the future, 5) government regulations, for example, a business license, and 6) competition, namely competitors’ locations. In other way, Brown et al (2003) stated that marketers recently don’t have to provide “the ideal places” to fullfill consumers needs and wants, but can create the unique place or ambient with uncommon experience called retro marketing strategy.
Price is one of the critical success of a company because it determines how much profit will be obtained by a company from selling its products in the form of goods or services (Brata et.al, 2017). Price is an exchange rate that can be equated with money and other items to benefit derived from the goods or services for a person or group at a certain time and place (Amanah et.al, 2018). Price is also defined as one of the factors that influence purchasing decisions, where it attracts customers to buy products or services.
Promotion can be defined as a form of marketing communication. Promotion is the most important activity playing an active role in introducing, informing, and recalling the benefits of a product to encourage customers to buy the product being promoted (Brata et.al, 2017).
According to Tjiptono (2008) in Imaningsih and Rohman (2018), promotion is a form of direct persuasion through the use of various incentives that can be arranged to stimulate the purchase of a product immediately and increase the amount of goods purchased by customers.
Product can be defined as something that can be offered to the market to satisfy a desire or need, including physical goods, services, experiences, events, people, places, property, organizations, information, and ideas (Kotler and Keller, 2009 in Fernando and Aksari, 2018).
A product is anything that can be offered to the market to satisfy consumer wants or needs (Widiyono and Pakkana, 2013).
Financial Focus: (Capital and Initial Investment)
According to Hidayati (2017), an investment can be defined as an activity of placing funds in one or more types of assets during a certain period with the hope of earning income and/or an increase in investment value in the future. Investment according to the characteristics (nature and actors) can be divided into two, namely 1) Public Investment, which is carried out by the state or government to build facilities and infrastructure to meet its people needs and is usually non-profit, such as toll-road construction, schools, and so on, 2) Private Investment, which is done by the private sector such as individuals and corporations (micro or household businesses, small and medium enterprises, and macro businesses) to obtain benefits in the form of profit.
The coffee shop business that is currently booming among business people and investors is a form of private investment.
Regarding capital, both investment and operational-production capital, small and medium scale downstream coffee business entrepreneurs do not yet seek help from banking sectors because of their assumption that troublesome administrative system banks have. Therefore, their capital mostly come from investment funds, either individuals or several investors.
3. Methodology
Types of the Study
This study uses a descriptive qualitative approach. It explains, describes, explains, and analyzes the variables under the study. It starts from the initial stage, the implementation stage, to the completion stage.
Location and Time of the Study
This study was conducted at Warung Kopi Merapi, located in Kepuharjo Village, Cangkringan, Sleman, Yogyakarta, Indonesia. It was conducted for 2 weeks starting from January 1, 2020, to January 14, 2020.
Data Collection Technique:
a. Primary, namely:
1. Interviews. Researchers use the semi-structured interview technique which is a combination of structured and unstructured interviews by first preparing a list of questions and asking additional questions to explore further from the answers given by the respondents.
2. Observation. Researchers use observation in the form of watching, taking notes, and taking photos to obtain an overview of the research theme.
b. Secondary, namely:
1. Information from social media and articles 2. Literature study
3. Documentation study Sampling Technique
This study uses the purposive sampling method. This study involves such various respondents as male and female students who like to hang out in this coffee shop at least twice a week.
Data analysis technique
This study uses the triangulation technique. The triangulation technique is used to test the validity of the collected data. Triangulation is a data validity checking technique that utilizes something else outside the data for checking purposes or as a comparison to that data (Moleong [2006: 330] in Pramita and Pinasti [2016]). The researchers interviewed and observed the respondents. Those activities were recorded. The information was then confirmed to Warung Kopi Merapi employees.
This study uses the interactive model of data analysis model proposed by Miles and Huberman covering data collection, data reduction, data display, and conclusions (drawing/verifying) (Rijali, 2018).
4. Conclusion
Warung Kopi Merapi is located in Kepuharjo village, Cangkringan, Sleman, Yogyakarta Special Region, near the Kali Adem Bunker, which is one of the areas severely affected by the
eruption of Mount Merapi in 2010. After the eruption of Mount Merapi, the area around Kepuharjo village was then planted with coffee trees by local coffee farmers.
It then inspired Pak Sumijo, the owner of Warung Kopi Merapi, to establish Warung Kopi Merapi in 2012 due to the abundant raw material, which is coffee beans (most of which are the Arabica and the Robusta), in which the coffee processing is managed by the local coffee cooperative in the area. Almost all employees of Warung Kopi Merapi are victims of the 2010 Mount Merapi eruption. Warung Kopi Merapi with its concept of ‘Back to Nature’ allows customers to enjoy the natural atmosphere with views of Mount Merapi, enjoy the fresh air and calmness as ways to relax and unwind.
Marketing Focus:
Place
At the time of the observation, Warung Kopi Merapi has a typical Javanese and fairly simple design. It is located on the slopes of Mount Merapi, Petung, Cangkringan, Sleman, and takes about an hour-long drive from Yogyakarta city, or you can get there via Jl. Kaliurang. There is no electrical installation in the area around the business location. To get to its location, customers need to go through a rocky road which is relatively difficult to pass and require Google Map assistance.
Further observed, Warung Kopi Merapi is located in the Disaster-Prone Area III (KRB III) of Merapi Volcano, which is located in the Kepuharjo area (about 324 people) covering an area of 120 square kilometers, with a red-color mark on the map meaning the closest area to the crater of Mount Merapi and the most vulnerable area. KRB III has a great potential to experience hot clouds, lava flows, toxic gases, as well as the movements of rock. Considering the condition, Warung Kopi Merapi should not be located in that place because it is too risky for businesses and its customers. However, the Sleman Regent Regulation No. 20 of 2011 on Disaster Prone Areas states that KRB III is allowed to be used as a tourism place with a semi- permanent building. Based on this regulation, it can be said that Warung Kopi Merapi is considered as a tourist spot, not merely a coffee shop, because its initial designation is not for a co-working space with internet access like the modern coffee shops existing today. The place discuss in this research is an implication of retro marketing, everyone cant predict the future but can remember the past and chance to relive it even for a moment brings a sense of comfort.
This information was confirmed through the results of interviews with respondents of Warung Kopi Merapi. The majority of the respondents were millennial-age students. They revealed that Warung Kopi Merapi basically was a hangout place to unwind, relax, and refresh their mind by enjoying the view and the cool air around Mount Merapi, chatting with friends, and enjoying coffee and snacks offered. Its relatively difficult to access location and been in KRB III are not an obstacle for customers to enjoy coffee products and the atmosphere offered.
The place or the location chosen by Warung Kopi Merapi disagrees with the theory of Place in the Marketing Mix, as expressed by Hurriyati (2010) and Christine (2016) in Zeth (2019). It states that the selection of a place or a location requires careful consideration of several factors such as easy access to public transportation and visibility, meaning that the location can be seen clearly from the curb and traffic, has spacious and safe parking lots, has areas for business expansion, the supporting environment, less competition, and supported by government regulations.
Promotion
Warung Kopi Merapi promotes its products by direct promoting and social media. It uses Instagram as its social media platform. However, its digital marketing has not been carried out
optimally because the information about the activities in Warung Kopi Merapi has not been updated actively and well-structured on its social media. This information was confirmed through the results of interviews with respondents. They stated that friends or family informed and recommended them about Warung Kopi Merapi through direct descriptions or their social media. The respondents then visited Warung Kopi Merapi’s official Instagram as the next reference to find out more about the location and menu offered.
Promotion done by Warung Kopi Merapi has not indicated the role of promotion as a marketing communication tool. Brata et.al (2017) explain that promotion should be a marketing communication that plays an important role in introducing, informing, and explaining the advantages of products that can encourage customers to buy. Warung Kopi Merapi relies on naturally occurring word-of-mouth from its customers as its promotion tool.
Product
Warung Kopi Merapi serves menus like the Robusta and the Arabica coffee, ready-to-brew coffee, wedang gedang, wedang secang, and fresh milk. It also serves various snacks such as Mendoan, fried banana, and fried tofu.
The products offered by Warung Kopi Merapi are not too diverse and they reflect a simple local menu meaning that they are intended as a mere complement. The main products sold by Warung Kopi Merapi are attractive views, fresh air, and a comfortable atmosphere to unwind and relax.
The customers revealed that drinking coffee and snacking while chatting and enjoying the comfortable atmosphere and beautiful scenery are the main attractions of Warung Kopi Merapi.
The respondents stated that drinking coffee that was ‘pure’ from nature while enjoying nature itself was able to relieve fatigue due to daily routines. This is in line with what Kotler and Keller (2009) express in Fernando and Aksari (2018) that a product is something that can be offered to the market to be able to satisfy a desire or need, including physical goods and places.
Price
The price of a product describes the market segmentation of a business. At Warung Kopi Merapi, the price for the available menus ranges between Rp. 8,000 and Rp. 11,000 while for ready-to-brew coffee is around Rp. 40,000 per pack.
From the observations by researchers and also interviews with respondents, the target market of Warung Kopi Merapi is millennial students studying in Yogyakarta, Indonesia, although there are also other customers like groups or families coming there after visiting tourist attractions not far from it. The price is lower when compared to similar coffee shops in Yogyakarta because the raw materials used, the Robusta and the Arabica coffee beans, are planted and processed from coffee plantations not far from the location of Warung Kopi Merapi, only about 800 meters. It makes the purchasing price of coffee beans from the local farmers lower, so Warung Kopi Merapi can sell its products at a more affordable price compared to similar coffee shop businesses.
This is in line with the study by Amanah et. al (2018) which states that price is also defined as one of the factors that influence purchasing decisions. In other words, price is an attraction for customers to buy products or services. The price of the products offered by Warung Kopi Merapi is affordable, even lower than that of similar coffee shops. This attracts customers to come, among any other consideration.
Financial Focus (Capital and Initial Investment)
Based on the observations, Warung Kopi Merapi is fairly busy with visitors, so it can be said that high sales volumes generate high profits as well. There are several things about Warung Kopi Merapi that attract investors and potential investors who are about to start their coffee shop business. The first is easy access and close to the location of the raw material. It makes the initial investment and working capital required to run this coffee shop cheaper. The advantage of the affordability of raw materials in such conditions makes the investors or business people can set prices that are relatively lower than those set by similar business actors.
In addition, they even can set prices that are the same or even higher than those of other coffee shops, as long as they can offer various other advantages in return. When this happens, they will be able to get a higher profit margin so that the initial investment can return immediately.
The second one is the location. Warung Kopi Merapi is not located in a strategic location, in the sense that it is far from roads, its customers, and public facilities, not easily accessible by public transportation, even requires Google maps to find its location. Despite this condition, it can attract its customers. Financially, this is one of the beneficial factors for business. Locations that are in this condition require a less initial investment in terms of rental or land-ownership costs, which of course, if the sales of the product are considered good, it will generate relatively greater profits and make the initial investment for rental or land-ownership costs being returned immediately in a shorter time.
Conclusion
The downstream coffee business, such as the coffee shop business, is a business that promises positive profit opportunities in the future. Based on the research conducted at Warung Kopi Merapi, finance and marketing are important factors that must be considered when starting or running a coffee shop business, besides several other factors. The most important aspect of marketing that is considered a major factor in marketing that determines the success of a coffee shop business is the location (place). A strategic location supports business success. However, in the case of Warung Kopi Merapi, a strategic location is not a determining factor for business success. Its location is in the Disaster-Prone Area and is quite difficult to reach by customers.
However, it turns out to be the main attraction for customers because their main intention is to find a place that can be used as a means to relax and relieve fatigue while enjoying coffee.
Without providing any internet facility, Warung Kopi Merapi has a very unique place in retro decoration and ambient, portraying with farm house style with natural mountain view, far beyond comfort place commonly provided by other coffee shop.
Initial capital is another factor that sometimes makes business people think that investing in a coffee shop business requires a relatively large initial capital. Warung Kopi Merapi shows that the initial investment and working capital required to run its business are lower than those of other coffee shops due to several factors. Its location requires lower costs because it is not located in a strategic area. Another factor is the availability of raw materials. Warung Kopi Merapi chooses its location near the coffee plantation. Local coffee farmers directly plant and manage the plantation which make the price of raw materials lower. Warung Kopi Merapi gets the lower price for the raw materials for its products so it can sell the products to its customers at lower prices too. This attracts customers then resulting in high sales and profits.
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