The Cabo Coffee Company story presented here points to the importance of management decision making based on business data analysis.  Savvy business management and leadership are key.  As an aside, the company makes its sales data available for data analytics projects at LCC International University.  Our students can study the results of these business decisions and offer ideas for the company to improve its performance and pursue new opportunities.

The Story

It appears that The Cabo Coffee Company is on a roll.  Sales and profits are at record levels, well above the year-to-year and pre-pandemic numbers.  But the Cabo San Lucas, Mexico, coffee roasting and hospitality company has a problem.  Data analysis revealed that profit margins at its coffee shops are down and declining.  The result is that the company must sell greater volumes of beverages and food to earn the same profits.  The pressure presents itself in staffing and operations challenges.

The Cabo Coffee Company ships Pluma Hidalgo coffee beans from a plantation in the La Sierra Madre Mountains of southeastern Mexico to its roasting facility at the southern tip of the Baja Peninsula.  In addition to its two coffee shops, the company sells roasted coffee beans to more than a hundred restaurants and stores in the Los Cabos area.  Also, the company exports roasted coffee beans to the US.  Details of the company are on its website  https://cabocoffee.com/. 

Further data analysis shows that the profit margin problem exists for all menu item categories.  Costs of raw coffee beans, paper products, and food items are increasing.  Labor and other costs are also up.  It is becoming very difficult to raise menu prices to cover the higher costs.  The company does not wish to cut product value to customers, such as smaller portions or lower quality.  A tough challenge.

In looking at the business data, the company decided to carefully manage the costs at the coffee shops and attempt to improve its profit margins.  But to increase company profits more rapidly, sales of whole beans are being ramped up.  Profit margins of roasted beans are higher than hospitality.  Increased sales activity is underway.  Agreements are in place with a new export company in Mexico, as well as distribution centers in the US.  Results are encouraging, and initial analysis is underway to identify new export markets in Japan and Europe.

Author: David Petrie, PhD, MA IM Faculty at LCC International University