Case Study: Applied Food Sciences (AFS)

Business Description: Caffe Sanora is a premium coffee brand with a health platform that is marketed by Applied Food Sciences, LLC (AFS), Austin, TX.

Theme: AFS is balancing several variables in an innovative product launch. It is leveraging proprietary technology to enter the specialty coffee market and has a strategic focus for positioning, distribution and promotion.

Background: AFS specializes in the development and marketing of proprietary technologies used in foods, beverages and nutritional supplements. The company has introduced several successful technologies to the market by selling direct to marketers, and has demonstrated a strong ability to locate and commercialize specialty technologies. Unsatisfied with the interest in its Caffe Sanora brand, AFS decided to bring it to market themselves. Caffe Sanora combines a premium taste and organic sourcing platform, in addition to an enhanced antioxidant profile. Research has shown that coffee beans in their natural state are an excellent source of antioxidants, yet conventional roasting processes typically destroy these beneficial compounds. By specially handling the beans in the field and during each step of AFS’ patented roasting process (called HealthyRoast), Caffe Sanora is able to retain 100% of its natural antioxidants. In fact, Caffe Sanora contains more antioxidants than most green tea products. This brand competes in a broad, $9 billion segment called Specialty Coffee, which includes flavors, unique quality or supply and specialty roasting operations. Within the U.S., this segment is growing at about 7% annually, which is about five times the growth of the mainstream coffee market.


Situation Assessment: The specialty coffee market is very crowded and the volume of product launches is accelerating, so many new entrants are fighting to find a unique market position. As a small company, AFS recognizes that it has limits to how far it may eventually bring this product in the market. For now, it is targeting market slices where it can demonstrate success, such as in local markets. It will eventually leverage these success stories to either attract a strategic partner or investment capital. Caffe Sanora is working to appeal on three key dimensions: taste, organic sourcing and a unique health proposition. Part of its positioning is driven by what other competitors cannot provide—coffee beans rich in polyphenols. Essentially all other roasting processes destroy the polyphenols naturally found in green coffee beans, and the problem is even more severe with darker roasts. AFS has recognized several options in its market positioning, which requires a balance around its multiple benefits. By focusing too much on any one dimension, the company may limit its appeal and narrow its consumer base.


Opportunities: Through a strong sampling and point-of-sale marketing effort, Caffe Sanora has begun to demonstrate that it has an acceptable value proposition with consumers. The key issue is not the appeal of the product, but how the product can gain more exposure. As a small company, AFS is driven by its ability to build the brand, and then its capability to grow the brand. Implicit in this challenge is that due to resource constraints, AFS may be limited in how far it can carry the brand alone. These two drivers are connected in that once a brand is established, it opens up AFS’ ability and flexibility to either get more resources to grow the brand, bring in a partner, or flip it to a larger player. AFS is focused on being highly efficient and economical in how it raises awareness and builds loyalty for Caffe Sanora.


Lessons Learned: (1) The clear majority of companies launch products without sufficient marketing budgets, and though this presents a big challenge, it doesn’t mean that a successful plan can’t be obtained. AFS has formulated and implemented a plan that fits with its budget. The company has patiently focused on a distribution plan that builds upon a series of successes; the logical being that once it has established success in local markets, its demand will rise in broader markets. (2) As providers of technology, a company is always limited by its customer’s willingness to grasp the concept and take risk. When there exists a strong belief in the commercial opportunity, it is often worthy of consideration, under the right circumstances, to bring the product to market by oneself. (3) Any individual product or technology strategy must fit with the overall company’s mission. For AFS, Caffe Sanora is an extension of its ability to identify, source, value and commercialize technologies that fit in the market.