Pricing strategy for Italy

ITC Trade Map shows that Italy imported 1,449,938 tons of green beans coffee for $2349 per ton
from the countries of the world. The top few countries to which the Italy paid most and least for
the green beans are:

Observation of Value for countries exporting Coffee to Italy under HS Code 090111 from the
ITC Trade Map :-

Exporting Countries Highest Paid (per ton)

Jamaica $51333
USA $30500
United Kingdom $27000
Nepal $17000
The trade map shows that the coffee from Nepal falls into top most priced coffee exported to
Italy having price $17000 per ton.

Exporting Countries Lowest Paid (per ton)

Sierra Leone $1632
Cameroon $1741
Cote D’Ivore and Uganda $1756
Angola $1767

Current Products and Price List for Mount Everest Organic Coffee Pvt. Ltd.

Product Type Price

Mustang Coffee 2000 per kilo
Mount Everest Coffee (Premium Grade) 2500 per kilo
Drip Coffee (Trekkers Coffee) Rs. 80 per packet of 12 gram

Coffee Quality and Pricing

In the words of Mr. Lama, the owner of Mount Everest Organic Coffee Pvt. Ltd., “the coffee
price at European Market is determined by the specialty grading of the Coffee”. Mount Everest
Coffee has received the grade about 84 in the expo held in Italy, hence, he has kept the premium
pricing for Mount Everest Coffee. Similarly, the other two brands have also received the score
about 84. So, the price of coffee in European market is directly proportional to the grade it
receives. The higher the grading of the coffee, the greater the bargaining power for the exporters
according to Lama.

Value Based Pricing

Value based pricing stretches on the perceived value that the customer is willing to pay for the
product. In context of demand for Nepalese coffee in Europe, the specialty grading and order
from the importers after tasting is observed. With respect to the information provided in the
Trade Map about the value of Nepalese Coffee in Italy, the recommendations regarding the
optimal price of the coffee is presented below:

Value of Nepalese Coffee in Italy as per ITC Trade Map : $18.74 per kg

Export Price of Coffee by Nepal Everest Coffee Pvt. Ltd. = $10 per kg

Difference in Price = $18.74 - $ 10 = $8.74 per kg

Considering the calculations presented above, it is advisable to export the coffee at the price near
$18.74 to get the best offer, which would increase the profitability of the business.

Cost

Cost includes the cost of production for the farmers with respect to the products that is acquired
by the Mount Everest Coffee Pvt. Ltd. For farmers, the cost for seedling is around Rs. 15-20
according to TEPC. The rate as per Nepal Tea and Coffee Development Board includes:

Cost for farmers = Raw Materials Cost + Labor Cost + Technical Cost (Cutting etc.)

Cost for farmers totals around Rs. 375 per kg. Therefore, the government has decided the support
rate for farmers of Rs. 450 per kg for A Grade Parchment Coffee set by NTCDB. The price paid
by Mount Everest Coffee Pvt. Ltd. to farmers is Rs. 600 per kg. Rs. 150 extra to motivate the
farmers who produce coffee.

Market entry strategy

After going through detailed analysis of potential market to expand and its market
characteristics, we have advised exporting mode of entry for operation of our business. The
process of exporting can be done in a variety of ways. Through their own website or an e-
commerce site like Amazon, Mustang Coffee may decide to sell directly to clients in overseas
regions. Also, the level of risk that Mustang Coffee is ready to accept, as well as the amount of
time and resources that must be devoted to this new venture, will all contribute to determining
the best course of action.

Direct and indirect selling are the two main exporting strategies and Mustang coffee can opt for
any of these strategies:

Direct selling:

Direct selling involves direct communication between Nepali manufacturers and a foreign
customer. This approach is more difficult but also more gratifying and profitable. Doing business
abroad can affect its participants in ways beyond just financial gain. It is personally satisfying to
establish new connections, get to know a new culture firsthand, and take on fresh professional
challenges. Additionally, it might result in creative product or service enhancements that
strengthen the business in whichever market it chooses to compete in.

Indirect selling:

In indirect selling, an export intermediary is in charge of locating foreign customers, shipping

goods, and collecting payment. Online stores like Amazon, eBay, and Alibaba are examples of
indirect selling strategies.  Other strategies that Mustang coffee can follow which exporting their
products include contracting with an export management firm, which then takes on all
obligations and legal control of the items and could benefit from a higher profit margin, which
relieves the burden on the business but may also result in lower profits and rewards.
In our opinion direct selling can be best suited for Mustang coffee as it can be segmented as
premium coffee beans with the best quality. Few factors like risk tolerance of Mustang company,
the size of the company, volume of production, resources that are available in Nepal like
packaging cover, the nature of the products of Mustang coffee, the opportunity cost and the
quantity of export in Italy should be considered before designing a suitable profitable business
plan. Below is the design of the operational of profitable business in Italy using 35,000 euro that
is NRs. 4,480,700:

Industry trade shows and associations

First step that Mustang coffee should follow is doing registration in various trade shows of Italy.
World of coffee (2022), Tuttoo food 2023, TriestExpresso Expo 2022, Agro.Ge.Pa.Ciok. 2022
are some of the coffee trade shows in Italy. Inorderto enter into the Italian market Mustang
coffee should demonstrate their coffee in various industry trade shows and the associations of
Italy so that they could know the quality of Mustang coffee and rate them which will ultimately
open the doors for Mustang coffee in Italy.

Business travel to meet existing buyers and potential new buyers or visit markets and partners

Second step that Mustang coffee should follow after acceptance of products in tradeshows are
allocating the time for business travel to meet the the existing buyers and the new potential
buyers in the market. Regarding the import of goods and services, each market has its own laws
and regulations. The company needs to confirm that the brand is really competent before
exporting and selling Mustang coffee in a particular region of Italy. We must conduct cost study
and account for: accreditations, certifications, licenses, Registrations and should
also demonstrate that we have the necessary procedures and paperwork to sell in that particular
market so that they will trust us.

3)Searching for potential buyer and Promotional activities in different market

In order to export, the Mustang coffee should search for the potential buyer and list them and
email them who can purchase their quantity in bulk. Investing in various marketing initiatives for
various markets, in our opinion, is something Mustang Coffee should do. Germany, Taiwan,
Japan, and Korea are a few examples of its primary markets. Today, word-of-mouth marketing is
one of the primary forms of marketing for any brand because we live in a global village where
knowledge is shared. In order to promote their brand, Mustang Coffee can engage in a variety of
activities while taking their culture into account. These could include things like: translating
marketing materials into other languages; adapting imagery, packaging, or logo to market needs;
sending product samples to potential customers; making videos of product demonstrations or
testimonials; and organizing events, networking gatherings, and sponsorship activities. Hence,
these activities will help to spread word of mouth and can increase the potential of export in Italy
also.

4)Search for consultant and freight forwarder

The international business terms under which the company is sending the goods must be
specified for all export shipments. The Mustang company must therefore be familiar with and
understand international commercial terminology. It is best to speak with a consultant and a
freight forwarder who can explain the freight process, costs, and terms.

5)Insurance cost

The amount of commodities exported from Nepal has increased recently. The issue of non-
payment is becoming more acute as exports grow in size. Exporters have been deterred by this.
However, it appears that the interested parties have not given export credit insurance enough
attention to be introduced to cover such risks. Therefore, Mustang Coffee Company should
absolutely choose this option if Nepal introduces export credit insurance when exporting to Italy.

6) Additional effort and supervision for export product (special packaging, labeling,
marking)

Foreign markets are very strict with the label and marking of products. Mustang coffee should
have special packaging, brief labeling and marking of the products which will impress the buyers
about the product and the quality. Appointing a supervisor to look after the all the products
before shipping can be beneficial.