Kava & CBD in Coffee Houses: A Case Study
- Olivia Windorf
- Dec 9, 2019
- 10 min read
Kava Kasa, a kava bar local to Grand Rapids, provides a laid-back and comfortable environment with a dine-in bar and wide varieties of seating in its downtown location. The environment is comparable to a regular coffeehouse, with comfortable seating, tables, artwork, dim lighting and even a platform for local performers to share their music. The unique part about this establishment is that Kava Kasa offers coffee, kava and ethnobotanical teas that naturally stimulates one's body or mind. The kava root is being applied in the food and beverage market, cosmetics and also pharmaceuticals, due to its healing benefits. It has been said to treat many diseases and disorders such as anxiety, stress, insomnia and many others.
Comparable to kava, CBD based products are also gaining news as it has become a popular way to cope with anxiety and enhancing focus. CBD is a naturally occurring compound that is found in the resin of the cannabis plant. The potent compound is closely related to THC, however, it does not provide the same high that comes from consuming THC. Many people try CBD and kava products as an alternative to using pharmaceuticals.
Kava Kasa has been become a successful business in the downtown area of Grand Rapids as the CBD, THC and kava craze is sweeping through west Michigan. This could be an excellent opportunity for current business owners to incorporate select items from this emerging category into their menu or product lineup. For select coffee and tea houses, this addition could be a very profitable and successful given it’s growing popularity. This case study will analyze the current coffee house and tea industry while also examining the CBD industry and potential growth. It will focus on the influence of kava, CBD and also briefly discuss the potential of opening a CBD and kava tea houses throughout west Michigan. It will also discuss the business opportunities and current operations of the company, Kava Kasa. Although kava is a root and CBD is a compound retracted from the marijuana plant, the two will be compared throughout this case study due to the similarities in backlash that the industries have received and also to strengthen the components that Kava Kasa offers in store.
Background Information
Cannabis has been cultivated by humans for nearly 4000 years. Doctors began studying the medical benefits of cannabis in the year 1533. In 1940, an American chemist had isolated the CBD compound and began studying it. The chemical structure confirmed that CBD was non psychoactive and further explored the potential of the compound being used for medical purposes. (pureratioscbd.com) CBD is natural pain reliever that can relieve anxiety and depression while improving heart health and anti-tumor or cancerous effects. Currently, CBD is sold in forms of liquid drops, vape pods, candy gummies and more. This has evolved into creating CBD infused teas and other products that have been sold in retail stores.
The root, kava kava, is said to mean intoxicating pepper and provides effect similar to as drinking alcohol to the brain making one feel calm, relaxed and happy without affecting mental clarity. It also provides many medicinal effects, and has been extensively studied as a anxiety reliever. A cup of kava is a traditional Polynesian drink. The term “bula” comes from the Pacific Islands where kava originated, and it means to cheers to long life and good health. The employees at Kava Kasa will often use this phrase while working at the tea house.
The founders at Kava Kasa, Riccardo Schinina and Karen Salenno, were introduced to the healthful calming effects of kava after working in the fast-paced telecommunications industry (“About”) and after Schinina had suffered from a shoulder injury and was looking for a solution other than opioids. The tea house has been open since 2016 and has seen substantial growth ever since. With most of the business coming from repeated customers, the environment currently holds events such as community yoga and open mic nights to hold the interest of the consumers. The menu offers several types of kava including everyday, premium, rare, coffees and kava smoothies. The menu also features CBD products and various types of teas. Each type of beverage is said to offer effects on the mind, body or both. While this industry has attracted a niche audience in Grand Rapids, there is still potential elsewhere for substantial growth.
Continually, another industry that has a promising future is the coffee industry. Coffee is currently the second most sought-after commodity worldwide, and has an industry worth of $100 billion across the globe at this time. The rate continues to grow and reaches a demographic of people ages 19 to 34 (Menke). Hence, the kava industry has much potential growth to explore due to the popularity of establishments that offer environments comparable to that of a coffee shop.
(SOURCE: NATIONAL COFFEE ASSOCIATION)
These identified trends have only increased in the last two years. The coffee industry has seen significant growth and in the event of collaboration with an industry such as CBD, kava, or any hemp products could be a profitable move for many entrepreneurs if introduced in an area such as East Lansing, Michigan or downtown Holland, Michigan.
Coffee shop customers are said to be younger, educated and 22% likely to be between the ages of 18-24 years. (sbdcnet.org) The median resident age of people in East Lansing, Michigan is 21.4 years. This exact age demographic falls within the standards of the person who is most likely to patronize a coffee shop. The median age for all of Michigan residents is 39.7 years (city-data.com). The younger generation is the target audience for a coffee or tea shop that would serve unconventional items on the menu, such as kava and CBD-infused teas.
In conclusion, the backgrounds of both the CBD/Kava industry and the coffee/tea house industry have similar demographics that follow the trends and updates of these products. The collaboration of these two features could make for an excellent business opportunity in a busier, high-traffic city. Kava Kasa has experienced success since its opening and continues to promote the teas.
SWOT Analysis
Strengths
Many of the strengths of the business, Kava Kasa, root from the comfortable, relaxing and inviting environment that attracts many Grand Rapids students and residents alike. The employees at Kava Kasa are generally quite enthusiastic and willing to share their knowledge about kava to all their customers. The downtown Grand Rapids location is prime due to the burgeoning economy of the city and the large population consisting of the key target audience. Also, there is an outdoor patio on the side of the building that offers seating throughout the warmer months of Michigan. Since this product is not universally known, hearing the name, Kava Kasa, is intriguing to the audience and may spark an interest to try kava. Upon hearing the company’s slogan, “the root of happiness,” it is inferred that a this a natural based product with positive benefits.
Weaknesses
On the contradictory, one of the weaknesses that the company faces is due to many people being unaware of the benefits of kava, or what the root actually is. Upon hearing the name of the establishment, it is not directly clear what is being sold if one is unfamiliar with the root. The slogan could lead people to think that the establishment focuses on selling beauty/cosmetic products or supplements rather than the tea house environment that it really is. Additionally, the association with hemp products is not a view that all Americans support. Upon learning of the products that the tea house sells, it could be easily dismissed by individuals that do not support hemp products. To help increase awareness of this niche product within the west Michigan community, the focus should be on the medicinal and health benefits of the kava teas.
Opportunities
An opportunity for the business is to incorporate more events and to enhance their social media presence in order to gain awareness and foot traffic. Since they are currently the only kava kava bar in Michigan, they present a great advantage against local competitors such as Ferris Coffee and Nut, The Bitter End, and many other Michigan companies. The company does have a presence on social media, but it should consistently provide more tidbits of information about what kava is and what it does for the mind and body and also the history of the product to help build awareness for new audiences.
The social media team at Kava Kasa has been diligent about informing the audience of upcoming events. There are many ways to increase social media awareness using Instagram, Facebook and Twitter. The team at Kava Kasa created company accounts across several platforms. Creating engaging paid advertisements to share on social media websites will attract current and new customers to come to Kava Kasa and will encourage consumers to provide user generated content. The social team could inform the customers of its online presence by creating informational fliers or hanging up a sign inside the tea house with the various social media handles of the business.
Additionally, consuming kava creates a lightness within a person’s physical body without actually hindering their cognitive or motor skills. For recovering addicts of any sort, kava beverages may act as an alternative to alcohol while still keeping the consumer sober and able to have an enjoyable time. This opportunity is marketable to those that do not enjoy alcoholic beverages but to still feel similar effects while being able to remain social.
Threats
Due to the fact that CBD is a resinous compound extracted from marijuana, it has received backlash and questions from lawmakers. For example, New York Times referred to kava as “Nature’s Xanax” (Montague). Since marijuana is considered illegal by federal law, lawmakers in New York ordered bakeries and restaurants to stop adding cannabidiol to beverages and food products. The case is the same for that of kava, it is questionable to many, especially since it is still illegal in other countries. These types of instances are causing many regulators to take attention which prompted the Food and Drug Administration to clarify that it is illegal to market CBD products as any form of dietary supplement. The recent decision of some states to legalize marijuana has likely sparked interest in the health benefits of cannabidiol. (businessoffashion.com) These threats are important to be aware of, in order to prepare for the future. The company website offers disclaimers regarding legalities and that individuals must be 18 years or older to drink the tea. Although these threats do not currently affect the kava kava industry and it is still being infused in many products, the association of kava with CBD or any hemp products may be viewed negatively.
Target Audience
The target audiences for the potential collaboration of these two industries and for Kava Kasa would likely be related to the age demographics that are attracted to the products. There are several groups which can be considered the target audience for this partnership.
Target Audience 1: Millennials
The first identifiable target audience is the generation consisting of those born in 1981-1996, also known as the millennial generation. These individuals are between the ages of 22-37 years. CBD oil and kava products act as anxiety relievers, and since millennials seem to be one of the first generations that acknowledges and accepts mental health discussions, this is an attractive concept. As a country, there has been an substantial increase in anxiety and depression since the 1930’s. By learning about coping mechanisms and natural solutions to handling various mental illnesses, people are able to find therapeutic resolutions through substances such as kava kava and CBD products.
Grand Rapids, being a highly-populated and large city with many college students and millennials, has experienced success since the opening of Kava Kasa. The employees at Kava Kasa are sure to ask if someone has visited the establishment before, and if not they are happy to offer information and advice when picking out a beverage. Kava Kasa employees work to make first-time customers into returning customers. The events that are held at Kava Kasa such as community yoga and open mic night is geared to attract the millennial generation.
Target Audience 2: Coffee Shop Goers
As previously stated, the environment at Kava Kasa is very welcoming. With warm lighting, comfortable seating, Indie background music and colorful artwork, it creates a calming environment where students and Grand Rapids residents can come to work, meet with friends, or attend one of the events held at Kava Kasa. Since the city of Grand Rapids boasts many coffee shops and cafes, the company stands out because it is selling a unique, niche item rather than what is expected. When a company like Kava Kasa is looking to grow, selling its unique strengths and assets to the target audience is the first step in expansion.
Since much of Kava Kasa consumer base is composed of returning customers, brand loyalty is very important in reaching this target market. The environment has to appeal to the average coffee drinker by becoming the consumer’s favorite place to study or meet with friends. The executives at Kava Kasa appeals to this audience by offering a sought-after environment while offering unique and niche beverages.
Target Audience 3: Law and Policy Makers
The root, Kava kava, is legal in the United States but many other countries are divided on the topic of this medicinal root. Some countries such as Britain and France have unclear laws regarding kava’s legal status, while others are more restrictive on the form that kava kava is sold in. Since the root is a controversial topic, it has been important for the workers at Kava Kasa to create a claim that protects their business and explains that the founder is abiding by the laws of the United States (“Disclaimer”). The law and policy makers are important to consider due to the implications that conflicts or new policies may arise. Due to the location being in Michigan, where marijuana was recently legalized for recreational use, Kava Kasa has not received much backlash from lawmakers at this time.
Conclusion
In conclusion, the industry of kava and CBD-infused products is still emerging and newly becoming accepted by many. The collaboration of these products and a coffee/tea house environment is effective, as proven by the successes of Kava Kasa. The niche market offers potential for creative ideas when trying to reach new audiences. Kava Kasa employees incorporate events involving art, music and dance in order to reach a wide range of people and continue spreading awareness about the medicinal benefits of ethnobotanical teas. The owners at Kava Kasa focus on making first time visitors into long-term regulars. The location has established brand loyalty and benefits from the lack of competition, since it is the only kava bar in Michigan. By creating more brand awareness through social media advertisements and reaching out to the college students and millennials in Grand Rapids, more consumers will be informed of the benefits to kava and will visit the tea house. Since the business has only been open for two full years, the social media team could create a long-lasting impact by promoting the business based off of its uniqueness and explaining the many benefits of this root.
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