Strategic direction

Fernhill Coffee Roasters is a private limited company that sells coffee beans to independent cafés and, since 2022, direct to consumers through a subscription service. The UK coffee market is growing, but competition from supermarket own-brands has increased. Extract A: Fernhill sales data

	2023	2024	2025
Café (wholesale) revenue (£000)	2,400	2,350	2,280
Subscription revenue (£000)	310	620	1,040
Number of subscribers	4,100	8,000	13,200
UK specialty coffee market (£m)	410	445	480

Extract B: Pricing decision Fernhill's marketing director wants to raise the monthly subscription price from £8.00 to £9.00. A small trial in one region suggested that the number of subscribers would fall by about 5%. The finance director worries that 'one bad review on social media could cost us thousands of subscribers', and argues that Fernhill should instead spend more on promotion to win market share.

Northgate Cycles plc was founded in Nottingham in 1962 and became one of Britain's best-known bicycle brands. It designs bikes in the UK and has them assembled by a contract manufacturer in Taiwan. Most sales are made through independent bike shops and large sports retailers. During the pandemic, demand for bikes boomed and Northgate increased its inventory sharply. When demand fell back in 2023, the whole industry was left with too much stock and prices were cut heavily. Northgate's profits fell and its share price halved. The new chief executive, Dana Okoro, believes the future lies in electric bikes (e-bikes). The UK e-bike market is growing at about 12% a year, while sales of conventional bikes are flat. Northgate's own e-bike range is small and receives mixed reviews. Dana has proposed acquiring Volt Velo Ltd, a London start-up with a highly rated e-bike, a strong social-media following and its own patented battery technology. Volt Velo's founders would want £24 million for the business and seats on the Northgate board. Some directors argue that Northgate should instead focus on its core brand: cut costs, reduce inventory, and sell more bikes directly to consumers online, where margins are higher. The finance director warns that the acquisition would need to be financed mainly by a bank loan, at a time of high interest rates. Northgate's workforce of 380 is mostly in design, marketing, sales and distribution. Many staff are long-serving and proud of the brand's heritage. Dana's management style is fast and decisive, and two senior managers left within six months of her arrival. Appendix 1: Northgate financial data (£m)

	2023	2024
Revenue	96.0	84.0
Gross profit	31.7	23.5
Operating profit	6.2	1.3
Inventory (year end)	41.0	33.0
Current assets	58.0	47.0
Current liabilities	30.0	31.0
Non-current liabilities	10.0	10.0
Total equity	52.0	50.0

Appendix 2: Volt Velo Ltd

	2024
Revenue	£7.5m (up 60% on 2023)
Operating profit	£0.4m
Average selling price	£2,400 per bike
Customer review rating	4.7 / 5

Appendix 3: Market information • UK conventional bike market: about 2.0 million units a year, flat. • UK e-bike market: about 220,000 units a year, growing about 12% a year. • Several large Asian manufacturers are entering the UK e-bike market with lower prices. • The pound has weakened against the New Taiwan dollar over the past year. • The government is consulting on new safety standards for e-bike batteries.