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Log InEstimate the annual market size for premium coffee shops (defined as those charging at least PHP 150 per cup) in Metro Manila. Walk me through your approach and any key assumptions you make.
Why This Is Asked
This tests your ability to break down a complex problem into manageable parts, make reasonable assumptions under uncertainty, and perform mental arithmetic, all core consulting skills for case interviews at McKinsey.
General Approach
Start by clarifying the question and defining terms. Use a top-down or bottom-up framework, segment the population logically, make clear assumptions, show your math, and end with a sanity check. Practice mental math daily.
Sample STAR Answer▾
Situation
In a mock case interview for my application to McKinsey, I was asked to estimate the annual market size for premium coffee shops in Metro Manila.
Task
I needed to define the boundaries of 'premium coffee shops' and produce a structured, reasonable estimate using logical assumptions and basic mental math, all within a few minutes.
Action
I started by clarifying the definition: premium means at least PHP 150 per cup, and shops include chains like Starbucks and independent cafes. I then segmented the market by population: Metro Manila has roughly 13 million people. I assumed 60% are coffee drinkers (7.8 million). Among those, I estimated 40% (3.12 million) buy coffee out at least once a week. Of those, about 35% (1.09 million) choose premium options. I multiplied that by 52 weeks per year to get 56.68 million premium coffee purchases annually. I assumed an average spend per visit of PHP 200 (drink plus possible pastry). That gave an annual market size of approximately PHP 11.3 billion. I then sanity-checked: that seemed reasonable given the number of Starbucks outlets in Metro Manila (around 300) each doing probably PHP 30-40 million annually, which fits.
Result
I provided a clear, step-by-step estimate of around PHP 11 billion, showing my assumptions and calculations aloud. The interviewer nodded and asked me to discuss one key sensitivity, which I identified as the frequency assumption.
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