COSTA COFFEE

Company Background:
Costa Coffee is a British multinational coffeehouse company headquartered in Dunstable, United Kingdom and a wholly owned subsidiary of Whitbread PLC. It is the second-largest coffeehouse chain in the world (behind Starbucks) and the largest in the United Kingdom. Costa Coffee was founded in London in 1971 by the Italian brothers Sergio and Bruno Costa, as a wholesale operation supplying roasted coffee to caterers and specialist Italian coffee shops. It was acquired by Whitbread in 1995, since when it has grown to over 1,700 stores across 28 countries. The business has 1,375 UK shops, 920 Costa Express vending machines and a further 800 shops overseas. Costa coffee entered India in 2005 through the Jaipuria Group as its master franchisee. It has already drawn up an aggressive expansion blueprint, under which it plans a four-fold increase in the number of stores in the next three years. RJ Corporation or the Corporation in the name of Ravi Kant Jaipuria got established in the year 1991. It has an annual turnover of over Rs. 3000 Crore. RJ Corp Limited operates as a holding company and through its subsidiaries which are into beverages, fast foods, dairy products, retail, real estate, housing, healthcare, and education businesses. RJ Corp Limited operates as a subsidiary of Jaipuria Group. Costa Coffee, like other ambitious coffee corporations, expanded its already far-reaching coffee empire throughout India in 2005. But despite any successes displayed in the hard numbers, Costa's higher management is declaring that they can do better. The corporation directly planted their original UK model onto the Indian subcontinent. In review of the 5 years of operations in India, Costa discovered the coffeehouses were first and foremost meeting places. As a result, the entire Costa Coffee model had to be reworked. The brand needs to refocus their efforts in the south, where coffee is a popular drink. DIL: Devyani International Limited (DIL) which is engaged in running Pizza Hut, KFC, Costa Coffee, Disney Artist outlets and restaurants and bars at the airport in different parts of the

country.DIL is a key associate company of RJ Corp. To delight the coffee aficionados, DIL in alliance with Whitbread Group UK Costa Coffee, started its Indian operations owns and operates 90 plus Costa Coffee stores in India. COSTA INDIA: Costa India is a part of RJ corporate group with a turnover of over 1200 Crores. Costa Coffees master franchisee in India, Devyani International Ltd. (DIL) has invested in a fully owned Commissary in Gurgaon that supplies savories and desserts for Costa outlets in India that matches the high standards of Costa outlets in U.K. The Group opened its first Costa Coffee outlet in Connaught Place, New Delhi. Costas USP lies in their excellent range of Coffee and Coffee-based drinks, apart from the other popular non-coffee beverages. This coupled with the well decorated, beautiful and unique interiors give Costa customers a relaxed environment to savor their coffee.

Market Study & Competitor`s Analysis

The secondary market study of Costa Coffee includes several factors. The first is target audience. It gives us an idea about the market where to actually sell the product. In this type of industry company cant easily sell its products or provide its services because its a service industry and only those places are suitable where the actual potential is found. Now as Costa is targeting very high end customers, it will target that market where it can find viable options like big corporate offices Target Audience: The target groups for Costa Coffee are divided on the basis of: Income: This is the foremost important parameter for Costa Coffee, as its products are very costly, so target group is upper class and upper middle class people. So basically elite class is the target group for Costa. Age: 21-45 including youngsters, professionals and mature customers. Time: The following table will show the target audience as per different time slots.

Midweek Sales Morning Commuters Local people Lunchtime Shoppers Afternoon Shoppers Evening Commuters Social customers Youth gangs

Weekend Sales All day Shoppers Social customers Customers out for lunch

business Local business Students people Pensioners

Mothers and kids

Competitor analysis can help us in identifying the strategies of our competitors. It helps us to analyze the strategies adopted by them. Unlike a fragmented industry where the moves of any single competitor may be of very less importance, Coffee industry of India is highly concentrated with CCD and Barista Lavazza leading the market. So competitor analysis becomes a vital part of strategic planning for any player in the market. The potential for number of branded coffee outlets in India is around 3,000 stores according to Tecknopak advisor. Since there is ample scope for each player due to the high potential in the market, different international chains are looking for retail partners in India to make their foray into the market. Chains such as Gloria Jeans and Coffee Bean & Tea Leaf are among the foreign brands that have opened stores in India. Global players are foraying into India growing beverage market. They are tying up with India partners. US based leading coffee chain, Starbucks, has entered into a distribution tie-up. The competitors are? Caf Coffee Day (CCD): CCD, a ISO 9002 certified company, is the first chain to enter retail by incorporating Amalgamated Bean Coffee Trading Company Ltd (ABCTCL) in the year 1994. It started the caf culture in India in 1996 by opening its first caf at Brigade Road, Bengaluru. Cafe format of CCD include Music Cafe, Sports Caf, Book Cafe, Highway Cafes, Lounge Caf, Garden Caf, Cyber Caf etci Barista Lavazza: Barista was established in February 2000 and it opened its first outlet at Basant Lok, New Delhi. The name Lavazza itself shows the Italian roots and shows a picture of the old coffee houses in Italy the hotbeds of poetry, love, music, writing, revolution and of

course, fine coffee, and is synonymous with all things Italian - creativity, art, passion and of course, espresso. CBTL: The Coffee Bean & Tea Leaf is a California-based coffee chain, owned and operated by International Coffee & Tea, LLC and has opened its first store in India in the last quarter of 2007. Blue Foods has franchise agreement with this California-based coffee chain. MOCHA: Mocha was opened in Mumbai in December 2001. Mocha Coffees & Conversations has 20 units out of which 12 are franchised. The largest Mocha is in India with 10,000 sq. feet. Bru World Caf: Building on the success of Bru, Indias leading coffee brand, Hindustan Unilever recently opened its first ever coffee outlet in Mumbai The Bru World Caf. Barnie's: US based coffee chain Barnies Coffee and Tea Company started its operation in India in August 2005. Barnie's opened its first store in Noida. Victoria Impex Pvt. Ltd. is the master franchisee of Barnies Coffee. Barnies Coffee & Tea Company Inc was found in 1980 in the US.

Gloria Jean's Coffees: Australian Coffee house Gloria Jeans (GJC) entered in India through master franchise agreement with Citymax India, (part of the Dubai based global retail giant, Landmark Group), a leading hospitality, leisure and food retail company.

SWOT Analysis:

STRENGTHS
1.Reputation of a well known UK brand of international standards 2. Scored highest on employee behavior, promotional offers and availablity of products. 3. Experienced global expansion.

WEAKNESS
1. Less number of stores. 2. Presence in relatively few countries worldwide. 3. Operates on franchisee system due to which there is high investment and some opportunity losses. 4. Poor brand recall, and highly priced.

SWOT
THREATS
1. Starbucks, the biggest threat is

coming to India.

OPPORTUNITIES
1. Expanding in markets like India and China. 2. Can target more number of corporates and IT complexes in commercial cities. 3. High potential in social gatherings.

2. Intense price competition in the future.

3. Being a late entrant as compared to CCD, it still has to achieve its break even that too with accumulated losses. 4. Higher margins may increase threat of new entrants. 5. Market share being captured by unorganized scale.
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Marketing Mix: 1. Product:

Brand Name: It signifies luxury and comfort. The brand name has perfection and excellence in its look and name. The Costa brand promise is WE MAKE IT BETTER and it is the quality standard that is used to convince people that COSTA is a better choice. Styling: Styling of the coffee shops is done in an Italian way which has a warm and welcoming atmosphere. Image: Image of the brand signifies luxury. The menus, posters and the pictures inside the stores are all designed to attract young and young at heart, professionals and customers. Theme: Costas theme has always signified warm atmosphere. Be it the colors used in the coffee stores or the theme reflected from the logo. The tones are warm, soothing and relaxing. The dominant tones chosen have touches of brown and maroon which exhibits a classy look. Service: The perfection is there in the excellent coffee made by the perfect Baristas who prepare coffee with speed and precision. Variety: The variety of products is great.

2. Price
Costa Coffee has always followed a premium pricing. Using a high price signifies that there is a uniqueness about the brand. There is different pricing which is followed for different products according to the location the store is situated at, whether its a posh area like South-extension (New Delhi) or a high-end area like an airport. Pricing has been done accordingly like active, economy, premium, super premium pricing etc. But prices have been comparatively higher as compared to other coffee retail outlets like CCD, Barista etc. But outstanding quality and the service compensates for the higher pricing. This is the reason why the target market is the privileged class and upper middle class.

3. Place
Costa Coffee stores have been opened in strategic locations so as to target the high-end segment. Stores have been opened according to the exposure and competitive edge in that area. Different types of outlets are there like high street stores as in Greater Kailash Colony, Delhi; kiosks present in different MNCs; IT Parks as in Cyber Park, Infinity towers and in malls.

4.

Promotion
Association with movie I AM. Promotion of the movie I AM was done at the Costa Coffee outlets. Different loyalty cards are given to professionals, employees of the companies and students in order to boost up the sales. Tie-ups with corporate, retail outlets and cinemas are done in the form of gift vouchers, coupons etc. Different campaigns for different seasons like Ice cold campaign was launched in April. Samples are provided when new products are launched. Promotions are done during IPL and world cup seasons where outlets were opened near the stadiums and rest of the awareness will be through word of mouth because of the reputation of the brand name Costa.

5. Process
The process at Costa Coffee is basically self-service but a flexible delivery process is there where the order is delivered on the table of the customer if the time taken to get the order ready is longer. Customers are asked to fill the feedback form in order to resolve their complaints or any aspect with which they are unsatisfied.

6. People
Employees are friendly and know how important hygiene is. Every single barista in every single Costa store has been professionally trained in the art of coffee by qualified coffee experts, at a special coffee academy. In some of the stores, for the first time ever in India a retail coffee outlet has taken this initiative of employing differentially able people who are deaf or mute.

7. Physical Evidence Warm and relaxing tones used in the logo, stores interiors reflect an Italian aura which welcomes the customers. Book awards, Costa Foundation for underprivileged creates a buzz among the public through different PR activities. These activities make the brand visible among the people.

TOWS Analysis:

Value Chain Analysis

A recent Allegra Strategies survey, (believed to be the largest ever independent survey of the coffee market) has identified Costa as the UK's favorite coffee shop in both 2010 and 2011. Costa also scored highest with British consumers on 'quality of coffee' among the leading branded coffee chains trading in the UK. Allegra Strategies is a London-based strategic research consultancy recognized as a global leader in the foodservice and coffee shop sector. Allegra is best known for its definitive reports on the European and UK coffee markets. They have accurately predicted trends in the UK branded coffee shop market since 1999. Inbound logistics-At Costa coffee, the whole coffee-making process right from storing, blending, to roasting, grinding, and pouring is done by Costa coffee itself and involves no one else. The beans are sourced from 100% rainforest alliance approved coffee from as far as Central and South America, Africa and the Far East. Costa coffee says only 1% of the world production of coffee is good enough to go into creating the unique taste and aroma of their Mocha Italia blend. Operations- When the coffee beans reaches the roaster y, an expertly trained team spends hours examining, cupping and charting the exact acidity, body, sweetness, bitterness and aroma profiles. The coffee beans are slow roasted to extract the true coffee flavor and aroma. Every

batch is slow roasted at low temperatures in a Petrocini and Probat drum roaster. The roasting is stopped when the oils are still contained within the bean. Outbound logistics- At the stores, the skilled baristas grind the beans, releasing the oils and serve them mixed with added contents. Marketing and Sales- The COSTA stores COSTA METRO Built for the city, these specially tailored metropolitan stores boast a sleek, contemporary feel.

COSTA EXPRESS-

Served at Costa express bars everywhere and they use only fresh milk and real Costa Mocha Italia beans.

COSTA DRIVE THRU

COSTA also markets itself on lines of being iconic when it comes to its packaging for being a true environmentalist. Each of the recyclable cups is made up using only certified sustainable pulp and vegetable, instead of oil-based ink. COSTA is on its way to making it even better by increasing the recycled content or using FSC certified virgin pulp paper.

Human Resource Management- The workforce at Costa includes a team of people who keep running Costa smoothly behind the scenes. The varied ranges of roles include everything from Human Resources and Service Quality to Retail Development Management, Communications, Finance, Corporate Sales, Supply Chain and Marketing. They are offered plenty of benefits including competitive salaries and Whitebread discount card. Most roles also include private health care, bonus schemes, company car, contributory pension and share save scheme.