Case Study

NESCAFÉ
 Indian Coffee Market - Overview

All India (cups)

100%

INSTANT COFFEE Roast & Ground (R&G)

57 % 43%

100% Coffee BLENDS (Coffee-chicory) COFFEE MIXES

18% 77 % (Just add water)

5%

NESCAFÉ CLASSIC NESCAFÉ SUNRISE BRU

100% 45% 55%

All Coffee = In-home + Out-of-home

 In-home coffee market snapshot
How to read figures – a% @ b%: All India (cups)
100%
a% = Market Share
b% = Annual Growth Rate

INSTANT COFFEE R&G

68 % @ +7% 32% @ -10%

COFFEE MIXES
100% PURE BLENDS (Coffee-chicory) (Just add water)
23% @ +10% 76 % @ +4%
1% @ +50%

NESCAFÉ CLASSIC NESCAFÉ SUNRISE BRU

100% 43% 57%
 ‘Café style coffee’
Mixes Segment

Coffee Mixes

Hot Cold
73% 27%

NESCAFÉ BRU BRU

Cappuccino Cappuccino Ice Cappuccino
77% 23% 100%

M. Shares (By Volume)

 Coffee in India – Consumer Landscape
SOUTH NORTH-EAST-WEST
WHO ►Initiation at young age (high school) WHO ►Initiation at young age (high school)

►Youth prefers Instant coffee to R&G ►100% Pure soluble coffee preferred
WHAT ►Prefer a strong coffee cup with great WHAT ►Coffee used as a milk modifier with
aroma lighter strength

►Coffee consumption skewed towards

WHEN cold season
WHEN ►All day, but key time of day is Morning
►Key time of day: Breakfast & Evening

►Majority at home but out of home ►Majority at home but out of home also
also is significant WHERE is significant
WHERE ►Coffee excitement through cafés, new ►Café culture spreading fast (top cities)
types of coffee beverages being
introduced
►Alertness, Stimulation, Conversations,
WHY &
Social Impress
►Aroma, Stimulation WHY
WHY ►Barriers (aided): Heat perception,
►Instant coffee for convenience NOT
expensive
 Coffee in India – Category Landscape
SOUTH INDIA NORTH-EAST-WEST INDIA

Coffee growing region, developed coffee Coffee is still an under-developed category

culture

► Tea-Coffee ratio = 4:1 ► Tea-Coffee ratio = 60:1

► No seasonality ► Highly seasonal
► Coffee loyal consumers ► Mostly light/infrequent users
► Understand a good cup of coffee (aroma, flavour) ► Coffee used as a milk-modifier

PENETRATION SNAPSHOT PENETRATION SNAPSHOT

SOUTH NORTH+EAST+WEST

►Urban (SEC A-E): 62% of population drinks coffee ►Urban (SEC A-E) 29% of population drinks coffee
►Rural (R1-R5) 27.5% of population drinks coffee ►Rural (R1-R5) 1.2% of population drinks coffee
(< Half of Urban)
NESCAFÉ: Brands-Geographical Distribution

NESCAFÉ Classic

SUNRISE Premium

SUNRISE Special (Andhra

Pradesh Only)
 Region
North-East-West
 Household Penetration (North-East-West)

Coffee Penet.% (Urban) Coffee Penet.% (Urban)

2007 2008 2009
28.5% 27.1% 29.5% 29.3% 28.2%
15.9% 15.4%
16.8% 16.7%
18.0%
15.7%
9.3% 9.2%
8.8% 9.3%
9.6% 9.5%

2005 2006 2007 2008 2009 Q1 Q2 Q3 Q4

Source :HHP 2007-2009, IMRB

 N-E-W: Coffee preparation & purchase
Who prepares coffee ? How is coffee prepared ?
Milk+Water
Students YWA* CWE* HW* Only Milk

Self 22% 19% 7% 87% Consumer Method of

Spouse - - 84% 1% Preparation
78
Parents 63% 64% 4% - 0.8g coffee
22 9g sugar
Know how 105 ml milk
to prepare 74% 75% 64% 99% 15 ml water
46% whip for froth
HW primarily prepares coffee at home

Who purchases coffee ?

Where is coffee purchased? How frequently?

Students YWA* CWE* HW*

Grocery/General 82% 10%
Self 47% 47% 59% 89% Store/Local Kirana
Spouse - - 75% 16%
Supermarket/Hype 14%
Parents 77% 77% 8% - rmarket 36% 54%

Wholesale store 2%
HW primary purchasers, shared by the CWE

* Glossary Monthly grocery

Emergency
Stock over

YWA – Young Working Adults

CWE – Chief Wage Earner
HW – House Wife
 Category User-ship: North-East-West

100%

80%
LIGHT
45

% HHLD Distribution
Majority of Consumers are
60% MEDIUM
infrequent users of coffee in
North-East-West Regions. 40% HEAVY

53
20%
2
0%

Light: up to 2 cups per HouseHold per month

Medium: 2 to 48 cups per HouseHold per month
Heavy: 48+ cups per HouseHold per month
Region
South
 Household Penetration (South)
Household Penetration (South)

Coffee Penet.% (Urban) Coffee Penet.% (Urban)

79.3% 78.5% 79.9% 78.6% 79.5% 2007 2008 2009
64.5%
63.9%
63.2%
63.5% 63.6%
62.8%
62.7% 60.9% 62.8%
62.3%
61.0%

60.3%

2005 2006 2007 2008 2009 Q1 Q2 Q3 Q4

Source :HHP 2007-2009, IMRB

 South: Coffee preparation & purchase
Who prepares coffee ? How is coffee prepared ?

Students YWA* CWE* HW* 15 Consumer Method of

Self 11% 21% 15% 96%
Black
Preparation
Spouse - - 76% - 1.3g coffee
Parents 80% 74% 6% 1%
Milk+Water 9g sugar
< 13 years Only Milk 120 ml milk
83
40 ml water
Know how 54% 47% 38% School
99% Cant say Tumble for froth
to prepare students

House wife primarily prepares coffee at home Coffee is mostly prepared with a mix of milk and water

Who purchases coffee ? Where is coffee purchased? How frequently?

Students YWA* CWE* HW* Grocery/General 84%

9%
Store/Local Kirana
Self 19% 36% 35% 65%
Supermarket/Hype 15%
Spouse - - 59% 34%
rmarket 37% 54%
Parents 77% 59% 9% 3%
Wholesale store 5%
House wife is the primary purchaser

* Glossary Monthly grocery

Emergency
Stock over

YWA – Young Working Adults

CWE – Chief Wage Earner
HW – House Wife
Café Culture
 The Opportunity
 50% of India’s population is below 30 years of age, making India the country
with youngest population in the world
 Young are earning high income at earlier stages of their career than
compared to previous generations
 High disposable income, a desire to spend on better things, and a desire for
change
 Increased relevance of Café culture
– Opened to different formats of coffee that can be consumed apart from the
regular hot and cold
– Different variants, earlier not known at all are becoming familiar; such as Lattes,
Cappuccinos, Espressos…
– Cafés becoming synonymous as meeting/hangout places where one can share
great moments over a cup of coffee
 Out of Home
 CCD, Barista, Mocha & Costa Coffee are the key players in the OOH
segment
– 2000 outlets across the country
– Huge expansion plans over the next 3-5 years; mainly in tier-II cities
– Also forayed into retailing of packaged coffees
 New Entrant
- Starbucks expected to open café’s in the Indian market soon
 Nestlé’s presence in OOH segment
- Café NESCAFÉ’s
- NESCAFÉ Café Corners
- Vending points across educational institutions & corporate/commercial
establishments
 Coffee mixes (In-Home): A Brief History
 First launched as a basic 3-in-1 coffee by NESCAFÉ in 1998, targeted at
youth
– Met with limited success, withdrawn next year

 BRU launched the first foaming 3-in-1 coffee in 2005, targeted primarily
at aspiring, trendy, upwardly mobile youth
BRU strategy : Focus in driving “Image”
– Leverage Cappuccino imagery of “Trendy”, “Youthful”, “Modern” Beverage
– Growth in Volumes but base still low
– Significant investments behind Cappuccino (both ATL & BTL)- ‘Sip Lick mmm
campaign’

 NESCAFÉ launched NESCAFÉ Cappuccino in 2008, with the proposition of

‘Bring home the café experience’
– This was followed with launch of the variants: NESCAFÉ Choco Mocha &
NESCAFÉ Vanilla Latte
 DELIVERABLES
(STAGE 1)
 Does ‘Café style’ coffee (in-home) have a role to play in developing the coffee
category?
• If Yes – How?
• If No – Then what do you see as the way to grow Coffee Category?
• You may use graphs & charts to support the same
Limit: 1 slide

 Give a Brand Positioning Framework for a Product (within the current portfolio
or outside) that you will look to support/launch. Only one product may be
selected. (Use the Brand Positioning Frame work given in the next two slides
strictly – to provide your inputs)
Limit: 1 slide
 Brand Positioning Framework format
TARGET
FOR . . .
CONSUMER

WHO . . . BRAND

BRAND
IS . . .
PERSONALITY

AND OFFERS … CORE ESSENCE

THAT MAKES ME EMOTIONAL

FEEL … BENEFITS

FUNCTIONAL
BY …
BENEFIT

I BELIEVE THAT … BRAND

DOES THIS BY REASON TO

PROVIDING … BELIEVE

UNLIKE … MAIN COMPETITOR

WHO IS NOT COMPETITIVE

OFFERING … DIFFERENTIATION
 E.g. Coca-Cola Zero
TARGET
FOR . . . active, individual young men
CONSUMER

WHO . . . Coca-Cola Zero BRAND

BRAND
IS . . . fit, tough, original and masculine
PERSONALITY

AND OFFERS … deep down refreshment for the body, mind and spirit CORE ESSENCE

THAT MAKES ME EMOTIONAL

like a man
FEEL … BENEFITS

FUNCTIONAL
BY … not having to compromise on my self-image or taste for the sake of diet
BENEFIT

I BELIEVE THAT … Coca-Cola Zero BRAND

DOES THIS BY REASON TO

the real taste of Coca-Cola with zero calories in packaging more suited to me
PROVIDING … BELIEVE

UNLIKE … Pepsi MAX MAIN COMPETITOR

WHO IS NOT COMPETITIVE

the real taste of Coca-Cola.
OFFERING … DIFFERENTIATION
 DELIVERABLES
(Stage – II)
Instructions
 Complete Marketing Plan:
– Slide 1: 4Ps in detail
– Slide 2: Broad-level Sales & Distribution Strategy
– Slide 3: A Five-year development plan for the brand
• Targeted annual Volume Growth figures. Rationale (may be supported with
statistical data).
• Marketing Inputs to be given, year-wise. Estimated spends.
• Assume a Marginal Contribution in the range of 30-35%. How long will the
brand/portfolio take to break even?
 Slide 4: Articulation of insight (from positioning framework)
 Slide 5: Give the tagline for the Product. Any creative designed will be given
brownie points!
Additional Data
 Out of Home: Café Coffee Day
Background
 Café Coffee Day is a division of India’s largest coffee conglomerate, the Amalgamated Bean Coffee
Trading Company Limited (ABCTCL). Popularly known as Coffee Day, it’s a Rs. 750 crore, ISO 9002
certified company. With Asia’s second-largest network of coffee estates (10,500 acres) and 11,000
small growers, Coffee Day has a rich and abundant source of coffee. This coffee goes all over the
world to clients across the USA, Europe and Japan, making it one of the top coffee exporters in the
world.
 ABCTCL’s retail division Café Coffee Day (CCD) pioneered the café concept in India in 1996 by
opening its first café at Brigade Road in Bangalore. Café Coffee Day is now the largest organized
retail café chain in India with cafes across top ninety cities in the country. It also has cafes in Vienna,
Austria and Karachi

Operation in India
 ABCTCL at present has 970 CCD outlets. The company plans to spend Rs 130-150 crore on
expanding its store network and changing the look and feel of existing stores in this financial year.
The Route To Market for Café’s is mainly through company owned, company operated Cafes.
 The chain is also trying to capture a slice of spends on in home consumption of coffee by retailing
its own coffee and related products through food and grocery chains.
 Out of Home: Costa Coffee
 British coffee chain Costa Coffee has reworked its India strategy to turn
profitable and expand its footprint. The new strategy involves closing
unprofitable locations, segmenting strategy for different locations,
changing the look and feel of outlets and customising the menu to better
suit the Indian palate.
 The chain, which has a master franchisee agreement with Devyani
International, a subsidiary of Ravi Jaipuria owned RJ Corporation, is
looking to expand only at metros. According to Santhosh Unni, the
company went through its share of mistakes before setting the model
right.
 As part of the restructuring, Costa will have four key formats situated at
airports, malls, high streets and IT parks. They have also introduced
something called the off premise business where they are setting up
kiosks in marriages, and seminars meetings.
 Outlets market share of major players

38, 2%
120, 5%

No of outlets
CCD
Costa Coffee
NESCAFE Touchpoint
803, 35%
Barista Lavazza
1270, 56% Lipton Café

42, 2%
Beverages dispensing system market share of major players

14000, 12%

No of machines
49000, 42% Nestle
42000, 36%
CCD
HUL
Others

11667, 10%
 NESCAFÉ Cappuccino
 Targeting youth (between 18-30) by offering
a great alternative to expensive
cappuccino’s available at Cafés
 NESCAFÉ brand name lends credibility

Objectives
 To become an image driver amongst the
youth by establishing the versatility of
NESCAFÉ as a brand
 To provide an affordable café experience to
those who aspire for it
Single Serve Pack
15g Sachet Multi Pack
(5X15g sachet)
 NESCAFÉ Cappuccino: New Variants

 New variants were launched in October

2009:
– NESCAFÉ Choco Mocha
– NESCAFÉ Vanilla Latte

 Launched in select cities

 Limited exclusive consumer

communication done since launch.
– Only In-Store communication through
Point of Sales