You are on page 1of 45

Home Grown Coffee Chains

Submitted to:
Prof Sonu Goyal

Submitted By:
Prakhar Singh 100
PGDM, Section B
IMI, New Delhi Section B, Group 8

Table of Contents

SNO CONTENT PAGE NO

1 EXECUTIVE SUMMARY 3

2 CHAPTER 1 – INTRODUCTION TO COFFEE 4


INDUSTRY

3 CHAPTER 2 – HOME GROWN COFFEE CHAINS 7

4 CHAPTER 3 – SUSTAINABILITY ADVANTAGE 37

6 REFERENCES 45

2
IMI, New Delhi Section B, Group 8

Executive Summary
The consumer in India is extremely heterogeneous. The urban consumer contrasts with the
rural and the South Indian consumer with the North Indian. Further still, the consumer in the
metros militates with his usage and habit patterns. The Indian consumer, is therefore very
difficult to understand and very difficult to predict. At the same time the consumer is a
evolving, with constant change in their choices.

Tea and Coffee are the favourite drinks in India. Though tea has ruled the roost for quite
some time, but a quiet café revolution is sweeping urban India with the explosion of coffee
bars. That is bad news for tea - still the favourite brew for a majority of Indians -, which has
been losing out to coffee in recent years.

Coffee bars, an unheard of concept until a few of years ago, are suddenly big business. There
is also rise in the consumption of coffee. The specialty coffee movement has gained much of
its momentum through the efforts of Indian companies like Barista, Café Coffee Day, Café
Mocha, JavaGreen etc. and also a whole range of foreign brands like Georgia Coffee, Costa
Coffee and Quicky‟s.

In India CAFÉ COFFEE DAY and BARISTA are the most popular and well-known
cafés. The college crowd rates them as one of the coolest hangouts. These companies sell
similar product but their positioning and target audience are very different from each
other. These players not only sell coffee and tea but also food and other merchandise items.

Despite of serving to different audience, these players compete with themselves. Each
player fights for its own share of market. They try to differentiate themselves by the way
of product or price or promotion. However, they are also facing the competition from the
foreign players like Georgia, Costa etc.

There has been a constant shift in strategies of the various players and it is intereting to see as
to how each of them would sustain themselves in a sunrise industry with ever growing
competition both from domestic and foreign players.

3
IMI, New Delhi Section B, Group 8

Chapter1 Introduction to coffee Industry


Coffee has been around in India since the 17th century. However, coffee drinking has
traditionally been largely restricted to domestic consumption, and mostly in the South Indian
states of Tamil Nadu, Karnataka, Kerala and Andhra Pradesh. Coffee as a drink largely faces
competition from substitutes like tea which had been the traditional beverage for households
for centuries and carbonated drinks. This trend changed after the arrival of non-traditional
coffee distribution channels like coffee bar chains, vending machines and specialty coffee
powder chains hit the market. They now constitute nearly 50% of the Indian coffee industry.
This change is attributed to demographic, economic and cultural changes. The new
millennium saw the advent of a young, upwardly mobile consumer class, which increasingly
demanded innovative, sophisticated products and specialty cuisines and beverages. Coffee
consumption at retail outlets created a place for customers to „hang-out‟ and enjoy their
coffee just like in the western world (as they saw in the popular sitcom “Friends”). Coffee
lovers also got exposed to a variety of new blends and flavours. Thus, coffee drinking
became more of conspicuous consumption to demonstrate one‟s lifestyle and status. Café
Coffee Day saw this opportunity and since setting up its first outlet in Bangalore in 1996,
now has a national footprint of 401 outlets.
SFI – 1, IIM Pg 4 Group 3, Section B
Analysis of the Coffee bar Industry

Threat of new entrants


Given the growing interest in coffee in India, it is only reasonable that many new players are
trying to venture into this market. The heavy initial investment and difficulties in sourcing
sufficient quantities and quality of coffee might prompt most new entrants to restrict
themselves to small, regional chains. These companies could evolve strategies for
maximizing operational efficiencies in their regions. This, coupled with very low switching
costs for consumers, will upset existing café chains.

Meanwhile, international coffee giants including Starbucks and Illy are also evaluating
prospects in India. Although capable of investing substantial capital, government regulation
makes it mandatory for them to use the tie-up or mergers and acquisitions route to enter the
Indian market. Unlike typical new entrants, these companies will arrive with considerable
past experience in the industry, putting considerable pressure on existing chains.

4
IMI, New Delhi Section B, Group 8

A third possibility is that of suppliers starting to integrate downwards in the value chain, to
take advantage of economies of scope. Such a move would result in considerable cost savings
and thus yield better margins for such cafés.

Substitutes
A unique, novel experience and the opportunity to socialize are the main attractions of café
culture. In the Indian context, restaurants, fast food joints and ice cream parlours could be
viewed as viable substitutes. Cafés have managed to differentiate themselves as more of a
lifestyle oriented industry compared to the others which satisfy basic needs. A bigger threat
of substitution would be from pubs and tea bars. While the concept of a tea bar is yet to catch
on, most Indians‟ preference for tea over coffee gives them a natural advantage. A perceived
international appeal of coffee could come to its rescue in this case.

Though pub culture has taken strong roots and competes heavily with cafes in the metros and
the larger cities, it is yet to gain acceptance among young people in most tier II cities.
Moving into these cities early is bound to give cafes an advantage.

Customers
Coffee-consumption in India has remained fairly constant in the past since it was restricted
primarily to the Southern states. Ever since the advent of cafes there has been a marked
difference in consumption patterns. Growth in annual coffee consumption has averaged 6.5%
over the last seven years. Overall consumption in India grew from 68000 tonne in 2002 to
80200 tonne in 20051 .The rising percentage of population In the age group twenty to thirty
years has been crucial to the success of the café culture. Higher disposable incomes and large
number of jobs in the IT and BPO sectors have also contributed to this growth. According to
a recent study by Harish Bijoor Consults, by December 2008 the country would have 1,135
organized cafes, growing at 63% per annum in terms of number of outlets. India has eight big
cities, 53 towns with a one million population and 3,410 urban agglomerations with
population below one million. It has potential to accommodate 5,000 coffee retail outlets
(Young India to drive coffee business, 2007).

1
http://indiacoffee.org

5
IMI, New Delhi Section B, Group 8

The biggest source of worry for the cafes is customer loyalty. While some customers have a
clear preference for one brand over another based on quality of coffee and experience, many
would base their preference merely on factors like easier accessibility and price.
Enhancement of customer experience, to achieve clear differentiation is crucial.2

Suppliers
Most Indian cafes source their beans from suppliers in India. The biggest threat from
suppliers takes the form of establishment of independent chains. Tata Coffee, suppliers to
Barista has set up its own chain coffee vending machines and is likely to enter the café scene
in the future. While CCD is safe from such a threat due to vertical integration with its parent
company ABCTCL, all the other players are likely to suffer from increasing supplier power.
International chains entering the Indian market however would be able to source coffee from
foreign suppliers without serious effects on quality and costs.

2
http://indiacoffee.org

6
IMI, New Delhi Section B, Group 8

Chapter 2 Home Grown Coffee Chains


India is one of the fastest growing coffee markets in world. Coffee drinking has become a
statement of the young and upwardly mobile Indians. The major players in coffee retail are
Barista, Café coffee day, Mocha, Java Green.

CAFÉ COFFEE DAY

A traditional family owned a few acres of coffee estates, which yielded the rich coffee beans

in the soil of Chikmagalur, However they soon amalgamated with Bean Coffee Trading

Company Limited, now popularly known as Coffee Day. The coffee growing tradition was

since 1875, but the opportunity after the deregulation of the coffee board in the early

nineties. Coffee Day began exporting coffee to the connoisseurs across USA, Europe &

Japan. In the calendar year 2000, Coffee Day exported more than 27000 tonnes of coffee

valued at US$ 60 m to these countries and, for the second time in its short career of 7 years

retained the position as the largest coffee exporter of India.

Coffee Day has a wide and professional network in the major coffee growing areas

of the country comprising over 50 agents and 50 collecting depots. Coffee Day's two

curing works at Chikmagalur and Hassan cure over 70,000 tonnes of coffee per

annum, the largest in the country. Coffee Day has a well-equipped roasting unit

catering to the specific requirement of the consumers. The most modern technology

available is used to maintain consistency and roast the coffee beans to the

demanding specifications of the discerning coffee consumers.

Key Features:

 125 years of coffee growing history

 A fully equipped ISO certified roasting plant with a 70000 tonnes per annum

capacity at Hassan

 5000 acres of self owned Coffee Plantations

 A ready and enviable base of more than 10000 suppliers

7
IMI, New Delhi Section B, Group 8

Coffee Day Comprises of the following Sub Brands

 Coffee Day - Fresh & Ground (350 Coffee bean and powder retail outlets)

 Café Coffee Day

 Coffee Day – Take Away (7000 Vending Machines)

 Coffee Day – Xpress (341 Coffee Day kiosks)

 Coffee Day – Exports

 Coffee Day – Perfect (FMCG Packaged Coffee division)

Café Coffee Day currently owns and operates 169 cafes in all major cities in India. It

is a part of India's largest coffee company named Coffee Day, ISO 9002 certified

company. Coffee Day's most unique aspect is that it grows the coffee it serves in its

cafes. Cafe Coffee Day's vending machines have a special niche in the market

compared to competitors because Cafe Coffee Day machines offer filter coffee unlike

the instant coffee offered by competitors' brands. Growing from a coffee exporter to

a coffee parlour, café coffee day has certainly come a long way in this segment.

Key Features:

 Pioneers of the Café Concept in India with its first Café at Brigade Road,

Bangalore in 1996. This Café was opened as a Cyber Café (first of its kind) but

later, with the burst of cyber cafes it reverted to its core competency….Coffee

 Essentially a youth oriented brand with majority of its customers falling in the

15-29 year age bracket

 Each café, depending upon its size attracts between 400 and 800 customers

daily

 At present it operates 169 cafes across 43 cities

 Plans to operate 200 cafes by December 2004

 It is a place where customers come to rejuvenate themselves and be themselves

8
IMI, New Delhi Section B, Group 8

Marketing Mix

Every company goes through different phases in the business. The phase is very similar to
that of the product lifecycle. In order to sustain in the market and to maintain its market share
it is essential for the company to have a right marketing mix. The company has to have a mix
of proper product that is relevant to the target audience, proper price, proper reach i.e. the
place and relevant promotion that keeps the target audience interested in the company.

Product

Café Coffee Day‟s menu ranges from hot and cold coffees to several other items. However,
the core product is the coffee. The management believes that trend is changing towards
coffee. So taking this opportunity, the company also sells coffee powder. Café Coffee Day
also believes in selling other merchandised products.

Coffees & Teas Refreshing Alternatives Eatables

Hot Coffee Granitas Melting Moments

Espresso Blood Orange Banana n’ Walnut Cake

Espresso Americano Cool Blue Banana Chocolate Mousse

Macchiato Pineapple Crush Banana Caramel pie

Cappuchino Emerald Ice Chocolate Doughnut

Café Latte Ruby Surprise Cookies

Chococinno Marble Cake

Café Mocha Pineapple Getaux

Irish Coffee Chocolate Cake

International Coffee Smoothies Ice Creams

Colombian Juan Valdez Mango Colada Vanilla

Ethiopian Qahwah Strawberry Colada Chocolate

Kenyan Safari Seasons Best

Cold Coffee Cremosas Quick Bites

9
IMI, New Delhi Section B, Group 8

Sweet Mint Litchi Samosa

Cold Sparkle Ginger Spice Puff

Brandied Banana Pina Colada Pizza

Tropical Iceberg Croissant

Iced Eskimo French Fries

Kathi Roll

Wraps

Biryani

Sandwiches

Kulcha

Burger

Pasta

Masala Sandwich

Coffee Add-ons Cool Refreshers

Honey Fruit Juices

Flavoured Syrups Mineral Water

Red Eye

Whipped Cream

Scoop pf Ice cream

Chocolate Sauce

Teas

Assam Tea

Masala Chai

Lemon ‘n Ice Tea

Kashmiri Qahwah

Apple n Cranberry ice tea

10
IMI, New Delhi Section B, Group 8

Product Sources:

Coffee Day's most unique aspect is that it grows the coffee it serves in its cafes. Coffee Day
has a well-equipped roasting unit catering to the specific requirement of the consumers. The
process is carried out under the control of experienced personnel to meet highest quality
standards. The most modern technology available is used to maintain consistency and roast
the coffee beans to the demanding specifications of the discerning coffee consumers. The
coffee beans are supplied to all the cafés from Chikmagalur.

The eatables at Café Coffee Day are catered by different vendors: example: ice creams are
catered by Cream Bell, Milk by Amul and samosa‟s by Patsiers Gallery.

Café Coffee Day also sells merchandise through its stores. 5 per cent of the revenue comes
from sale of merchandise.

Quality standards:

Café Coffee Day has a check on quality all the time and in several aspects. The operational
in-charge will go around checking business, record keeping, service and check the feedback
forms. The food in-charge will look at the way food is being stored, coffee is being made,
what is the time take to extract the coffee and so on. Marketing person will go about checking
displays, how the merchandise are displayed.

Price

Café Coffee Day has positioned as “Value for Money”. The major target customers are the
youngsters. Pricing is a very sensitive issue for the Indian consumers.

Café Coffee Day believes in mass marketing. The average spent by the customer is 100-125.
Their coffee starts from as long as Rs 15. However there are some outlets where the
students are given special discounts. CCD even set up their outlets in the college campus. For
e.g. Café Coffee Day has opened an outlet at the NMIMS campus where they are providing
additional 10% discount to the students.

CCD is looking for expansion to more interior places. Here prices become more complex as
the consumer are very conservative in spending. A cup of coffee at Rs. 35 is accepted in

11
IMI, New Delhi Section B, Group 8

metro cities but not in small towns. The decor, ambience and the experience will play a
major role in pulling the crowds in small cities.

The price of the product has to be kept uniform in order to maintain the uniformity in all the
outlets.

CCD target audience is youngsters. Majority of them are dependent on their family for their
expense. This is one of the most important reasons for low pricing compared to other cafes.
They believe it in making their product at an affordable price. Pricing is one of the
important weapons for them to fight against their competitor.

Place

Café Coffee Day outlets are spread across India. However, there are more number of outlets
in the metros and towns. Café Coffee Day has also been on an aggressive drive to expand the
number of cafés in the smaller towns across the country based on research and invitations
received from these places to open more such cafes there. However, the focus has not been on
just opening more cafés wherever there has been an opportunity. Café Coffee Day is already
the largest and most wide spread retail chain of cafes in India with a current count of
620 cafés in 102 cites.

Promotion

In order to stay with the competition and to keep the audience interested, they undertake lot
of promotion activities. CCD jointly organizes large number of promotions with the other
companies serving the similar target audience. These cafes have emerged as a new media
vehicle for reaching the right type of the customer. CCD gets in physical touch with
audiences, target loyalty club members, or advertises in their newsletters. CCD has also
undertaken a promo jointly with TVS scooty. The promo was done at all the outlets across 43
cities. In this promo a package of 2 ices blended cold coffee and 1 choc fantasy for just
selling for Rs 82.

12
IMI, New Delhi Section B, Group 8

Customer Loyalty Programme:

Coffee shops have a high loyalty factor i.e. 60-70% of customers come in at least once a
week. The Cafe Citizens Programmed launched along with Net Carrots Loyalty Services
would reward regular customers of Cafe Coffee Day. Any customer who bills a minimum of
Rs 100 on a single bill is automatically eligible for membership to the Cafe Citizens
Programmed. The programmed entitles members to a 10 percent discount on all food and
beverage bills for a year from the month of membership. Members will also receive surprise
gifts from India times Shopping when they reach a total billing amount of Rs 2,000, Rs 5,000,
and Rs 10,000. Members can track their total bills spend at any Cafe Coffee Day outlet across
the country. The programme was very successful and they attracted 1, 35,000 citizens.

Smart Card Programme:

Started from 1st Aug, 04; one can enroll into the program by paying Rs.100/- at any Café
Coffee Day Outlet and get a TEMPORARY CARD immediately after filling in the enrolment
form. With the Card, one can accumulate Value Points Equivalent To Cash on net purchases
at every transaction made at any of CCD outlets, provided the card is submitted to the café
staff at the time of placing each order.

The personalized permanent SMART CARD would reach at ones place in 7 days from the
day of enrolment and the points would be transferred from temporary card to the
PERMANENT SMART CARD. The points accumulated on the card would be printed on the
bottom of the bill. So it is very easy to keep track of the points. As soon as 100 points have
been accumulated on the card, one can start redeeming the points. Points can be redeemed on
food, beverage and now even merchandise like coffee powder, T-shirts, mugs etc except
Jukebox coupons.

Current Promotion:

Oyester Bay

The current promotion is done with the Oyester Bay Jewellery for the woman‟s day. CCD has
arranged the contest, which is arranged for the woman‟s day event. This type of contest
attracts the young crowd especially girls.

13
IMI, New Delhi Section B, Group 8

Fame Adlabs

CCD is also involved in the promotion with Fame Adlabs. The pamphlets are being
distributed indicating the current movie shown and the movies to follow. Also it shows the
special offer for some lucky customer to get the coffee free.

Magazine

CCD also has private magazine “Café Beat” distributed free to their customers. It includes
ads and advertises about the promotions to follow.

Tie-Ups

CCD jointly organizes large number of


promotions with the other companies
serving the similar target audience.

EBD Book Café:

EBD is book café has joint ventures with


CCD. EBD Book Café believes that by
selling books from within the espresso
bars like CCD and other such co-
locations that have a footfall of over 100
plus customers in a day will help them to achieve growth in book sales. One can find one‟s
favorite books at such cafes starting from fiction, non-fiction, religion, cookery, management,
lifestyle, art & craft, children books and much more. EBD Book Café are in collaboration
with Café Coffee Day have existing outlets in Ludhiana, Jaipur, New Delhi and Kanpur and
are in discussion to open more such outlets in, Mumbai and Ahmedabad. The CCD
bookshops are in the same premises though not necessarily inside the outlet.

Himalaya with CCD:

To drive usage of honey, Himalaya Drugs is developing daily diet products and looking at
marketing them by tying-up with leading consumer brands. It has tied up with Cafe Coffee
Day, to create four dishes; Honey Cappuccino, Honey milk shake, Rich Chocolate Cake and

14
IMI, New Delhi Section B, Group 8

ice cream topped with honey and nuts. The Cafe


Coffee Day partnership is unique. It provided a
platform to reach out to the target audience in a
relaxed environment where they could
experience innovative uses of honey. The
association with Cafe Coffee Day across 100
outlets in seven cities was not only to expand
the category, but also towards creating touch
points to experience the goodness of Himalaya
Forest Honey

Levi’s:

CCD has also tied-up with Levis where CCD will promote Levis product in their cafes.
Levi‟s recently launched their latest range of apparel, Levi‟s 501, through CCD as part of
their annual laterals like Wall visuals, Tent cards, Posters and Door stickers. There is also a
special Levi‟s Drink.

Movie launches:

Apart form product launches, the company also does a number of tie-ups with the movie
industry in the same manner. For instance, there was Damdaar coffee that was sold during
the launch of the movie DUM. There was also the Damdaar contest wherein the prizes
were movie tickets, posters, CDs, and cassettes. In addition, the winners get a chance to
meet and have a coffee with the stars of the
movie.

Ambience and Surrounding

“First Impression is the Last Impression”.


This is true in this business. The first thing that
the customers come across is the surrounding
and the ambience of the store.

To further brighten the vibrant atmosphere of

15
IMI, New Delhi Section B, Group 8

the cafés, there has been a greater thrust on providing more value added services such as
video juke boxes, cosy sofa seating, and exciting round the year promotions. Trading Co. Ltd
had gone in for an image change and revamping of interiors in the last quarter of 2001.

Café interiors at the company's 169 outlets are being given a whole, new look. In a change
from the largely wood and granite based interiors, there is more of steel and lots more colour.
The young colours of today, lime green, yellow, orange, and purple will predominate. The
crockery will also sport these colours. The larger cafes will also have lounge areas and a few
beanbags.

International Presence

Café Coffee Day, the premier retail chain of


cafés in India announced major developments
within the company including its dynamic plan
to expand the chain into the overseas markets.
After having established itself firmly in the
domestic market offering a world-class food and
coffee experience to over 25 million customers
annually across the country, the chain has
already started setting up the infrastructure at 10
cities where it has targeted to open at least 50 cafes by December 2004.

The entire international offering will be based on the successful Indian brand/model in which
Café Coffee Day has gathered a lot of rich experience in coffee café retailing. As with the
domestic cafés, the international cafés will also be trendy, offering attractive prices, and the
coffees served will be made from the premium quality coffee beans.

16
IMI, New Delhi Section B, Group 8

Future Strategy

Spreading Wide:

CCD is planning to increase its reach by going to the small towns. To achieve the mission of
being a number 1 player in coffee category they cannot ignore these small towns. The
Company is focusing on the southern states of the country such as Tamil Nadu, Karnataka,
Andhra Pradesh and Kerala, and the western region, starting with various markets in the state
of Maharashtra.

To widen the scope of target audience, CCD is planning to open some special cafés. These
cafes would serve to the different target audience. However, they have aggressive
competition from the Barista and other cafes. According to the management, they have a
greater threat from the foreign players.

Expensive Cafes:

The major target group of CCD is the youngsters. However, the company wants to widen its
target group. Café Coffee Day is planning to come up with a different type of café, which
will be having different environment all together. Even the merchandise will be different
from that of the original CCD cafes. The coffees and the merchandise would be much more
expensive and of a better quality. These cafes are mainly targeted to people with high-
income group and status oriented people.

International Coffee Flavours:

CCD is planning to start soon with the international coffee at all the outlets. They have
already done the test marketing in certain outlet of Bangalore. Adding the new flavour would
increase the choice for the customer.

Positioning In the Mind of the Customers

CCD holds a distinct position in the minds of the target customer. Most of the customers are
loyal and visit the same outlet. CCD is very aggressive in terms of the marketing activity in
order to maintain the market share. Major customers are youths. Focusing on the target
group, tie-ups are done with other companies in order to keep the audience interested. They

17
IMI, New Delhi Section B, Group 8

are planning to tie-ups with the cinema theaters, shopping malls.

Coffee Café Day is the most popular hang out place for the youngsters. CCD is perceived as
energetic and trendy organization. The crowd is very lively. Most of the consumers are
frequent visitors. Many of the people also have their loyalty card “I visit here twice a week.
It‟s a good place to hang out with friends.

CCD has the wide variety of coffee that suit to the consumers needs. The ambience is very
clean, well-lighted and airy. Most of the outlets also have large parking space and good
seating arrangements. There is a young feel to it. The prices are very reasonable (compared
to Barista, not our local Udipi) too and an average coffee would cost about Rs. 40. They also
have attractive T-shirts sporting Coffee day labels, cups, etc for sale, which are manufactured
by Coffee day.

The food at CCD is at the affordable price. Customers coming out there also find the food
interesting especially veg. wraps and the chicken ciabatta (Italian sandwich). However they
don‟t like pizzas. Sometimes, the food smells a bit stale. The deserts are the most preferred
by the youngster‟s especially chocolaty cakes and apple pie. The employees are very friendly.
They maintain a good relation with their customers. At CCD employees are very helpful and
serve the customers, which differentiate them from other cafes. CCD coffees are much
cheaper than that of cafes. This is one of the main reasons for attracting the young college
crowd. CCD is also very well spread.

Many customers believe CCD move with the competitor. Wherever Baristas opens its outlet,
CCD comes with the outlet.

One will not find more of working class or management people. It‟s not the good place to
have a business talks. The place is very noisy which makes them difficult to concentrate.
Even the seats are much closed arranged thus does not maintains secrecy.

The music at CCD is very loud and trendy that is suited for the young crowd. There are also
some people who believe that CCD is cheap and it does not suit their status.

The other problem that customer feels is the practice of having a TV set that is perpetually on
MTV or Channel V or something and something loud and jing-bang going on.....It would be
much better to have some soft music.

18
IMI, New Delhi Section B, Group 8

SWOT Analysis of Café Coffee Day

Weakness:
•Limited Target Audience.
Strength: •Follow the competitor
Large Number of outlet. strategy.
In house sourcing of coffee •Quality of food- Stale breads.
beans. •Loud and Hard Music.
Tie Ups with good companies. •Improper sitting
arrangement.

Opportunity: Threat:
Large Untapped Market Entry of Foreign players like
Tie-ups with other Georgia, Starbucks etc.
companies for promotion. Large unorganized market.

19
IMI, New Delhi Section B, Group 8

BARISTA

“Barista” (which means “bartender‟‟ in English) is an Italian coffee chain shop. Barista traces
its roots back to the old coffee houses in Italy- the hotbeds of poetry, love, music, writing,
revolution, and of course, fine coffee.

Barista Coffee was established with the aim of identifying growth opportunities in the coffee
business. Increasing disposable incomes and global trends in coffee indicate immense growth
potential in this particular segment.

More significantly, they have been quick to spot a latent need waiting to be tapped: Coffee
lovers seek a complete experience. One that combines intelligent positioning with the right
product mix and carefully designed cafes. In other words, they seek an "Experiential lifestyle
brand".

As one might imagine, tapping into this need requires a company that can not only deliver
great coffee and espresso bars, but one with the ability to scale up operations quickly. At
Barista, they have gone to great lengths to establish this.

Barista started its operations with its first outlet at New Delhi in Feb 2000. The Company was
promoted by Amit Judge‟s Turner Morrison Group BARISTA Coffee Company Ltd - in
which Tata Coffee Ltd holds 34.3 per cent stake Ventured into India.

Barista Coffee Company Limited has been recently listed among the top 100 brands in India
by Super Brands India; the Indian Division of the globally renowned Super brands ltd.
Barista was selected out of 711 leading Indian brands across 98 categories. Barista has its
operations spread over 153 outlets across India. At present, Barista had, he said, over 120
espresso bars and corners in the four metros and 14 cities of India, with 35 being added over
the last 12 months, out of which 10 had been relocated.

Barista –Marketing Mix

Barista continued to maintain its focus on quality by sourcing only Arabica beans and using
the best international espresso machines, supplied by the Italy-based LaCimbali.

Barista was, working towards becoming the number one in terms of parameters likes brand-
imagery, brand-dominance, customer-loyalty and turnover. The strategy for fulfilling its

20
IMI, New Delhi Section B, Group 8

mission over the next decade would be by leveraging its strong position in the Indian market
to grow further in an Asian context.

Product

Barista cafes also have a good number of product mixes. The menu ranges from variety of
coffees and pastries. Barista also sells other items like mugs, Coffee beans, T-Shirts, Coffee
Kettles.

Coffees & Teas Refreshing Eatables

Alternatives

Coffee with Milk Smoothies Sandwiches

Cappuccino Guava Paneer Tikka

Caffe Mocha Mango Cheese & Tomato

Caffe Latte Grape Chicken Tikka

Smoked Chicken

Black Coffee Granitas Rolls

Espresso Italiano Blue Curacao Kadhai Paneer Roll

EsperanoTM Lime Ice Chicken Masala Roll

Americano Mixed Fruit Tango

Guava Crush

Dessert Coffees Milk Based Pastas

Latte Bianco Strawberry Freeze Tangy Tomato Pasta

Caffe Borgia Mocha Freeze Creamy Chicken Pasts

Icepresso

21
IMI, New Delhi Section B, Group 8

Cold Coffees Iced Tea Other Food

BrrristaTM Lemon BBQChicken Croissant

Brrrista FrappeTM Peach

Brrrista BlastTM

Iced Caffe Mocha

Coffee Add-ons Other Drinks Desserts

Various Flavours Ginger Fizz Walnut Brownie

Chocolate Fudge Kinley Water Mocha Excess

Whipped Cream Chocolate Excess

Espresso Shot Dark Temptation

Ice Cream Scoop Chocolate Mousse

Chocolate Chip Muffin

Almond Raisin Muffin

Apple Cake

Teas

Assam

English Breakfast

Darjeeling

Earl Grey

22
IMI, New Delhi Section B, Group 8

Product Sources:

Barista sources its coffee beans from around the world, but a major supplier is TATA Coffee,
part of the TATA Group that owns a large stake- holding in Barista. These coffee beans are
then sent to Venice, Italy where they are roasted into a blend exclusively for Barista. The
food and desserts at Barista is exclusively catered to by the Taj, who ensures a high standard
of quality with all its products. Barista also sells merchandise through its store, all of which is
imported. The merchandise accounts for nearly 1/6th of Barista‟s overall sales.

Quality Sources:

Barista has a check on the quality of its products every 14 days. Barista also incorporates
TQM at its headquarters in Delhi. Since Delhi is the base for all its distribution, quality
control measures are adopted there to avoid any poor quality products being distributed.

Price

Barista holds the perception of being an expensive cafe. However, Barista was the first
organization to start the concept of the organized cafes in India. Initially Barista started with
Skimmed pricing policy. Barista segmented the market according to the income and age.

Due to the entrance of new players, Barista was finding difficult to maintain the market share.
First and foremost, Barista re-defined the target market customer. They even planned to
change their tagline. "Where the world meets” And so when company looked at this
positioning and they looked at the pricing - the strategy being that if we lower the pricing.

Apart from this, Barista has also introduced new low-priced beverages. The officials say
these price cuts have resulted in 15-per cent walk-ins at Barista's outlets during the last few
months. Barista decided to alter their strategy in order to retain their market. After studying
the market, Barista found that competitors were fighting against them against the pricing.
They decided to reduce their pricing. It was not done from a perspective of acquisition. With
reduction in the prices, there had been a 47 per cent increase in footfalls over the
subsequent three months.

23
IMI, New Delhi Section B, Group 8

Place

Barista started its first outlet at Bangalore and from there it has started spreading its wings
especially after price reduction. Now they are even planning to focus on raising the bar of
coffee experience. Barista already has presence in all the metros and has a presence in all the
highly populated regions like Mumbai, Delhi, Bangalore and many more places.

Barista is seeking to expand through the franchisee route model and plans to enter B-class
towns in the country and middle-class localities in the metros such as North and East Delhi.

Promotion

Barista did not initially believed in any kind of promotion but in order to keep their customers
interested they started building the brand by communication both within the store as well as
outside the store through mass media. It under takes various promotion activities during the
festival or during occasions like Valentines Day. Barista has done advertising in almost all
national newspapers. Barista has launched summer campaign through summer chillers, and
was advertised through different channels.

Barista Coffee has tied up with Sony Music. Under this association, Sony Music would
endorse CDs and music cassettes of their recent acts, which will be used as the lucky draw
prizes for the participants. Consumers buying food, beverage and merchandise for Rs 110/-
and above during specified hours of the performance, will be entitled to participate in the
lucky draw. The prizes will be given away in a couple of draws during the performance.

Barista also takes part in various sales promotion activities to help increase sales at their
outlets.

a) Sponsorships:

Barista sponsors various events and festivals, which provides them valuable promotion
directed at strategic markets. The sponsorships are mainly in kind, although major events are
sponsored in cash also.

b) Collaborations:

Barista has entered into special collaborations and alliances with various partners for co-

24
IMI, New Delhi Section B, Group 8

marketing brands. For example, Barista entered into a deal with Leo Mattel toys to provide
the popular board game Scrabble at every Barista outlet across the country.

This is an ideal alliance for both the organizations, because it provides Leo Mattel with an
important avenue for promoting their product, and it provides Barista‟s customers an added
attraction for spending more time at Barista outlets. Barista has also entered into partnerships
with various movies, for promotions through Barista, and recently, they tied up with Star
World for its “Absolutely Everybody” campaign.

c) Sales Promotion:

Barista uses a special “Barista Coffee Card” for its sales promotion activities. The Barista
Coffee Card entitles you to one complimentary hot beverage when you are done sipping
seven. It is available to all Barista coffee regulars. No membership fees, no references
required. Fill out the card and you are a member. As a Coffee Card holder, you earn one
stamp on the card every time you purchase a beverage. Simply present the card to the cashier
when you place your order at any of their outlets. Once you have collected seven stamps, you
can hand over the card to receive your complimentary hot beverage. Barista hopes this card
can help drive sales growth, and increase customer retention.

Tie-Ups

Barista with Taj Group:

Barista Coffee, a leading coffee bar chain, has tied up with Taj group of Hotels for setting up
exclusive Barista expresso bars at the Taj hotels in metro cities. The first such bar would be at
the Emperor Lounge at the Taj Mahal hotel in New Delhi followed by a Barista Bar at the
Sea Lounge at the Taj Mahal Hotel in Mumbai. This would be followed by similar bars at Taj
Mahal hotels in Calcutta, Chennai and Bangalore. Barista also will be housed at the coffee
shops of all major Taj Hotels in the country.

Barista with Tata Teleservice:

Barista has also tied up with Tata Teleservice. This tie-up was primarily done in order to
provide consumers' access to the Internet. The objective being, today if you look at Barista
consumers, a fair number of them come to Barista to discuss business over a cup of coffee.

25
IMI, New Delhi Section B, Group 8

Moreover, it is easier for them to meet at Barista, discuss business and send the information
across. It is going to be focused primarily on work, towards the busy executive who is
traveling and has dropped by for coffee or the small office segment who might just want to
work out of Barista.

Lacoste with Barista:

Lacoste India has decided to tie-up with coffee outlet chain Barista in all the major metros
and some mini-metros. The strategy is to target younger audiences, which have a penchant
for the "finer things in life". The customer segment of Barista is very different from the ones
who visit a regular coffee shop.

Elle-18:

Barista is jointly tied up with Elle 18 to promote their product. Elle-18 is launching a
collection of coffee colored lipsticks and has named it after Barista‟s beverages! Therefore,
they are working with Elle 18, which is a youthful brand. Moreover, they both will grow with
this association. For Elle 18, the objective is to build a platform for their range of coffee
colored lipsticks and for them, the objective is to associate with the brand and have their
consumers coming in to Barista.

CBC Book shop:

Barista has tie-up with CBC bookshop, which has book corner at eight Barista outlets in six
cities. Barista‟s bookshops are right inside the café. Barista prefers best sellers and classic,
besides books on management, lifestyle, sports, health, religion, children and even cookery.
Some of the outlets also stock activity books, comics, CD-ROMs and crayons.

Other tie-ups:

Barista has tie-ups with Planet M, Crossword and the Taj group of hotels for setting up
Espresso corners within their premises. Moreover, along with ABN Amro, Barista has
introduced a concept called Ban café - a café in the bank premises.

26
IMI, New Delhi Section B, Group 8

Ambience And Surrounding

The colour shades that they have used are


terracotta; it is warm - it is orange. The
background has a dark Orange colour.
Orange colour signifies of a style and
friendly ambience of its own.

In order to match the colour combination of


the surrounding even the uniform of
employees are orange in colour. The place
invites the customers to spend time.
However, the focus would, continue to be to recreate the ambience of the typical Italian
neighbourhood espresso bars in India so as to provide a comfortable place for people to
relax and experience “the joy of coffee”. The ambience of the location and the quality of
coffee would, continue to be the key factors while growing the chain.

It has lots of board games for any one to


indulge in, like chess, word scramblers, and
a guitar to pluck some chords.

Music:

The music is not too loud and encourages


conversation, and the person behind the
counter is non-intrusive and friendly.

Barista is also planning to organize live


music. Listening to live music, while
sipping a warm cup of coffee, next to your beloved can make an evening a perfect memory to
cherish. In order to gift its customers with this tranquilizing experience, Barista is buzzing
with live music this winter spate. Barista presents 'Oceans', the music band that will perform
live at various Barista outlets.

27
IMI, New Delhi Section B, Group 8

Sitting Arrangement:

Barista is a place for relaxes. Even in a crowded espresso bar, at Barista, one will have his
share of privacy. The seats are arranged at a certain distance to have a privacy of talks as their
major customers come there to discuss the business or to relax and chat.

International Presence

The company operates over 130 coffee joints including four in Dubai and Colombo. Barista
had chalked out aggressive strategies for expansions into Europe and West Asia.

Barista has already started its operation in both Sri Lanka and Dubai and doing very well.
They are talking terms with a few potential partners in Kuwait. Barista owns and manages all
its outlets in India but operates through franchisees in other countries.

Future Strategy

The management at the Barista outlets thinks that their positioning is very different from that
of CCD. They think that the people going to CCD are young college students. The target
audience for the Barista are young managers and middle level mangers and also family.
However there is a treat to them in terms of the share of the young college going crowd,
which forms a main target audience for the CCD and comparatively small part for Barista.

Increase in outlet:

As part of its marketing strategy, the company is planning to promote international coffee
blends first through 40 Barista stores in Mumbai, Delhi and Bangalore. With the move, the
company also hopes to expand the number of Barista Espresso Bars on an average rate of two
to three per month as well.

International expansion:

Barista is also looking for the international expansion. They are planning to expand in the
Kuwait market. Barista is also planning to expand its presence in the other Asian countries
like Sri Lanka, Dubai.

28
IMI, New Delhi Section B, Group 8

Promotional Activity:

As part of its marketing strategy, Barista Coffee Company Ltd is planning to launch a host of
consumer promotions at its outlets. For the purpose, the company is currently in talks with
many entertainment, consumer goods and music companies, which include the US-based
Bose Corporation, Swatch and International Travel House.

Positioning In The Mind of the Customers

Barista is a place where the world meets. People come to Barista to have a meet or to relax.
A lot of them actually come alone as well. This is actually one of those places with people
coming in alone because they are comfortable with themselves. It is a place where people are
meeting each other in an environment, which is fulfilling social and intellectual needs.

The employees at the Barista are also energetic. They help the customer in making decisions
for their purchase.

29
IMI, New Delhi Section B, Group 8

SWOT Analysis of Barista

Strength: Weakness:
•Claim to sell the best •Expensive coffee
coffee •Self service for the
•Large Number of outlet customers
•In house sourcing of •Quality of food- Stale
coffee beans breads
•Espresso-Highest selling
coffee

Opportunity: Threat:
•Large Untapped Market •Entry of Foreign players
•Tie-ups with other like Georgia, Starbucks
companies for promotion etc
•Large unorganized
market

30
IMI, New Delhi Section B, Group 8

Café Mocha
Café Mocha was established in December 2001, with its first store in Churchgate Mumbai, by
a Mumbai based entrepreneur Riyaz Amlani, who has a long experience in the hotels and
restaurants business. The café boasted of an eclectic Indo-Tibetan theme and fresh worldly
coffee.

It soon spread to other parts of Mumbai and adjoining areas with 3 more outlets. From there it
moved to other tier one and tier two cities in India like Pune, Delhi, Chennai, Ahmedabad,
Hyderabad, Jaipur and Chandigarh. As off now the coffee chain has 13 outlets in the various
cities.

The thing about Mocha was the coffee shop itself. It was never designed to be a cut-and-paste
format where every outlet would look the same. Every outlet would have a flavour and look
of its own and would look completely different from any of its other outlets.

“Mocha stands for the coolest coffee shop in the country with its own sense of style. It has
proven that a coffee shop chain doesn’t need to look like the cubicles in an office. Every shop
can have its own wild and intense flavour. Everything from a wall to a cup can have its own
sense of expression and identity. That diversity and variety in every outlet enriches rather
than confuses. And makes it a coffee shop people love to visit once more” 3

Marketing Mix

Product
Café Mocha has a wide range of products form Arabica Coffee, flavoured Tea, shakes, and
also a wide range of food beverages like sandwiches, complete breakfast, etc. Also it features
a whole range of flavoured „Sheeshas’.

3 „http://www.mocha.co.in/history.html‟

31
IMI, New Delhi Section B, Group 8

Price
Mocha follows a premium pricing strategy for is range of products. Almost all of its products
are priced almost 15-20% extra as compared to other coffee retails. It believes in positioning
its products not just as simple drink or food beverage, but believes in providing the customer
an experience to spend time, relax while savouring the best there is to eat and drink.

Place
“Mocha has never seen itself as a conventional cut and paste model chain of coffee bars –
each one like the other. With each new Mocha, something new evolves in its décor, its menu
and ambience. Mocha does not replicate itself but follows a continuity of design through all
its outlets. Each Mocha is as individual as you are.”4

Mocha lays as much as stress on its interiors as its physical locations. Both play a significant
role in the place strategy of café mocha. The location is significant as they portray themselves
as a premium brand and hence it is essential that they are located in a city with their required
customer base and where it would be visible and accessible to them.

Promotion
Café Mocha does not indulge into direct promotion via conventional means like
advertisements, tv promotions etc. It primarily uses user communities to spread word of
mouth. Communities like Mocha Bike Club, Mocha Film Club, and Mocha Music Mania etc
are promoted. Members are of these communities ac t like brand ambassadors of the café
chain. Members are offered discounts and are exclusive offers; this is done primarily to
promote memberships. Also at times Mocha showcases itself using outdoor activities and
events like music concerts etc.

Positioning
“It’s a place to meet and suspend reality for a few moments. It’s about taking time to savour
the finer things in life”, these are some of the extracts from its vision statement. It clearly
suggests that the café is not just about coffee but a place to spend time and enjoy.
The product differentiation reflects in all their activites. Even the way their cafes are laid out
reflects their virtue to deliver something different and more than just a mere coffee.

4 (http://www.mocha.co.in/outlets.html)

32
IMI, New Delhi Section B, Group 8

Growth strategy

The growth pattern of Café Mocha is a steady one. In about 7 years they have been able to
open 13 café. They have not got into frenzy to open random stores. They are taking a careful
path so that keep their identity of differentiation. They don‟t want to be part commodity
coffees retail, but rather grow as a place to savour coffee and the ambience.

Swot Analysis of Mocha

Weakness

Strength • High prices

• Product differentiation • Low availability

• Perceived as a premium brand • Very low marketing


communications
• Better quality
• Place advantage of existing players

Opportunity
Threats

• Expand into other territories


International Players like
Costa coffee etc.
• Offer more food beverages
Premium coffee by other
• Sell Mocha merchandise retailers like CCD

33
IMI, New Delhi Section B, Group 8

Java Green
Javagreen was started in 2003 as a chain of In-
Store Cafés within Reliance WebWorlds. After
the formation of ADAG it has expanded into
other locations outside Reliance and operates
over 100 cafes operating within a host of retailers, food courts and corporate campuses.
Javagreen has been designed as a neighbourhood gourmet coffee shop that is fast, friendly
and fun. They offer a wide, international range of hot and cold coffees, made with their
exclusive specialty coffee blend. This unique blend has been created in house, to suit our
range of hot and cold coffees, the style of preparation in their stores and the type of
equipment used to brew coffee. Green coffee is sourced and roasted to their specifications
with traceability maintained all the way from the plantation to the outlet.

Their beverages menu includes teas, granitas, milk smoothies and soups in a variety of
international and popular regional flavours. An innovative range of wraps, paninis,
sandwiches and pastries provide a wholesome choice for those looking for a quick but filling
bite. Their food menu has been developed in house with proprietary recipes and ingredients.
The menu is standardized across India so that the products are uniform and consistent across
all outlets.

Marketing Mix

Product

The following menu items of JavaGreen suggest the kind of products line the café is having,
and if look deep into it we find that they are primarily trying to provide value for money
products. They vouch to provide an international taste.

34
IMI, New Delhi Section B, Group 8

They make a point to provide to quick service and have more conventional drinks and
beverages rather than the exotic ones, but at the same time providing quality and consistency.
According to javaGreens, they will serve you same taste in any of their 90 outlets.

Price

The products at JavaGreens are prices moderately, i.e. „provide international taste at marginal
cost. They believe attracting customers on the base of their taste and availability, and hence
are not driven by margins but rather volume. To make this possible they incur less in
developing ambience etc. and this cost advantage is passed onto the customer.

Basically they practice a mix of penetration and competition pricing whereby increasing
market share and be competitive to other players.

Place

JavaGreen café are largely located in Reliance Web World internet café. Apart from that they
find place in many malls in South India namely, Bangalore, Kochi, Chennai and Hyderabad.
In other parts of India they are located in Delhi, Kolkata, Ahmedabad.

JavaGreen doesn‟t have many stand alone coffee outlets but like its mission suggests, it caters
to the need of a quick cup of coffee. Many of its 90 outlets are kiosks in mall lobbies.

Promotion

JavaGreen doesn‟t indulge in nay kind of promotion on its own. It has become an integral
part of the Reliance Web Worlds, and are self advertised as a part of Web Worlds. They
believe in quick coffee, quick munch and are placed in locations which ebnable them to
deliver the same.

Growth Strategy

The growth of JavaGreen has been rather stagnant. By the consumers it is not considered a
popular brand and it acts as an add-on product of Reliance Internet café.

There has been a lack in an attempt to provide the coffee chain a pan India presence and are
mainly confined to southern parts of India.

35
IMI, New Delhi Section B, Group 8

It seems that the top management lacks focus and it is not a priority to develop the coffee
chain as a profitable venture in itself.

Swot Analysis of JavaGreen

Weakness
Strength
• Lacks focus
Strong linkages • Percieved as a poor
brand
Competitive pricing • Narrow product range
Place advantages in
some parts

Opportunity Threats
• Expand into newer • New entrants like
territories Quicky’s, Georgia Coffee
• Increase product giving similar preposition
portfolio • Major Coffee retailers
venturing into the ‘quick
coffee’ concept, eg.
Coffee day

36
IMI, New Delhi Section B, Group 8

Chapter 3 Sustainability Advantage

Retail coffee chain industry is becoming more and more competitive as international players
are trying their foray in Indian market. Now the big question is “whether the home grown
coffee chains will be able to sustain themselves”.

Barista

Barista has the following competitive advantage over others which it can leverage in future.
The advantages can help Barista to tap the opportunities coming its way and fight the
competition.

1. Strong Brand Image: Barista has a strong and clear brand image. Their customers can
easily identify and relate to the Barista brand. This helps foster brand loyalty.

2. Excellent Human Resource: Barista is perceived as excellent for the service and
behaviour of their staff by their customers. It has also opened training facility to nurture more
talent. This is a huge advantage, especially in a service organization. Barista must strive to
keep this advantage.

3. Ambience & Décor: Another significant area of excellence is the kind of ambience and
décor Barista cafés have. It has been able to recreate the Italian ambience in the
neighbourhood store which liked by customers.

4. Strong base for expansion & growth: Barista have worked hard on their brand, image
and human resources and have a strong base for future expansion and growth- whether
nationally or internationally.

5. Linkages: It has worked hard on tie ups and have pre-empted a number of linkages which
can be leveraged for growth.

The company initially had a model to expand by owning stores but it later shifted to a
franchisee, which has paid rich dividends but it carries a risk of brand dilution, so it must
have a strict HR policy and see to it that all staff in the franchisee are recruited from its own

37
IMI, New Delhi Section B, Group 8

training institute. The company need to shatter its image as a costly brand by aggressive
promotions. It also need to build on its coffee resources as it is dependent on TATA coffee
foe its supplies.
However Barista lack in few areas where immediate attention is required:

1. Average taste & quality of products suited for Indian consumer: Barista has a strong
brand image of being the coffee- lover‟s traditional café, but the taste of food products served
is not upto the mark for traditional Indian consumer. They need to come up with food suited
for Indian taste.

2. Perceived as an expensive brand: Barista need to engage in some promotional strategy


which would shatter its image as an expensive brand among the middle class Indian
consumer because they will be the real volume driver in coming times

3. Inconvenient delivery process: Although started as a new concept and to recreate the
image of Italian café`, the concept of self service is not mingling with the Indian consumer,
Indian consumer find it inconvenient to go back to the counter just to receive their order.

4. Supplier power: Since the USP of Barista is the taste and quality of the coffee that it
serves, it must look to ensure supply of good quality coffee beans. Presently it is locked in
with TATA coffee for supplies and thus lacks the bargaining power when it comes to quality
or price.

The acquisition of Barista by Lavvaza has brought in the much needed financial chest to
expand. Lavvaza plans to invest 650 crores to open 400 stores in the coming 2-3 years.It will
also give Barista opportunity to exploit synergies of distribution, sourcing, better staff
training, product quality and variety (We get the global, 2007).

The challenge for Lavvaza now is to enter the mass market without diluting the „Barista
experience‟, they need to pre-empt competitors by buying property in tier II cities at prime
locations where prices are still under control. They are dependent on their supplies on TATA
coffee which varies prices according to the market condition. The company can integrate
backward to hedge against these variations.

38
IMI, New Delhi Section B, Group 8

Café Coffee Day


"The third most frequented place after home and workplace or college"
The Café coffee day has got the maximum number of coffee stores in India. Café coffee day
is amongst the big guns in coffee industry.

1. Highly rated Taste & Quality of products: Café Coffee Day is perceived better by their
customers for the Taste & Quality of their products. There lies a great potential to attract the
customers who give emphasis on “money for value”. This is also helped by the fact that they
grow their own coffee beans, and this provides an important base for future expansion and
growth.

2. Value for money proposition: Café Coffee Day is projected as an “affordable” brand.
This strategy has worked extremely well so far, and Café Coffee Day is seen as a value for
money brand.

3. Strong youth orientation: The Café Coffee Day brand is, and always has been, extremely
youth- oriented. In a country where over 40% of the population is under the age of 20, there
is huge potential for Café Coffee Day to become one of the country‟s largest youth brands.
The untapped market share and potential for growth is enormous.

4. Capacity to expand easily and appeal to the mass market: CCD has advantage in easily
replicating its earlier opened stores and expand quickly compared to its competitors. It has a
undeterred focus on the mass market which will be the drivers of all volume growth in
coming times.

CCD has a distinct brand identity of its own in the mind of youth. It is the largest organized
retail café chain in India. The main strategy of CCD is cost leadership, and it takes pride in
being affordable despite its good quality. The future goal of CCD is primarily rapid growth
by establishing affordable omnipresent cafés, and thus it has opened up outlets at such a
scorching pace. CCD has an advantage in giving good service at an affordable price, CCD
has been targeted the student community and mainly the middle class and its focus on this
segment has been unwavering. This segment is fast becoming the largest chunk of customers

39
IMI, New Delhi Section B, Group 8

for these coffee chains. Barista broadened its focus with a price cut in 2003 to capture this
segment which did not have pockets as deep.

The primary strength of CCD is its large number of outlets nationwide (401 against Barista‟s
130), lower capital requirements for setting up stores (Rs 25 lakhs for 1000- 1500 square
meters versus Rs 35-40 lakhs for 800-1000 square meters in case of Barista), vertically
integrated supply chain and franchisees. As CCD sources its coffee from its own plants it
hedges risks which arise due to fluctuations in the price and supply of coffee beans. Barista
on the other hand is entirely dependent on Tata Coffee for its supplies. CCD also has larger
volumes of sales per outlet, with each CCD cafe, on average, attracting around 500 and 600
customers per store everyday as against Barista‟s 350-400 per store per day.5

The primary weaknesses of CCD lie in their lack of strategic tie-ups (unlike Barista),
inconsistent quality across outlets and weak image. For food items, CCD uses multiple
suppliers whose products vary from region to region6. This reduces standardization in taste
and quality. Barista on the other hand enjoys the expertise of the Taj chefs ensuring
standardized quality products at all its outlets. Café coffee day has less brand loyalty, and
many of its patrons aspire to move up to Barista due to its better coffee and premium image.
Due to its target of college students, CCD tends to alienate some of the higher age group who
prefer a more sober atmosphere.

To sustain in the highly competitive coffee café companies need to pre-empt the middle class
mass market which will be the key drivers of all volume growth in the coming years. Café
Coffee Day has done well in entering the mass market by rapidly penetrating into 72 cities.
But this has brought about a deterioration in the brand image of it, which is needed to sustain
between brand conscious urban youth. Another factor needed to sustain is a upper hand on
the supply side of coffee beans, the company has a safe and secured supply of coffee beans
via the coffee garden in owns in south India. This also insulates the company from any future
variation in the price of coffee beans which is a commodity and hence volatile in price and
supply

5
www.capitaline.com
6
http://indiacoffee.org

40
IMI, New Delhi Section B, Group 8

Java Green
Java green raison d'etre was to provide an additional service to customers of Reliance web
world. Java green was designed to add on a basic product in already existing offering. The
Branding, interiors and the marketing strategy of Java Green reflects very clearly that Java
Green believes in adding on value and they are not competing with any chain.

Java green which was started as a chain of In-Store Cafés within Reliance Web Worlds has
expanded into other locations outside Reliance and operates over 100 cafes operating within a
host of retailers, food courts and corporate campuses.

Reliance wishes to opens Reliance infocom at the rate of 200 per annum, that‟s a whopping
number. Reliance petroleum and gases, starting June 2010, will have their fuel outlets all over
India. That will help Java green to grow further. The sustainability advantage for java green
lies in the fact that it can leverage on reliance fuel and webworld outlets. Moreover since the
services at reliance webworld are increasing like it is offering conference, ticket booking,
gaming portals etc, the consumer will tend to spend more time which will give java green
more opportunity to sell their products to customers. Reliance is positioning “Java green as a
neighbourhood cafe, that is, fast, friendly and fun,”

In addition to coffee, consumers get to surf net, play games, view movies and video chat with
people across the globe through their broad band services. This makes Java green a truly
connected café and java green enjoys an edge over others.

Javagreen aims to be a business focused on continual value to its customers on the backbone
of an efficient business operation.

41
IMI, New Delhi Section B, Group 8

Mocha

Mocha provides wide range of products including a whole range of flavoured sheeshas which
sets it apart from the other existing coffee players like CCD and Barista.

Mocha sells experience rather than simple drink or food beverage. Each Mocha is as
individual as you are.” with each new Mocha, something new evolves in its décor, its menu
and ambience. Mocha does not replicate itself but follows a continuity of design through all
its outlets.

The location of each mocha is of prime importance in its sustainability as they portray
themselves as a premium brand and hence it is essential that they are located in a city with
their required customer base and where it would be visible and accessible to them.

They have not got into frenzy to open random stores. They are taking a careful path so that
they keep their identity of differentiation.

Effects of foreign Players

The potential of growth in liquid coffee retailing is huge as coffee consumption in the country
is considerably low. In the North, coffee consumption is eight grams per persons as compared
to 40 gm in the South.

After attempts by Barista, Coffee Day and Qwicky's to provide Indian consumers the foreign
players have finally decide to enter Indian markets. Café Coffee Day and Barista dominate
Indian café market. The entry of foreign player is a treat for these players to maintain their
market share. The foreign player would also target the similar segment of target market thus
causing the problem for the local players. There is a tendency of Indian customers to visit
once and if they get satisfied than they turn to be loyal customers.

42
IMI, New Delhi Section B, Group 8

I) StarBucks

Starbucks is one of the fastest growing brands in the world, after entrepreneur Howard
Schultz bought the chain 15 years ago. Starbucks Coffee - with its 5,689 outlets in 28
countries - has grown in sales at an average of 20% annually to $2.6bn in '02.

The Starbucks Corporation is reviving its plans for entering India. The company is expected
to actively scout for prime real estate in metro markets in the next few months, and plans to
open its first store in the next 12-14 months. Starbucks has identified Delhi, Mumbai, and
Chennai as the potential entry points for the chain in India. Starbucks is presently working
on the franchisee model.

The Starbucks target audience is the hip, urban, on-the-go caffeine addict, and the chain that
originated in Seattle has got mega-plans for India. Starbucks has pinpointed high-potential
localities like a few in South Mumbai and Bandra. In keeping with its international strategy,
Starbucks will only open shop in the best of prime locations. The company's practice is to
acquire real estate at a premium over market price, in order to squeeze out competition, and it
is planning to do the same in India.

II) Georgia

Coca-Cola India found a good market for the hot beverages. They announced the launch of
low-price ready-to-drink coffee and tea in a bid to capture a larger share of the domestic
beverages market.

The drinks will be marketed under the brand name Georgia and sold through a large number
of retail outlets all over India. According to them, it is time to take the product from the class
market to the mass market. Hot tea and coffee form the biggest combination in India's
burgeoning beverage market. Georgia has launched two types of cafes, one where normal tea
and coffees will be sold and would be priced at 3 –4 Rs per cup; the other is Georgia Gold,
which is for the premium segment. Georgia Gold has also merged with Mc-Donald‟s.

More and More foreign players would enter into this segment. The company will have to
differentiate their product from the others in terms of price, flavour, and ambience and also
target audience.

43
IMI, New Delhi Section B, Group 8

Suggestions and Recommendation

Pricing:

Indian consumers are highly price sensitive. Pricing will play very important role. In order to
sustain the competition it will be very important to have a proper pricing strategy in place.
Over pricing the products would actually limit the scope of target audience. While under
pricing would actually degrade their brand value. In either of the cases there will be a loss for
the company, as they will loose their customers.

Promotion and Advertising:

Promotions have a deep impact on the Indian consumers. The consumers would also increase
their consumption to take the advantage of the promotion schemes. Promotion should be
design properly to keep the target customer interested. The promotion should not degrade the
value of brand. The company also needs to tie up with other companies whose target
audience match with theirs Like CCD with Levis, Barista with Archies etc.

Merchandising:

Indian consumers‟ likes having more choice of before they actually make their selection of
buying. Different type of coffees and food items need to be introduced in order to provide
customers with more choice. Even new flavors of coffee beans should be introduced.

Expansion:

Each and every player wants to have a wider expansion in order to have more reached. The
companies should open the outlets only where they find the potential. They should conduct
detail study before taking a decision for opening an outlet. For e.g. CCD follows the strategy
of following the competition. They open the outlet wherever Barista opens it. This has proved
successful. This is a big risk as opening an outlet requires huge investment and it may result
in a huge loss.

44
IMI, New Delhi Section B, Group 8

References
1. http://www.mocha.co.in
2. http://www.java-green.com
3. www.barista.co.in/
4. www.cafecoffeeday.com
5. http://indiacoffee.org
6. http://retailrise.com
7. Sustainability Competitive Advantage – Pankaj Khemawat

45