Running Head: COFFEE WARS IN INDIA 1

Coffee Wars in India Case Analysis

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EXECUTIVE SUMMARY

This case analysis sought to shed light on all the possible causes of failure of a firm in the

competitive Indian coffee market. The company chosen for this report is the Café Coffee Day.

The company was seen favorable because of its huge presence and influence in the Indian coffee

industry. The desirable competitor used is the Starbucks, which has an important global presence

and influence, especially when they entered the Indian market. Through a keen eye on the

internal and external environment factors of the Café Coffee Day, different strategies were

incorporated to get the best possible solutions to its problems. The primary aim of this report was

to try to analyze the depth of the problems from both within the coffee industry and outside and

try as much as possible to come up with solutions that will prevent or mitigate the firm from

future problems. The study used the secondary research methodology that is mixed because it is

quick and readily available. As a recommendation, the company should focus on the decision

options preferred in the report.

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Coffee Wars in India Case Analysis

Coffee drinking has been a phenomenon, especially in southern India, which largely

brands itself as being the home of the first ever-produced plant. Today, the plant is grown in

large quantities in Tamil, Nadu, and Karnataka, and it is drunk all over the Indian cities. The

strength of the aroma of the coffee is not to rural homes, but it has also taken the urban cities by

storm. Because of this significant process, major firms have come up such as the Café Coffee

Day, which pioneered the concept of café in India in the year 1996 (Customer perception and

attitude towards retail coffee chains, 2013). Despite this fact, the Café Coffee Day (CCD) faces

significant competition from the likes of Starbucks. This case analysis seeks to shed light on the

conditions faced by the firm both externally and internally with a view to establishing its

strategy.

Analysis of the problem

By the end of the year 2013, the management of the Café Coffee Day (CCD) had a major

downfall of remaining uncompetitive in order to sustain its position as the leading coffee brand

in India. The Café Coffee Day external environment has been changing significantly with the

sudden rise in the levels of expectations from the middle class and the aggressive entry of the

coffee brands, which holds the global domination in this sector. One of these global movers is

the Starbucks, who have managed to shake up the coffee industry in India by introducing their

acclaimed universal standards of service. The Café Coffee Day competitive shift in strategy from

the differential leadership strategy to the cost leadership strategy has been able to give it a unique

advantage over cost. However, their new form of policy has also made the Café Coffee Day

complacent with all the average levels of service to the customer, focus limited to the attractive
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affluent stages, and the new challenges of the operations that may primarily impact the Café

Coffee Day equity on their brand and all their growth ambitions of the future.

Findings

The Café Coffee Day’s small competitive effect is from some factors that are present in

the scenario of the current market. Up to now, the Café Coffee Day has had a focus that is to the

affluent segment or sector in its growth. Even after experiencing successful experiments in

designs such as the square formats and the lounges, the Café Coffee Day is contemplating on its

expansion of its portfolio with a primary focus set on its affluent segment. This market is largely

untapped and very attractive. The dominant global force in the coffee industry saw this enormous

opportunity and immediately took measures such as launching a partnership with TATA to tap

this exciting opportunity (Wharton School, 2012). Starbucks has a good record of

accomplishment in the countries it operates, and it can replicate the same success quickly in

India (Yoffie and Bijlani, 2013). The sudden success of Starbucks may, in the end, dilute the

major brand by squeezing the margin strategically from the top and eventually threaten Café

Coffee Day’s ambitions for global growth.

The unexpected changes in the Café Coffee Day’s external environment have led to the

performance level benchmark to rise. The high demand from the consumers for an excellent

customer service has increased due to the sudden growth of the middle class. To complicate the

matter, the entry of Starbucks has further introduced the customer services that are globally

accepted, innovation of products in partnership with TATA and stores that are locally themed to

meet the customers’ needs. The Café Coffee Day has failed to establish itself by delivering the

highest standards brought about by the giant Starbucks.

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If we even exclude Starbucks from the equation, the level of customer service at Café

Coffee Day has considerably deteriorated. The staffs of the Café Coffee Day do not engage the

current and potential clients well, and their interaction with these customers is on a transaction

basis as opposed to the establishment of trust and understanding. Their staff is from the small

Indian villages and towns and are not trained enough to fit the ever changing customer’s culture.

To compound the problem, Café Coffee Day is seen by the public as a tired brand. The firm has

failed to incorporate new changes and ideas, especially in the café format that primarily brings

more revenue. Their attitude towards product innovation is wrong such that they have not

invented products. To shed light on this, their menu of food and beverage is updated once after

the end of two years or worst after three years. This cannot be compared to the accepted updates

on a quarterly basis to keep customers excited and engaged and the highest possible level. The

other problem faced by this firm is that they have an enormous issue in the management of their

talent. The high degree of attrition that is driven primarily by benefits and salary to the staff. The

Café Coffee Day operational issue is to the degree of the customer services at their stores.

Despite the challenges they face, mainly driven by the highly competitive environment, the

strategic strength for the Café Coffee Day has always been their ever-strong emotional

connection with the established youth. Their particular relationship with the youth has been their

key driver for their sustainable growth.

The decision analysis

To facilitate their competitiveness in the Indian coffee market, a firm like the Café Coffee

Day should incorporate some different decision options. Some of the options should include the

correction of their course. Under this option, they should continue with their current plan on the
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youth by fixing all the issues affecting the operations, the invention of the brand and wait for the

market to shape up.

Another possible option would be to focus on correcting the course aggressively by

focusing on the growth of the affluent sector by primarily expanding all portfolios of the square

and the lounge formats in order to compete with the competitors such as Starbucks. They should

support the growth by fixing any issues affecting operations and engage in massive branding.

Another notable decision option would be to create a premium brand that is separate intended for

the affluent segment. For this to be successful, they have to adopt a strategy of differentiating

brands to target both the youth and the affluent segments. This is done by creating a premium

brand that is separate to tap the affluent sector, convert the square and lounge formats to go in

line with the new brand. This positions the firm to compete with the other very competitive

firms. They can also leverage the Café Coffee Day original brand to sustain the significant

growth of the youth in their market share plan.

Criteria for the Decision

Their decision should focus on the growth of their affluent group by engaging in the new

business growth on the wealthy groups of the age of 25 years and above. This heavily contributes

to 25-30% of the overall portfolio primarily by the firm. Their other criteria should focus on

sustaining the growth of their youth by largely maintaining the growth of the youth at the age of

25 years and below in that segment. For the satisfaction level of the customers, the criteria

should be primarily be driven by the innovations in the sectors of food and beverages, increased

courteousness of the staff, and revamping the interior of the store. The other possible criteria

should involve increasing the staff satisfaction by providing better salary and benefits, increasing

their budget for investments, and implementing a proper period for the firm.
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Decision Analysis and Recommendations

For this firm, there is a clear line between putting the focus on the affluent group and the

youth. By creating a premium brand for the wealthy group separate from other brands, the Café

Coffee Day will tap into segments that are attractive without having to lose their high position in

the groups of the youth. This separate brand will allow all efforts driven towards branding to

focus successfully on competing with their competitors without fading out their image in the

critical minds of the youth.

The decision based on the slight correction of the course is anonymously because it is very

conservative in the competitiveness of the firm. The stated option does not in any way target the

affluent group of the economy. This gives an invitation to Starbucks to profit highly from this

group and, therefore, put more pressure on the Café Coffee Day.

The option of correcting the course aggressively is also rejected because it will affect the

growth of the youth. The option will make the firm position itself in between the affluent group

and the youth group. This has the effect of giving unnecessary conflicting and inconsistent

messages to both the customers and, therefore, creates confusion about the brand.

The other decisions of staff satisfaction, the satisfaction of the customers, and the budget

are given a lower priority while evaluating the options. The three decisions meet the criteria and,

therefore, are suitable for making the firm very competitive.

Conclusions

Although the firm faces stiff competition from the global powerhouse in the coffee

industry like the Starbucks, different options can be implemented to help sustain the growth of

the company. The preferred decision options will highly enable the firm to adopt a strategy for

both the growth of the youth groups and the affluent groups. The new set of the premium brand
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will allow the company to compete with the global brands. The momentum of the growth in the

youth will keep rolling through the company’s brand. If all the preferred options are considered,

the company will face a favorable competing environment.

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References

Customer perception-and-attitude-towards-retail-coffee-chains-–-a-stu…. (2013, June 14).

Retrieved from http://www.slideshare.net/theysi/customer-

perceptionandattitudetowardsretailcoffeechainsastudyindelhiwrtbaristaccdnescafe1

Wharton School. (2012, February 22). India’s Largest Coffee Chain Prepares to Take on

Starbucks - Knowledge@Wharton Retrieved from

http://knowledge.wharton.upenn.edu/article/indias-largest-coffee-chain-prepares-to-

take-on-starbucks/

Yoffie, D. B., & Bijlani T. (2013). Coffee Wars in India: Cafe Coffee Day Takes On the

Global Brands