A Case Study

On
“Starbucks a Challenge to Café Coffee Day”

Case Study Submitted To

Balaji Institute of International Business (BIIB)

Pune

In
Partial Fulfillment of the PGDM (Marketing)
Curriculum
For Academic Year 2018-2020

By
Abhishek Singh
(IB1816158)

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Declaration
I, Abhishek Singh, Student of BIIB – Balaji Institute of International
Business, Pune, hereby declare that this case study entitled as “Starbucks
a challenge to Café Coffee Day”, is a bonafide record of work done by
me during the course of PGDM program and all contents and facts are
prepared and presented by me without any bias.

I also declare that it has not previously formed the basis for the award to
me for any degree/diploma associate ship, fellowship or other similar title,
of any Institute/Society.

Place: Pune
Date: 28th Feb 2020

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Table of Contents
S no. Page No
Topic
1 Executive Summary 4

2 Introduction 6

3 Overview 8

4 Case 11

5 Analysis of the case 13

6 Annexure 22

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Executive Summary:

The case is about café coffee day (CCD) emerging as one of the leading coffee outlet
in India. CCD has captured a large market share and achieved numbers that the
competition will take decades to achieve.
Café Coffee Day is not just a coffee shop for the people in India, today. It is more of a
vogue to people which they tenderly make. A tranquil atmosphere combined with
decent amenity, it is one of the most favourite hangout Place for teenagers. Main
challenges faced by CCD is lack of awareness and promotion on features like combo
offers, Indian style snacks, membership offers, special pricing. CCD is the coffee shop
that has decreased the gap between affordability level of teenagers and a premium
coffee shop. CCD talks about ambience and not about products and pricing. Where
competitors like Starbucks and Barista talk about product, pricing, as well as the
ambience.
Starbucks and CCD are competitors, but definitely not in coffee.
CCD started with a business of ambience, but over the years it got diluted. Their
promise to the guests (customers) was to deliver an ambience to relax and socially
connect to each other. In order to compete with the existing competitors, CCD priced
its beverages at a lower price. So as to attract the young crowd, college students, office
going people etc. It became a regular hangout place for them. But now entry of
Starbucks created a new buzz in the market. It is offering the same but the brand is new
in the market. They offered the same value preposition. As of now they have limited
stores hence they are more focused. Once they start to compete with CCD in the
business, they will face a lot of challenges from CCD. So the best strategy for CCD
would be to create some buzz around their products. Add something new to ambience
or to crockery or to latte and keep an eye on the customers. Competition in this industry
is growing rapidly and CCD have to make changes in its communication to the target
audience.

 So what changes should be made by CCD in their promotional campaigns?

 Should CCD recognise the entry of Starbucks as it is in a far more premium
segment than CCD? What should CCD do to counter the competition from
Starbucks?

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  Would the brand image of Starbucks just be of one-time novelty value or will it
be able to shift consumers to a more premium concept in the long term?
Therefore, should CCD react? And, if yes, how?

The First Café Coffee Day outlet was set up on July 11, 1996, at Bangalore, Karnataka
with the tagline ‘A lot can happen over a cup of coffee’. It swiftly expanded into
innumerable cities in India adding new stores with more than 2000 cafés across the
country by 2016. In a span of 20 years, CCD brewed its way to success, in popularity
and love the it harvested.
Most of the customers of CCD Visit weekly and a rest of them visit once in a month.
The main reason for this can be inferred from growing customer base of Starbucks or
lack of awareness and knowledge about all the offerings by CCD.

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Introduction:

Currently, the coffee chain market is more than Rs. 1,000 crore and is growing at a rate
of 30 per cent each year. The market is dominated by a few brands with CCD the largest
in terms of turnover and the number of outlets in India, followed by Barista – a distant
second.

Other players in the market are Costa Coffee, Mocha, Coffee Bean & Tea Leaf and
Gloria Jean’s. Currently, India has about 1,800 coffee outlets, or cafes, and business
sources claim India can accommodate another 2,700 cafes. This seems possible given
that, against global per capita coffee consumption of 4 kg a year, India stands at 0.82
kg.

The coffee market in India has been growing due to the demand for Ready to drink
coffee and has become a part of an individual’s daily consumption basket. Due to
changing cultures, consumers are becoming aware of domestic and foreign brands,
which are boosting the consumption levels.

The export promotion schemes and other subsidies by the GOI, and increasing trend of
eating out coupled with the rising share of young population has driven the market.
Well-established coffee shop chains, such as Cafe Coffee Day (CCD) and Barista,
enhanced their Pan-India presence in the later part of the review period. Meanwhile,
several relatively new players, such as Costa Coffee, Coffee Bean, Gloria Jean’s and
Java Coffee, are trying to establish a footing in Indian coffee retailing. Both these
factors drove on-trade consumption of fresh coffee beans in 2010, with volumes
growing by 12%. On-trade sales have emerged as the primary sales channel for fresh
coffee beans, in the absence of any appreciable off-trade consumption.

In 2017, the average bill amount at coffee outlet was between rupees 150 and 200. This
is expected to rise to rupees 245 by 2019. With customers paying significant amount
for their coffees, they expect a lot from a coffee outlet. Factors such as, atmosphere,

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ambience, menu, service and brand name are playing an important role while choosing
a coffee outlet.
Coffee Chains market in India is quite a mature one, which can be seen from the fact
that Café Coffee Day manages more than 2700 Café’s in 200 cities in India.

Also, Mumbai turns out to be the most expensive city for average bill amount and
Kolkata remains to be the least expensive. It is forecasted that the coffee shops/café’s
market in India will cross INR 5600 Crore by 2018. Café Coffee Day is the biggest
player in the coffee shops and café market in India, followed by Starbucks, Barista
Lavazza and Costa Coffee. There are few other players in the market, which include
Java green, Coffee N U, Coffee Bean & Tea Leaf, Gloria Jeans, and The Chocolate
Room etc.

Coffee has turned out to be a trendy beverage for the young population of the country
and with the high ratio of young population in India; the entire coffee market has been
benefited. The coffee shops and café’s turn out to be the best locations to hangout for
youngsters and are thus, preferred over other venues.

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Overview and company profile:

Café Coffee Day is a fully owned sub-division of Amalgamated Bean Coffee Trading
Company Ltd., having its headquarters in Chikmagalur, Karnataka.
The Amalgamated Bean is among India’s top two coffee producers and exporters, with
10,500 acres of coffee plantations in Chikmagalur.
It opened its first cafe in 1996 on Brigade Road in Bangalore, and today has the largest
cafe retail chain in India – with over 2700 Café’s in 200 cities.
Café Coffee Day (abbreviated as CCD) is an Indian café chain owned by Coffee Day
Global Limited, a subsidiary of Coffee Day Enterprises Limited. Coffee Day serves 1.8
billion cups of coffee, annually, in six countries “Running coffee outlet is a hospitality
business and one needs to create the right atmosphere and experience backed up by
strong supply chain and logistics channel.”
Café coffee day is an ISO 9002 certified company. It has over 5200 acres of coffee
farms which is second largest in Asian region registered as a social service provider to
people. Large numbers of coffee day outlets are located in Bangalore. Growing IT
Industry in India is one of the major contributors to the revenue of these coffee chains.
The cafe chain has had much success riding, and to some extent creating, the cafe
culture wave that swept across metropolitan India following strong economic growth
resulting in an increase in youth spending power.
It has even tied up with various telecom providers and micro sense to enable its cafes
Wi-Fi capable. Its first Wi-Fi cafe was opened on Lavelle Road, Bangalore.

In June 2010, CCD acquired Café Emporia, a café chain from the Czech Republic. Cafe
Emporia has 11 cafés in Czech Republic. While 7 of them are in Prague, 1 is in Brno
and Olomouc and 2 are at Freeport-Hate.

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Cafe Coffee Day's divisions include:

 Coffee Day Fresh 'n' Ground, which owns 450 coffee bean and powder retail outlets
 Coffee Day Square, a high level coffee bar in Bangalore, Chennai, Mumbai, New
Delhi
 Coffee Day Xpress, which runs 900 plus Coffee Day kiosks
 Coffee Day Beverages, which runs over 34,000 vending machines
 Coffee Day Exports, its exporting wing
 Coffee Day Perfect, its fast-moving consumer goods packaged coffee division
 Coffee Day B2C Plant, Coffee vending machine manufacturing division

The Amalgamated Bean produces 7,000 tonnes of coffee every year and sources
another 35,000 tonnes from other plantations. About 25,000 tonnes are exported and
3,000 tonnes used in CCD cafés.

The company started with its first store in Bangalore in 1996. It took six years to reach
35 outlets across the country by 2002.

Currently the company has three formats: CCD, CCD Lounge (Premium Format), and
CCD Square (single-origin coffee, from one estate, not blended).

In addition to this, the company has 900 CCD Express (kiosks for take-away) and
16,000 vending machines in offices.

CCD had a clear vision that the outlets would not be coffee-drinking places. They
would be the perfect hangouts for young people and a place for occasional casual
meetings for corporates.

Therefore, the business model was built towards enabling CCD to be a good hangout
place, both in terms of its ambience and the pricing.

The philosophy of the brand is well captured in the tag line ‘A lot can happen over
coffee’.

While all was going well for CCDs, Starbucks with its 50:50 joint venture with Tata
Global Beverages, entered the Indian market in its second attempt.

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Challenger - STARBUCKS:

Starbucks started in 1971 with one outlet but today, with more than 15,000 stores in 50
countries, Starbucks is the premier roaster and retailer of speciality coffee in the world.
The company in India, called Tata Starbucks Ltd., launched its first outlet in Mumbai
in October 2012.

Starbucks expanded its presence to Delhi in January 2013 by opening two outlets at
Terminal III of the Indira Gandhi International Airport and later one in Connaught
Place. Initially, Starbucks opened a combination of standalone outlets located at malls,
airports, metro stations, and commercial complexes. The company plans to expand its
retail footprint in India by opening outlets in hospitals, near gyms or health stores,
educational institutions and corporate campuses.

The decision to open outlets inside Tata-owned retail stores and properties would
depend on the brand’s premium positioning. As of June 2013, Starbucks operates 15
outlets in two cities. The company plans to have 350 outlets in India by the end of 2017.
And 500 stores by the end of 2018 covering major cities of India. Most these outlets
are focused towards Tier-1 and Tier-2 cities. Major focus of Starbucks would on
Metropolitan India.

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Case:

With the entry of Starbucks in India, and its partnership with TATA group is a major
threat for coffee chains in India with the gradual increase in customer base of Starbucks
and its popularity among youth. Café coffee day show a decline in no. of visitors who
visited their coffee outlets once in a month.
No doubt Tata Starbuck is going to eat the market share. CCD could have been
proactive but still a lot can happen.
Café coffee day is considered for creating wave of café culture in India. CCD has
provided a platform for connecting socially by providing ambience and coffee so that
it is affordable. CCD has made it possible for common people to be connected to each
other.
CCD is selected as their preferred coffee shop due to the value for money they offer.
There were few challenges faced by café coffee day initially in the beginning of the
business. Café coffee day changed the perception of youth towards the hangout places.
But with entry of global giant Starbucks in India, CCD faced many challenges.
Starbucks tried earlier to enter into the Indian market, but failed. It tried again and
succeeded to enter into the India market with partnership with TATA’s (Joint venture).
TATA in India has an image of trust and quality. Entering with Tata enterprises in India
is a strategic move that helped it gain an advantage. Starbucks’ partnership with the
Tata group will place at its disposal considerable resources and the expertise of one of
India’s largest conglomerates which will reduce this advantage to a great extent.
With Starbucks premium pricing, it faces limited opportunities for expansion into tier-
II cities. Its locations will be limited to upscale areas of metropolitan cities and will be
limited to majorly Tier-1 cities.

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Problem statement:

 What changes should be made by CCD in its promotional campaigns?

 Should CCD even recognise the entry of Starbucks into the Indian market as it
is in a far more premium segment than CCD? What should CCD do to counter
the competition from Starbucks?

 Would the brand image of Starbucks just be of one-time novelty value or will it
be able to shift consumers to a more premium concept in the long term? Should
CCD react? If yes, how?

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Analysis of the case:

VISION OF THE COMPANY

“To be the best café chain in the country by offering world class coffee experience at
affordable prices”.

MISSION

• To provide the best quality services to customers at affordable prices.

• CCD is aiming to create its own niche merchandising like Indian coffee powder,
cookies, coffee mugs, coffee vending machines and desserts.

PHILOSOPHY

Core philosophy of café coffee day is to provide trendy lifestyle products that youth
can relate and a unique experience to its customers and in order to execute it, it has
opened some new outlets with the facility of music lounge and also many outlets have
separate book counter.

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MARKETING MIX

Café Coffee Day has a well-equipped coffee roasting unit catering to the specific
requirement of the customers. The most modern technology available is used to
maintain consistency in flavor, aroma and roast the coffee beans to the demanding
specifications of the coffee consumers. Essentially it is a youth oriented brand with
major part of its customer base falling in the 20-35 year age bracket. Each café,
depending upon its size and location attracts between 300 and 600 customers daily.

USP of the Brand: Affordable Price

PRODUCT:

Café Coffee Day product mix constitutes a wide range of products like samosa, chicken
biryani, masala sandwich, Paneer tikka sandwich, coffee, frappe etc. The bestselling
item in summer is frappe, which is coffee and ice cream blended together for superior
taste. In winter it is cappuccino. Their merchandising includes funky stuff like coffee
mugs, sippers, t-shirts, caps etc. Serving Size: The serving size of a product is a
measure, not only of quantity, but also of value for money. PRODUCT SERVING
SIZE: Hot Coffee 210 ml, Cold Coffee 350 ml, Smoothies 350 ml.

PRICE:

Considering that Café Coffee Day knows its major customer lies in the bracket of 20-
35, it has tried to derive a policy whereby it can satisfy all its customers. The price for
a cup of coffee ranges from Rs.80 to Rs 180. There have been only minor changes in
the pricing policy of Café Coffee Day. The changes in pricing are majorly due to
government taxation policy.

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PLACE:

The strategy CCD has adapted is to place a cafe in every possible location where profits
can be made. This is a prime factor in determining the success of a retail chain. Café
Coffee Day looks to cater to their target market with strategically located outlets. Their
outlets are generally located in High Street/ Family Entertainment Centers, IT HUB,
gas stations, near Colleges etc.

PROMOTION:

Café Coffee Day is involved in all the areas of serious consumer passion like:
Television. They have tied up with Channel [V] ‘s Get Gorgeous contest. Tie-ups:
Besides that, Café Coffee Day also tied up with alot of the youth brands. They use
social media platform like Facebook, twitter, Instagram. Café Coffee Day uses special
‘Café Citizen Card’ for rewarding Café Coffee Day’s customers. It is a loyalty program
to gain new customers and retain the existing one.

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Dagmar approach for Café coffee day

1. Awareness – Advertisements about the product and the brand involved made
the consumers aware of the brand and the product.

2. Comprehension – These tasks also helped the consumer in understanding the

attributes and the features of the product and what the product will do for the
consumer.

3. Conviction – The advertisements convinced the customer that the product was
meant for them.

4. Action – Ultimately, after conviction, the customer was to be enticed to take

action

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Competitive SWOT Analysis with Starbucks

Café Coffee Day

 Strengths- Taste & Quality of the products. Growing of own coffee beans and
Projected as an “affordable” brand.
 Weakness - Lacks the power and strength expected to maintain brand loyalty.
Average rating for their behavior and service. No tie ups with big international
brands as Starbucks has one with the TATA’S
 Opportunities - Over 40% of the population is under the age of 20, hence
untapped market share and potential for growth. The use of clever
collaborations (bookstores, etc.)
 Threats -The brand doesn’t project a clear image to customers about what Café
Coffee Day is all about. Brand Loyalty is not so strong.

Starbucks:

 Strengths- Strong Brand Image, Excellent Human Resource, Ambience and

Décor, Strong base for expansion and growth
 Weakness - average taste and quality of product, Perceived as an expensive
brand, Inconvenient Delivery Process
 Opportunities- Strong Brand Recall, Presence of large number of outlets,
Pricing Large number of untapped market.
 Threats -Coffee substitutes, Rise in the cost of coffee products and substitutes,
Competition from national and international products.

STRATEGY GAPS:

• Limited target audience-focused segment is the YOUTH.

• Lack of price affordability due to varied purchasing power.

• Home delivery service is unavailable-people staying at far off places can not avail the
service.

• Entering into new products bringing more competition

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The key strengths of Starbucks is its Distribution channel, affordable pricing and high
brand equity.

1- Strong Distribution Channel: CCD has a strong store format through which it
targets all the segments. It operates its 1,550 outlets in three main formats which target
different segments
 Regular café (1,495)
 The premium Lounge (51)
 and CCD Square (4), which serves single-origin (rather than blended) coffee
 Apart from these outlets, CCD has also set up 600 takeaway kiosks called CCD
Xpress, and 16,000 vending machines in corporate offices around the country.
Expansion at CCD has been driven in a grid of vertical formats, where verticals include
transport hubs, shop-in-shops, hospitals, highways, college and corporate campuses

2- High Brand Equity among Youths: Being the pioneer of coffee culture in
India, CCD enjoys high brand equity among the youths with major part of CCD
customers falling within the age group of 20 to 30 which accounts for 60% of the
overall revenue. The group comprises of mainly college going students and young
working professionals
3- Differential Pricing: CCD follows differential prices, different stores of CCD
have different pricing, which allows CCD to maintain profitability at store level.

The biggest weaknesses that could be identified was the weaker brand image and
lacking brand loyalty among the customers. Cafe Coffee Day, should focus on these
two, mainly to compete with Starbucks, as they being a really strong brand. No doubt
that they will eat up the market in the existing scenario.

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1) Brand Image and Brand Loyalty. As it can be well recognized that the brand loyalty
and image to the customers is more on Tata Starbuck. Even Cafe Coffee Day should
build such strategies to create Brand Loyalty and enhance brand image. Some of the
example strategies could be Loyalty Cards with benefits, Quality promotion rather than
Product Promotion.

2)Targeting:-
In the discussed case, it has been shown clearly that CCD focuses mainly on the
youngsters for their product. However, younger generation today, is more impulsive
and may switch-over to another brand very quickly. Hence, the company might make
some strategy to target the other groups also. It may build an atmosphere wherein casual
business meetings; formal business meetings can also be undertaken. Rather than only
for youngsters hanging-out, it can target families too.

In addition to this, CCD can also employ the benefits from the Indian Festive Occasions
into Indian Market. As such occasions are numerous in India and people think liberally
to make any expense in these occasions and are ready to spend more. Currently, Café
Coffee Day does not have a connect with the end users. They are just another premium
coffee shop. What they could do is, for example, send their top 1000 coffee customers
on a 2-day stay in one of their premium plantations. The experience would be
remembered a lifetime. There is a whole lot of technology needed around this, like
loyalty cards etc.

REVIEW OF PROBLEM AREAS

The areas of weaknesses, which needs to be improved upon, so that both can eliminate
any disadvantage that may occur, and improve customer satisfaction.

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  Weak brand image: The brand doesn’t project a clear image to customers about
what Café Coffee Day is all about. This could prove as a deterrent during future
national and international expansion.
 Inefficient human resources: According to the market survey, Café Coffee
Day’s staff received only an average rating for their behavior and service.
 Ambience & Décor: A lot of respondents did not like the fact that Café Coffee
Day outlets and literature served as prime space for a lot of advertising and
promotions. They felt as if the café’s had been hijacked just for advertising.
 Lack of financial resources: Café coffee day lacks in financial resources as the
global giant have biggest conglomerate of india as their partner.

SUGGESTIONS: -

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• Café Coffee Day has done extremely well so far to project itself as an affordable
youth- oriented brand. But there are still certain areas where the brand needs to get
stronger. Therefore, CCD should focus more on customer retention.

• With regards to physical evidence associated with the brand, Café Coffee Day needs
to do a lot of work if they have to catch up with Starbucks. The size of Starbucks outlets
is a major differentiator.

• My first recommendation for Café Coffee Day is to clean up the décor wherever
unnecessary advertising is taking place.

• Although it might be an important source of revenue, long-term customer perception

of the brand isn’t very positive. So, the brand should focus on brand loyalty and various
offers should be introduced to the frequent visitors.

• Café Coffee Day would do better by providing promotional space for its partners with
the use of clever collaborations, and not printed advertisements and posters.

• Perception of the brand and its training policies should be redefined to avoid falling
into any type of controversies.

• Increase in promotional plans like twitter contests, boarding radio programs Facebook
campaign and other social and internet media marketing tools.

• Pricing strategy with respect to population factor as to how many people belong to
such market. Café coffee day should focus on introducing Combo offers.

• They should make attractive promotion plan for attractive features.

REFERENCES:

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https://www.thehindubusinessline.com/news/education/ccd-must-not-take-on-
starbucks-directly/article5397474.ece

https://en.wikipedia.org/wiki/Caf%C3%A9_Coffee_Day

https://www.thehindubusinessline.com/markets/stock-markets/cafe-coffee-day-
primary-offer-a-rich-brew/article7757939.ece

http://www.casestudyinc.com/coffee-day-brand-strategy-india

http://www.starbucks.in/

https://www.cafecoffeeday.com/about-us

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