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THE CAPPUCCINO CONUNDRUM: WHAT KEEPS THE JAVA FLOWING?

JAI HIND COLLEGE BASANTSING INSTITUTE OF SCIENCE & J.T. LALVANI COLLEGE OF COMMERCE

RHEA TIBREWALA YEAR: 2010-2011

JAI HIND COLLEGE BASANTSING INSTITUTE OF SCIENCE & J. T. LALVANI COLLEGE OF COMMERCE
23-24, Backbay Reclamation, A Road, Churchgate, Mumbai 400 020

Bachelor of Management Studies

THE CAPPUCCINO CONUNDRUM: WHAT KEEPS THE JAVA FLOWING?

Rhea Tibrewala Seat No.: 56 Name of the Guide: Jaimit Doshi Date: 5/12/2010

DECLARATION

I, Rhea Tibrewala of Jai Hind College of T.Y.B.M.S. (Semester V) hereby declare that I have completed this project on The Cappuccino Conundrum: What Keeps the Java Flowing? in the Academic year 2010 - 2011. The information submitted is true and original to the best of my knowledge.

Signature of the Student

CERTIFICATE
I, Jaimit Doshi, hereby certify that Rhea Tibrewala of Jai Hind College of T.Y.B.M.S. (Semester V) has completed the project entitled The Cappuccino Conundrum: What Keeps the Java Flowing? in the Academic year 2010 - 2011. The information submitted is true and original to the best of my knowledge.

Signature of the Project Coordinator

Signature of the Principal of the College

TABLE OF CONTENTS

List of Illustrations...............................................................................................................6 List of Appendices................................................................................................................7 Acknowledgements...............................................................................................................8 Abstract.................................................................................................................................9 Chapter One: Introduction................................................................................................10 1.1 Research Questions........................................................................................................................11 1.2 Purpose and Future Scope..............................................................................................................11 Chapter Two: Methodology................................................................................................13
2.1 Overview...........................................................................................................................................13 2.2 Design...............................................................................................................................................13 2.3 Participants........................................................................................................................................16

Chapter Three: Results.......................................................................................................18


3.1 Main Players......................................................................................................................18 3.2 Results of Qualitative Research.......................................................................................................19 3.3 Results of Quantitative Research.....................................................................................................21

Chapter Four: Discussion and Analysis of Results..........................................................27


4.1 Consumer Typecasting.........................................................................................................27 4.2 Quantitative Research Results Analysis................................................................................32 4.3 Chain stores vs. Single Units................................................................................................35

Chapter Five: Recommendations.......................................................................................38


5.1 Recommendations to Single Unit stores.................................................................................38 5.2 Recommendations to Chain Stores........................................................................................39

Chapter Six: Conclusion......................................................................................................40 References..............................................................................................................................41

LIST OF ILLUSTRATIONS

Illustration

Page

1. Details of Respondents (Qualitative Analysis) ...............................................16 2. List of Coffee Shops Mentioned in Qualitative Research...............................18 3. Demographic Profile of Respondents...............................................................21 4. Average break up of monthly expenses............................................................22 5. Preferred Day Hang outs of Respondents.........................................................22 6. Preferred Coffee Shop Companions..................................................................23 7. Time Money Matrix...........................................................................................24 8. Importance of Factors in Coffee Shop...............................................................24 9. Repeat Orders.....................................................................................................25 10. Comparative Ranking.........................................................................................26 11. Four Consumer Groups......................................................................................27

LIST OF APPENDICES

Appendix

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1. Discussion Guide for Qualitative Analysis..................................................42 2. Sample Questionnaire...................................................................................44 3. Table of Coffee Consumption in India.........................................................47

ACKNOWLEDGEMENTS

Foremost, I would like to express my sincere gratitude to my guide Prof. Jaimit Doshi for the continuous support of my study and research, for his patience, motivation, enthusiasm, and immense knowledge. His guidance helped me in all the time of research and writing of this project. I could not have imagined having a better advisor and mentor for my study. Besides my advisor, I would like to thank my coordinators, Professors Doctor Rakhi Sharma, and Omkar Patki for their insight and encouragement, and my college principal, Dr. Kirti Narain for being a constant source of inspiration to me. Last, but not the least, I am grateful to all my colleagues and friends who assisted me by providing me with adequate direction in my research during the completion of the project, and were supportive throughout.

Rhea Tibrewala

ABSTRACT

The needs of each consumer are different when it comes to a coffee shop. These needs, their fulfillment as well as non-fulfillment in certain cases is what this study addresses, through the conduction of an in depth study of consumer needs with respect to coffee shops. It also attempts to reveal how single unit coffee shops face up against the giant competition of well known chain shops, by examining how each caters to a specific group of consumers. This study will serve as an expos on the real thoughts of the consumer when it comes to coffee shops, as well as point out where coffee shops are failing to meet the needs of their consumers. It is a highly complex and multi-faceted study.

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Chapter One INTRODUCTION:


An estimated 94,400 million tons of coffee were consumed in India in the year 20081, of which 24% is consumed out of home, at restaurants, baristas, and tea shops.2 A simple Google search unearths the vast variety of coffee shops accessible to consumers. Ranging from well known chain stores such as Barista, Caf Coffee Day and the Coffee Bean and Tea Leaf, to single unit mom and pop coffee shops, to hotel lounges and roadside stalls, the number of places where coffee consumption takes place is astounding. Mumbai itself houses a bevy of coffee houses. Caf Coffee Day, housing 31 outlets spread across the city has the highest presence, with Baristas 27 outlets trailing not far behind. It is not surprising then, that a majority of consumers surveyed named either of these two stores as their favourite coffee shop. The brand presence and locations of the two giants make their influence almost inescapable, and ensure their positioning at the top of the mind of the consumers. However, lurking in the shadows of their bigger counterparts- the coffee chains, are a veritable army of smaller, single unit shops, which though lesser known, are very much existent and conducting everyday business on a smaller scale. The stimulus to conduct this study arose from the fact that in spite of the presence of a great number of single unit coffee shops located all over the city, the vast majority of coffee consumption takes place in the more popular chain stores. This paper will attempt to classify coffee consumers into groups based on their store preferences and consumption habits. Based on the information gathered through in depth surveys, a hypothesis can be formed as to where chain stores succeed where the single unit stores fail, which can then be tested against a quantitative study. This paper will attempt to delve into the mind of the consumer and serve as an expose on the reasons behind coffee consumption. Based on consumer preferences gathered through surveys, suggestions can also be made as to service recovery where coffee shops are failing to meet consumer needs.
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http://www.indiacoffee.org/indiacoffee.php?page=CoffeeData#consumption http://www.authorstream.com/Presentation/john_cd-279431-coffee-statisticscoffeeconsn007-entertainment-ppt-powerpoint/

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1.1 RESEARCH QUESTIONS: These are the principle research questions on which the study is focused:

What kinds of consumers visit coffee shops? What factors determine a visit to a particular kind of shop? Why do chain stores prevail over single unit stores?

1.2 PURPOSE & FUTURE SCOPE: The research questions define the main problem areas of this study, as well as provide a basis for recommendations on the pertinent issues. However, it is essential to first define the purpose of study. The purpose of study can be summed up as follows: Indian consumers have various needs and preferences related to their coffee consumption habits. Different stores attempt to fulfil these needs through different means. Each coffee shop caters to a different kind of consumer, who finds his needs best fulfilled by the coffee shop he favours. The purpose of this study is to attempt to type-cast heterogeneous consumers into homogenous groups of people who share the same general consumption habits and prefer a certain type of coffee shop. In addition to this, the study compares the success of chain stores to the performance of single unit coffee shops, and provides recommendations for the latter. The findings of this research can serve as a guide to single unit coffee shops, a niche market in Mumbai, to identify and better understand the type of consumer that would be susceptible to

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their marketing strategies, and how to create a loyal base of consumers by providing service according to their specifications. Furthermore, the study shall facilitate easy problem recognition in the cases of chain stores, and provide suggestions as to how they can build upon their strong brand identities and capture even larger market shares.

Chapter Two METHODOLOGY:

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2.1 OVERVIEW This research was conducted in order to determine consumer needs and preferences relevant to coffee consumption. The comparison between single unit and chain stores in terms of fulfilment of these needs were also part of the objectives. In order to answer these research goals, the researcher opted to obtain the view of consumers in line with this topic. Specifically, a total of 40 respondents from various fields within Mumbai were randomly selected to make up the sample. The research was designed both in a qualitative as well as quantitative capacity. Selected participants were subjected to an in depth interview, based on a pre-conceived discussion guide, following which a survey questionnaire structured along their responses was administered to a larger sample. Data gathered from this research instrument were then computed for interpretation. Along with primary data, the researcher also made use of secondary resources in the form of published articles and literatures to support the survey results. 2.2 DESIGN The descriptive method of research was used for this study. To define the descriptive type of research, Creswell3 stated that the descriptive method of research is to gather information about the present existing condition. The emphasis is on describing rather than on judging or interpreting. The aim of descriptive research is to verify formulated hypotheses that refer to the present situation in order to elucidate it. Moreover, this method allows a flexible approach, thus, when important new issues and questions arise during the duration of the study, further investigation may be conducted. With this research type, it is essential that the researcher already has a clear view or picture of the phenomena being investigated before the data collection procedure is carried out. The
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http://www.educationforhealth.net/EfHArticleArchive/1357-6283_v13n2s14_713664899.pdf

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researcher used this kind of research to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study. The descriptive method is advantageous for the researcher due to its flexibility; this method can use either qualitative or quantitative data or both, giving the researcher greater options in selecting the instrument for data-gathering. The aim of the research is to determine consumer needs and preferences relevant to coffee consumption, as well as to compare the performance of chain stores and single unit retailers. The descriptive method is then appropriate for this research since this method is used for gathering prevailing conditions. For this research, two types of data were gathered. These included the primary and secondary data types. The primary data were derived from the answers the participants gave during the research process. The secondary data on the other hand, were obtained from published documents and literatures that were relevant to the subject. With the use of the survey questionnaire and published literatures, this study took on the combined quantitative and qualitative approach of research. By means of employing this combined approach, the researcher was able to obtain the advantages of both quantitative and qualitative approaches. (i) Qualitative Approach: Qualitative approach generates verbal information rather than numerical values. Instead of using statistical analysis, the qualitative approach utilizes content or holistic analysis; to explain and comprehend the research findings, inductive and not deductive reasoning is used. The main point of the quantitative research method is that measurement is valid, reliable and can be generalized with its clear anticipation of cause and effect. Being particularistic and deductive in nature, quantitative method is dependent on the formulation of a research hypothesis and confirming them using a specific data set. The scientific hypothesis of a quantitative method holds no value. This means that the researchers personal thoughts, subjective preferences and biases were not applicable to this type of research method. The qualitative analysis is what attempts to establish the hypothesis that is either supported or refuted through quantitative analysis.

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The qualitative approach was implemented in this study through a series of in depth interviews conducted with 10 different consumers of coffee, each interview lasting for an average period of 40 minutes. The instrument that facilitated the interview was the pre-conceived Discussion Guide (View Annex I). The consumers responses were audio recorded to be able to analyze them in greater detail in the later parts of the study, and to avoid misinterpretation. Open ended, non quantitative responses were encouraged, as the main purpose of the qualitative approach was to establish a hypothesis, not support one. (ii) Quantitative Approach: Quantitative data collection methods are centred on the quantification of relationships between variables. Quantitative data-gathering instruments establish relationship between measured variables. When these methods have been used, the researcher was detached from the study and the final output was context free. Measurement, numerical data and statistics are the main substance of quantitative instruments. An approach that is primarily deductive reasoning, it prefers the least complicated explanation and gives a statement of statistical probability. The quantitative approach is more on the detailed description of a phenomenon. It basically gives a generalization of the gathered data with tentative synthesized interpretations. Quantitative methods establish very specific research problem and terms. Variables, both dependent and independent, that are needed in the study are clearly and precisely specified in a quantitative study. The quantitative approach was used extensively in this study to analyze the information gathered in the administered survey (View Annex II). A number of quantitative and statistical tools were used for the purposes of: -

Collection of empirical data Modelling and analysis of data Evaluation of results

2.3 PARTICIPANTS:

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In order to determine consumer needs and preferences with relation to coffee consumption, a total of 40 respondents were asked to participate. Being a general study, no inclusion criteria were imposed. The participants qualified for sample selection were not necessarily consumers of coffee. This qualification would have restricted the sample size and increased margin of error in the assessment of the fulfilment of needs by present day coffee shops. The respondents were selected from various fields, students, working professionals, as well as middle aged consumers. For the qualitative analysis, the sample size was 10 respondents, whose personal details have been delineated in the table below: Illustration I: Details of Respondents (Qualitative Analysis) Respondent No. 1 2 3 4 5 6 7 8 9 10 Female Male Female Female Male Female Male Male Female Female 19 19 21 51 43 20 51 20 21 20 Student Student Student Doctor Businessman Student Businessman Student Student Student Sex Age (years) Occupation

The quantitative analysis was administered to 30 respondents, with an age range of 17-53 years.

Ethical Considerations As this study required the participation of human respondents, certain ethical issues were addressed. The consideration of these ethical issues was necessary for the purpose of ensuring the privacy as well as the safety of the participants. Among the significant ethical issues that

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were considered in the research process include consent and confidentiality. In order to secure the consent of the selected participants, the researcher relayed all important details of the study, including its significance and purpose. By explaining these important details, the respondents were able to understand the importance of their role in the completion of the research. The respondents were also advised that they could withdraw from the study even during the process. With this, the participants were not forced to participate in the research. The confidentiality of the participants was also ensured by not disclosing their names or personal information in the research. Only relevant details that helped in answering the research questions were included.

Chapter Three RESULTS


3.1 MAIN PLAYERS

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This section is a brief outline of the consumers preferred coffee shops, based on various factors. It includes a list of coffee shops mentioned during the qualitative analysis that were then used as bases for the questionnaire in the quantitative analysis. These have been mentioned along with their primary reasons for citation as the consumers favourite haunts.

Illustration II: List of Coffee Shops Mentioned in Qualitative Research

Name of Coffee Shop Cafe Coffee Day Barista The Coffee Bean and Tea Leaf Verandah at the Oberoi Kyani and Co. Moshe Mocha Theobroma

Number of citations as favourite 13 8 4 2 1 1 1 1

Primary reason for citation Happening, young vibe Warm, friendly Large, welcoming Quiet, stylish Old world charm Great food Exotic, exciting Menu variety, home styled

3.2 RESULTS OF QUALITATIVE RESEARCH The primary result observed from the qualitative analysis was the emergence of a distinct pattern of consumption, which allowed delineation of consumers into four specific groups: i. Non Users ii. Indifferents iii. Chain store loyalists

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iv. Single Unit loyalists *Anomaly: Coffee Loyalist The primary characteristics of the four groups have been described below: i. Non Users: -

Non consumers of coffee Low to average monthly income (Below Rs. 2500) Have a variety of hobbies and activities

ii. Indifferents: Sociable extroverts Above average monthly income (Rs. 2500-3500) Generally do not take initiative

iii. Chain store loyalists: Younger, college going Low to average monthly income (Below Rs. 2500) Non experimental Sociable and extroverted

iv. Single Unit Loyalists: Older crowd Artistic, experimental, and introverted Above average to high monthly income (Rs. 3500 upwards)

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Further information pertaining to the discovery and formation of these consumer groups can be found in the discussion section.

3.3 RESULTS OF QUANTITATIVE ANALYSIS The information in this section corresponds to the results of the survey administered. The questions of the survey can be viewed in detail in Annex II.

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Illustration III: Demographic Profile of Respondents

70 60 50 40 30 20 10 0 Ag e S ex Av g MonthlyIncom era e e

Age (%) Below 18 years 18-45 years Above 45 years 60 25 15

Sex (%) Male Female 65 35

Average Monthly Income (%) Below Rs. 1500 Rs. 1500-2500 Rs. 2500-4000 Above Rs. 4000 20 30 37.5 12.5

Illustration IV: Average break-up of monthly expenses

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12% 6%

6%

Travel F ood Movies


46%

12%

Nig outing ht s Work S hopping

18%

The inputs provided in the survey have been illustrated in the above pie chart, which depicts the average spending habits of the consumers surveyed, based upon their rankings in the qualitative, as well as the information gathered in the qualitative interviews. Illustration V: Preferred Day Hangouts of Respondents

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2 4% F F ast ood Joints Restaurants

9%

P atisseries/ C onfectionaries C offee S hops Bars Malls

14% 18%

17%

The primary contenders when it came to daily haunts of the consumers have been declassified below (in order of preference) along with examples cited:

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1. Fast Food Joints: Subway, McDonalds 2. Malls: Atria, CR2 3. Patisseries/ Confectionaries: Birdys, Theobroma, Butterfly
4. Restaurants: Five Spice, Cafe Leopold

5. Coffee Shops: Cafe Coffee Day, Barista, The Coffee Bean and Tea Leaf 6. Bars: Cafe Mondegar, Gokul Bar and Restaurant, Sports Bar

Illustration VI: Preferred Coffee Shop Companions

The vast majority of respondents were found to prefer visiting a coffee shop with friends. The second best option was with a boyfriend or a girlfriend. It was a select few who ever visited a coffee shop alone or with a family member. Certain respondents were indifferent to the company they were with at the time.

7 % .50 2 0% .5

2.50 %
Fm a ily F riend s

32 0% .5 55 0% .0

B oyfriend/ G irlfriend Alone Indifferent

Illustration VII: Time-Money Matrix

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70 60 50 40 30 20 10 0 0.5hours- 1hour 1hour- 1.5hours 1.5hours 2hours Abov 2hours e

B elowR . 200 s R . 200-400 s R . 400-600 s Abov R . 600 e s

The time money matrix outlines the relationship between the average time spent at a coffee shop and the amount of money spent there. For most of the results, there was a proportionate increasing relationship of time and money spent. Illustration VIII: Importance of Factors in Coffee Shop The inputs provided were ranked in order of importance. The most important factors following this question were identified as: Rank 1 2 3 4 5 6 7 8 Factor Ambience Crowd Food taste and variety Service Price Location Size of outlet Coffee

The most highly cited factor of importance was ambience, with the crowd of a coffee shop coming in a close second. Surprisingly, the least cited factor of importance was the actual coffee.

Illustration IX: Repeat Orders

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The following chart depicts the percentage of respondents who mentioned in the survey that they had a tendency to repeat the same orders at the coffee shops they visited each time.

10% Y es 21% 51% No S etim om es Rarely

18%

Illustration X: Comparative Ranking

The following table depicts the comparative ranking of various coffee shops, based on various factors. The ranks were calculated as those with the majority of votes in the various surveys.

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Name of Coffee Shops Barista, CCD Theobroma, Butterfly Moshe, 210 Celsius Cafe Brittania/ Kyani and Co. The Oberoi Lounge/ Courtyard by Marriot

Ambien ce 1 2 4 5 3

Food/Dri nk 3 2 1 5 4

Servi ce 2 4 3 5 1

Crow d 2 1 3 4 5

Location 1 3 4 5 2

The chain stores like Barista and Cafe Coffee Day held the strongest position, with the maximum number of number one ranks, whereas the Irani cafe category held the lowest position, with the least popular votes in most factors.

Chapter Four DISCUSSION AND ANALYSIS OF RESULTS


4.1 CONSUMER TYPECASTING Following the qualitative research, the consumer was able to identify four primary groups of consumers, which were classified in the previous section as follows:

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i. Non Users ii. Indifferents iii. Chain store Loyalists iv. Single Unit Loyalists * Coffee Loyalist Anomaly The characteristics of the four users were identified in Section 3.2. Illustration XI: Four Consumer Groups

Non Users

Indifferen ts

Chain Chain Store Store Loyalists Loyalists

Single Single Unit Unit Loyalists Loyalists

Using the discussion guide as a reference, the researcher established a distinct pattern in the consumption habits of the four groups, and was therefore able to classify them.

i. Non Users

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The Non Users were that group of consumers that either avoided coffee shops, or rarely frequented them. Their low monthly income was the primary factor cited as their reason for avoidance of expenditure on frivolities such as coffee. Their purchasing power was limited, and their sensible mindset disallowed them to spend on coffee, which they considered a luxury (the average chain store coffee costing Rs. 100 or more). The Non Users preferred to get more value out of their expenditure, by either watching a movie or play, or eating out. They did not gain value for money by spending it at a coffee shop. Coffee shops to them were a place to socialize and spend money- and while they enjoyed mingling with their friends, stated clearly that it could be done either at one of their residences, or in public places, where money need not be spent simply in the pursuit of socializing. Another reason highly cited by them as a reason for avoiding coffee shops was the crowd issues. To Non users, coffee shops were either too loud, too quiet, too rowdy- a social situation which made them uncomfortable and irritated. Non Users when prompted were discovered to have a variety of extracurricular hobbies and activities, ranging from sports to music to social service, which occupied a considerable part of their leisure time. They therefore stated that the minimum amount of leisure time they get to themselves, they would rather spend doing something fruitful rather than sitting at a single place and sipping on an expensive coffee. Non Users were achievers and doers- and spending long hours over a table was not their ideal way to unwind after their hectic schedules. The primary issues concerning the Non Users can therefore be classified as follows: Lack of value for money at coffee shops Ambience issues Lack of activity makes a coffee shop mundane for the dynamic Non User

ii. Indifferents

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The Indifferents stated that they didnt mind visiting coffee shops on occasion, but would generally not initiate the process. They were extroverted and sociable, but not the leaders of the pack, and would go to a coffee shop if that was the plan. Impulse visits to coffee shops were the speciality of this group of consumers, who found a nearby coffee shop a good place for an after college rendezvous, or a post-lunch hang out. The primary factor that induced this group to visit a coffee shop was its location- the convenience of access to the coffee shop determined which kind (single unit or chain) store they would visit. In this regard, chain stores generally won out because of their superior positioning and location strategies. The other reasons cited for visiting coffee shops were for the food, which made food courts, patisseries, and movie theatres primary contenders. The price and variety of the food were primary determinants in choosing a hang out. Both, chain stores as well as single unit stores were visited, both having their advantages as well as disadvantages. The chain stores were viewed as more reliable and familiar joints, whereas a visit to a single unit store was generally more exciting and experimental. The primary issues concerning the Indifferents were then:

Choice of coffee shop dependent on location and purpose of visit (food, quiet, etc.) Impulse rather than planned visits Chain stores were more frequently visited because they were at the top of the mind of consumers

iii. Chain store loyalists:

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This was one of the more distinct groups of consumers, who clearly preferred chain stores such as Barista and Cafe Coffee Day to single unit stores. They were adamant about their choice, and provided adequate reasoning for the same. Chain store loyalists were a younger, more vibrant crowd. Their youth and energy was the perfect complement to the loud music and bright colours of chain stores- the orange colour theme of Barista was cited to liven the atmosphere, and the popular music that played at Cafe Coffee Day kept things lively for its youthful patrons. Chain stores are generally reasonably priced, which appeals to the younger crowd in view of their limited purchasing power. In addition to this, places like Gloria Jeans even offer student discounts, which was further incentive for visiting. The limited purchasing power of the consumers increased their desire for value for money- not wanting to be experimental, and being guaranteed of reasonably good food which was more importantly standardized- this was what mattered to the chain store loyalists. The familiarity and sense of awareness of the standards and service of a chain store was comforting to this group of consumers. Single unit stores were more unreliable, and the chain store loyalists were unsure of what to expect each time, which was not in the single units favour. Another major factor in the choice of chain stores over single units was that they were better located- most colleges have a major chain store at a reasonably proximal distance, as do most movie theatres and malls. The lower prices and un-pretentious atmosphere were also given as reasons for the chain stores preferable environment. The chain store loyalists primary concerns can be summarized below as follows:
-

Younger, more energetic vibe appeals to patrons Standardization, location, and pricing are the biggest advantages, whereas lack of promotion of single units is probably their biggest failure

Value for money is gained from standardization

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iv. Single Unit Loyalists

Single unit loyalists were the complete converse of the chain store loyalists. Older, more reserved, and with a higher income- the loud, energetic vibe of the chain stores were construed as garish and obtrusive by the single unit loyalists, for whom a coffee shop was a means of escapism- for solace and comfort.

The single unit loyalists were the literati- the artists, the poets, those who enjoyed the occasional moment of solitude. Single unit coffee shops fulfilled their needs perfectly in this respect, by providing a subtle, more niche location for them to contemplate over a hot cup of coffee, without being disturbed by loud music or over bright colours.

The single unit coffee shop loyalists reasons for visiting coffee shops were more subdued- to enjoy a quiet meeting with a close friend, to pore over a book, or to simply enjoy the coffee and relax. This consumer group had a cult-like manner, which the atmosphere of single unit stores complemented perfectly. The higher priced coffee was not an issue as long as they got their desired quiet ambience.

The visits to these shops were usually pre-planned, with a view of spending a relatively high time period there. The regulars tended to order the same dishes, and visit the same places repeatedly. Chain stores were considered less classy and meant for yuppies.

The main issues related to this group of consumers were:

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Time and money spent is higher due to conducive atmosphere Chain stores are too conventional for them, the reliability and standardization which is available there puts them off rather than excites them.

The niche status of single unit stores is their primary selling point for this group

As can be seen from the above four consumer groups, there are distinct characteristics in each coffee consumer- characteristics which are best fulfilled by some stores, and unfulfilled by others. Recommendations can be made to both, single unit as well as chain stores based on these replies on how to sustain their competitive advantage, or appeal more to a new kind of market.

The distinction between these four groups of consumers addresses one of the vital questions raised by this study- What kinds of consumers visit coffee shops?

4.2 QUANTITATIVE RESEARCH RESULTS ANALYSIS

The classification of these four consumer groups also facilitated the execution of a quantitative analysis, which tested the characteristics of the four groups against different kinds of people, and through establishment of various relationships, such as average income-propensity to visit coffee shops and time spent- money spent were able to strengthen these premises.

The two relationships that were tested in the quantitative surveys were:

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(i) The average income of the consumer determines the propensity to frequent a coffee shop as well as the type of coffee shop visited.

(ii) The time spent at a coffee shop determines the amount of money spent at a coffee shop.

The above mentioned hypotheses aided the researcher in addressing the second of the vital issues concerning this study- What factors determine a visit to a coffee shop?

There are several factors that determine the visit to a particular kind of coffee shop, as can be seen in Illustration VIII (Importance of factors). This particular question in the survey was designed to identify the vital determinants of the choice of a coffee shop.

The foremost determinant of the choice of coffee shop was the ambience and crowd- which, as can be seen from the four different kinds of consumer groups, can vary vastly from place to place. Food taste and variety and service were the next most important factors, as patrons of coffee shops sought value for money. With respect to this arises the question of pricing in coffee shops. Were consumers willing to pay above average prices for excellent food and service? Or was low pricing the only factor for choice?

To better examine the relationship between average income and type of coffee shops that fulfil the needs of each income group, one can revert to the four consumer groups in the previous section, where the characteristics of each consumer group clearly mention their average purchasing power.

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The following was observed in the case of each group:

1. Non Users (low income group) generally avoided coffee shops, stating that they were a waste of money in view of their limited purchasing power.

2. Indifferents (low-medium income group) didnt mind going to coffee shops, but considered other options such as movies and restaurants to be more value for money.

3. Chain store loyalists (medium income group) preferred reliable, standardized products and places, where they would be assured of a certain brand of service for a known price.

4. Single unit loyalists (high income group) barely considered price as a factor, and were more concerned with the ambience of the stores they frequented.

As can be observed from the above information, the value for money is relatively high in the first three consumer groups, which leads them to safer pastures- chain stores and franchises where they are assured of a certain level of service quality, and there exists a known output.

The high purchasing power of a single unit loyalist enables them to be more discerning, and gives them a greater choice, and more room to experiment, which leads them to new, experimental places, rather than run of the mill chain stores.

The relationship between income and choice of coffee store is also helpful in determining pricing policies of coffee stores, especially single units, if they are of a mind to increase their consumer base (View Recommendations Section).

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The second relationship to be tested in the quantitative survey was that of the time and money spent in a coffee shop.

For this, it was easy to establish the Time Money Matrix (View Illustration VII in the previous section) from the survey. The analysis of the illustration defines the relationship between time spent and money spent in a coffee shop.

Analysis of Time Money Matrix:

Highest percentage of consumers in three out of four cases spent an average of Rs. 200-400. The only exception to this was when consumers spent the least amount of time in a coffee shop, that is 0.5 hours- 1 hour. There was a steady increase in the higher bracket (Rs. 400 - Rs. 600) purchases of consumers as the time spent kept increasing.

As can be clearly seen, there was a direct relationship between time spent and money spent at a coffee shop. The more time consumers spent there, the more money they spent, not just on coffee, but on food, on higher tips, on other entertainment (e.g. jukebox, merchandise). In certain qualitative interviews, respondents stated that spending long hours in a coffee shop obliged them to keep buying food or snacks, not because they wanted to, but because they felt accountable on grounds of occupying a table for extended periods of time, and not consuming in proportion. This caused conflicting feelings of guilt or self deprecation which the researcher found interesting.

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Although coffee shops would undoubtedly benefit from this phenomenon in the short run, it would not be advisable to promote these negative feelings and use them to their advantage, but rather cultivate a healthy and fair promotional strategy that would inspire an increase in sales.

4.3 CHAIN STORES VS. SINGLE UNITS

The table in Illustration X (view previous chapter) clearly depicts the popularity of chain stores amongst consumers, whereas the lag of single unit stores is clear. The reasons for these are varied, ranging from lack of appealing ambience, to lower service quality, and an unappealing crowd.

The primary strength of chain stores, however, as gleaned from the qualitative as well as quantitative analyses was their positioning and branding strategy, which was all encompassing, and ensured that chain stores are at the top of every consumers mind. Most consumers when asked to name coffee shops, regardless of whether it was their favourite or not, responded with the name of a well known chain store. Even the superb location and easy service interface (self service) of chain stores make them simpler for consumers, especially the younger consumer base. Many consumers stated that they were unaware of the presence of single unit stores in their immediate area, which was a big negative point for them, because in the case of lack of knowledge of their existence, how can single units compare against the repeated promotion of the chain stores, even if willing consumers exist?

Chain stores are a more conventional and reliable option, and as has been established, the majority of consumers hold great value for their money- which they feel less safe in investing in an unknown coffee shop, with no service benchmarking and guarantee of a particular quality. Single units tend to capture a more niche market with their underground status, and though it

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works for their regulars, this is detrimental to them in terms of a larger market share and increased revenues.

Single unit stores hold their own when it comes to menu variety and food quality, in fact, a majority of respondents stated that chain stores tended to serve food of an average quality, which won out over single unit stores merely in terms of price. The number of repeat orders (view Illustration XI in the previous chapter) was greater for respondents who frequented chain stores, indicating a lack of variety in their menu. On the other hand, this could also be argued conversely, saying that the consumers ordered the same thing repeatedly because they were assured of its taste and quality.

The other advantage of single unit stores was their ambience, which appealed to a more mature, older set of consumers, for whom chain stores were too exuberant. Single units should attempt to maintain this atmosphere, but at the same time, focus on their brand visibility and positioning in order to attract new consumers who belong to the segment that they cater to.

The comparison of single unit coffee shops to chain stores was also made on grounds of the companions to a visit to each type of place. While single units cater to smaller, more intimate groups, chain stores generally cater to groups of three or more, and it is of vital importance that each store strives to maintain the ambience in a manner that best suits their clientele.

From the above research, it is clear that the primary areas on which single units need to focus are on their branding and positioning strategies, which the chain stores have already established. Another important factor responsible for the decline of single unit stores is their location. Recommendations have been made in the following section as to the improvement of single unit stores.

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Chapter Five: Recommendations

The recommendations in this section have been divided into two sections, encompassing suggestions for both, single unit as well as chain stores.

5.1 RECOMMENDATIONS TO SINGLE UNIT SHOPS

The recommendations to improve the status of single unit coffee shops are as follows:

i. Increase their promotional activities to improve brand visibility: Relocation of already established coffee shops would be harder to implement, than to increase their visibility. Since positioning was cited as one of the primary success points of chain stores, single units should attempt to place themselves at the top of the consumers minds in order to attract them more frequently.

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ii. Location: The location of the chain stores is very mainstream and easily accessible,

which not only increases their brand visibility and keeps it at the top of the mind of the consumers, but also makes it an easier option. Single unit stores should attempt to locate themselves at handier locations, in order to promote themselves. Most consumers are not even aware of the existence of single unit stores, which is a great detriment to them.

iii. Improving service quality: The quality and reliability of service of single unit stores must improve in order to retain consumers. Consumers are rarely tolerant of service gaps, and consistently varying levels of service quality will result in a loss of consumers, if the single unit stores do not establish a certain pattern of service delivery.

iv. Pricing: Lowering their prices may help single unit stores to attract more consumers, as well as open their doors to new groups of consumers, as there is a relationship between price and choice of coffee shop. 5.2 RECOMMENDATIONS TO CHAIN STORES

Chain stores, though mostly successful in capturing a large and loyal market base have a few shortcomings that can be addressed as follows:

i. Improve food and service quality: Chain stores ranked high on value for money, but only because single unit stores were too high priced for the average consumer. In fact, single units won out in terms of food and service quality, though the high prices brought down their popularity. By providing consistent and excellent service and food quality, the chain stores ensure their steady popularity, and success on their own terms, not merely on the failure of the single unit stores.

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ii. Loyalty programs for regular consumers: With the increasing degree of competition in

the chain store market, popular haunts such as Barista and the Coffee Bean must make an effort to retain their consumers by offering them incentives and promotional offers. Single unit loyalists highly commended the quality of service at their respective favourite stores, which was more personalized and customized to their satisfaction. The chain stores should make an attempt to do the same, in order to garner more loyal support from their consumer base.

iii. Increase menu variety: The primary contenders of coffee shops like cinemas and malls provide much more options for food than do chain stores. In single unit stores, menu variety is usually greater, and customization of items is possible. In order to prevent the loss of consumers, chain stores should make an effort to increase the food and beverage variety.

Chapter Six Conclusion

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Various studies of consumer behaviour relating to coffee shops have been carried out before. However, this study attempted to further this study by sub dividing coffee shops into the categories of single unit and chain stores, a point of view which has previously been disregarded, as far as secondary research has shown.

The materialization of four distinct consumer groups was one of the major results of this study, and through qualitative as well as quantitative analysis, it became easier to clearly pinpoint their specific characteristics and establish relationships to understand them better, on the basis of which recommendations could be made, to various kinds of coffee shops, in the final chapter.

Based on the results shown by the respondents, chain stores have more or less captured the coffee market, with their outstanding branding and positioning strategy, as well as by locating themselves in prime consumer areas. Their only spheres of contention are service and food quality and variety, in which respect single unit stores have the upper hand. However, lack of branding, visibility, and the niche status of single units are culminating in their downfall.

It remains to be seen if single unit stores will improve their strategy and catch up to their competitors, the chain stores, with such a large share of Indias beverage market at stake.

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REFERENCES

Coffee Statistics, http://www.authorstream.com/Presentation/john_cd-279431-coffee-statisticscoffeeconsn007-entertainment-ppt-powerpoint/

Marketing Mix of Barista vs. Caf Coffee Day,


http://www.scribd.com/doc/27006020/MARKETING-MIX-OF-BARISTA-VS-CAFE-COFFEE-DAYVS-MOCHAword-doc Consumer Behaviour in the Coffee Market, http://uberbusy.com/2009/07/02/consumer-behaviour-in-thecoffee-market/ Espresso Tales, http://economictimes.indiatimes.com/policy/Espresso-tales-What-meworry/articleshow/7026024.cms

The Coffee Experience, http://ivythesis.typepad.com/term_paper_topics/2010/02/the-coffeeexperience-and-consumer-buying-behaviour-a-comparative-case-study-on-coffee-brands-andfa.html Coffee Consumption, http://www.scribd.com/doc/3174294/Marketing-Coffee-consumptionConsumer-behavior

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APPENDICES
Annex I: Discussion Guide Proforma for Qualitative Analysis

Discussion Guide 1. Introduction (2 minutes) Hi, Im _______. Thanks for meeting with me. I am a student of Jai Hind College and Im conducting research for my thesis project, which is on the subject of coffee shops. Id like to get your views on the subject. This research will be used for a college-level assignment and will not be published. 2. Consumer Profile (2 minutes) Tell me a little about yourself your name and age What do you currently do? Occupation and lifestyle should be brought out What are your hobbies/ interests? What is your pocket money?

3. Warm-up (Lifestyle and leisure habits) (7 minutes) How often do you get time off in the week to yourself? How would you spend an average day off? How often do you meet up with your friends/ colleagues outside of the workplace? Where would you meet them? Prompt- Coffee shop?

4. Coffee shop habits (6 minutes) Do you like going to coffee shops? Name some coffee shops which you go to. How often go you go to a coffee shop? On what days/ at what time do you like going there? With whom do you like going to a coffee shop? How much time do you generally spend there? How much money, on an average do you spend there? Any other related information offered? (e.g. who pays, what do you eat, etc.)

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The responses for Section 4 reveal the general habits of consumers when it comes to coffee shops, whereas Section 5 analyses specific preferences and the needs that a coffee shop fulfils for different consumers. 5. Respondents specific preferences (10 minutes) The questions in this section apply to both, single unit coffee shop lovers as well as chain store loyalists, and can be adjusted accordingly. What is your favourite coffee shop? (Single unit or chain?) Why is it your favourite coffee shop? (Reveals the top-of-mind needs that it fulfils?) How often do you go there? How much time do you spend there? Money? If you couldnt go to your favourite shop, would you go somewhere else? Where? (Reveals degree of loyalty/ Primary competitors) Tell me a little about an average sojourn to your favourite coffee shop.

6. Respondents core preferences/ needs (10 minutes) Would you have as good an experience in another coffee shop? Why/ why not? How do you feel when youre sitting in your favourite coffee shop? What vibe do you get from your favourite coffee shop? Have you ever had a bad experience at your favourite coffee shop? Why would you say your favourite coffee shop is better than any other, like a Barista/Theobroma? (Loyalists may reveal core differences between chain/ single units)

7. Single units vs. Chain stores (6 minutes) These questions should draw out comparisons between chain stores and single unit coffee shops. Reasons for the respondents preference should be drawn out here along with the frist spontaneous response when asked to choose between the two. 8. Wind up (1 minute) Would you like to add anything else that we have not covered? Thank you for your time. Total time: 44 minutes

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Annex II: Proforma of Survey

QUANTITATIVE INTERVIEW: Name: Age: Sex: 1. What is your average pocket money bracket for the month? Below 1500 1500-2500 2500-4000 4000+

2. Rank your monthly expenses in order of highest to lowest. Travel Food Movies Shopping College/ Work purposes Clubbing/ going out at night

3. What are your preferred day hang outs? Pick from the examples below. - Fast food joints - Restaurants - Patisseries and confectionaries - Coffee shops - Bars - Malls 4. Name your favourite coffee shop. Why is it your favourite? _________________________________________________________________________________ _________________________________________________________________________________ 5. When you go to a coffee shop, is it with: - Family - Friends (if so, then approximately what number of friends? ___)

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- Boyfriend/Girlfriend - Alone - Dont think about it

6. How much time do you generally spend in a coffee shop? Half an hour- 1 hour 1- 1 hours 1 -2 hours Over 2 hours

7. How much money do you end up spending at a coffee shop? Below Rs. 200 Rs. 200-400 Rs. 400-600 Above Rs. 600

8. What elements of a coffee shop are essential to you? Rank them in order of importance, one being the most important. Ambience Food taste and variety Coffee Service Location Price Size of outlet Crowd -

9. Do you find yourself ordering the same thing at a coffee shop each time? Yes Sometimes Rarely No

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10. Comparatively rank the following coffee shops, on the basis of the following factors: Name of Coffee Shops Barista, CCD Theobroma, Butterfly Moshe, 210 Celsius Cafe Brittania/ Kyani and Co. The Oberoi Lounge/ Courtyard by Marriot Ambience Food/Drink Service Crowd Location

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Annex III: Table of Coffee Consumption in India Estimated Domestic Consumption (1995 - 2008) Calendar Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Quantity (in MT) 50000 50000 50000 50000 55000 60000 64000 68000 70000 75000 80200 85000 90000 94,400

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