Electronic copy available at: http://ssrn.com/abstract=1920827

CCD: A case analysis

Authors:

Sachin Bansal Head- Strategy & Brand Marketing

sachin@sachinbansal.com

Professor Manoj Joshi*

Amity Business School, Amity University, Lucknow Campus, Uttar Pradesh, India, 226010

: +91-522-2330934, (M) +91-9415017498 E-mail: manoj.joshi.m@gmail.com

Electronic copy available at: http://ssrn.com/abstract=1920827

INDEX Section 1: Introduction 1.1 Growth of the Caf Industry in India 1.2 Corporate Profile Section 2: Case Study on Caf Coffee Day 2.1 Marketing Mix 2.2 Competition 2.3 SWOT Analysis 2.4 Comparison with Barista Section 3: Conclusion 3.1 Business strategies suggestions to increase market share

INTRODUCTION

Logo

Parent Company Caf Coffee Day (CCD)

Category Coffee joints

Sector Food Products

Tagline/ Slogan A lot can happen over coffee

USP Most recognizable and affordable brand in India

Segment People looking to go to have a coffee and snacks at a hangout place

Target Group Youth in the middle and higher income groups

Positioning India's favorite coffee shop, for the young and the young at heart

1.1 Growth of the Caf Industry in India The coffee market in India has been growing due to the demand for Ready to Drink coffee and has become a part of an individuals 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 latter part of the review period. In 2010, Cafe Coffee Day and Barista had 970 and 200 stores, respectively, and they aim to continue expanding in the next few years. Meanwhile, several relatively new players, such as Costa Coffee, Coffee Bean, Gloria Jeans 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 2010, the average bill amount at coffee outlet was between rupees 135 and 150. This is expected to rise to rupees 245 by 2016. With customers paying significant amount for their coffees, they are also expecting a lot from an outlet. Factors such as menu, ambience, service and brand name are playing an important role while choosing a coffee outlet. Indian Coffee Chains market is quite mature which is evident from the fact that Caf Coffee Day alone maintains more than 1000 Cafs in 141 cities in India. This forms the main focus of this project. 1.2 COPORATE PROFILE Caf Coffee Day, A division of Amalgamated Bean Coffee Trading Company Ltd. (ABCTCL), having its headquarters in Chikkamagaluru, Karnataka. It opened its first cafe in 1996 on Brigade Road in Bangalore, and today has the largest cafe retail chain in India with over 1000 Cafs in 141 cities. Running caf is a hospitality business and one needs to create the right ambiance and experience and back it up with strong logistics Caf coffee day is a 750 crores ISO 9002 certified company has over 5000 acres of coffee states which is second largest in Asia registered as a social service provider to people. Large numbers of coffee day cafes are located in Bangalore. 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 World Space and Micro sense to enable its cafes with satellite radio and Wi-Fi, respectively. Its first Wi-Fi cafe was opened on Lavelle Road, Bangalore. Its different divisions include:

Coffee Day Fresh n Ground (354 Coffee bean and powder retail outlets) Coffee Day Xpress (341 Coffee Day Kiosk) Coffee Day Take away (7000 Vending Machines) Coffee Day Exports Caf Coffee Day Coffee Day Perfect (FMCG Packaged Coffee) division

OBJECTIVE The objective is to start trading in the overseas markets. Having set up a subsidiary in Vienna and a franchise operation in Pakistan, the caf coffee day expects to vend its brand through departmental stores.

VISION

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

MISSION

To be ranked no. 1 among the service sector 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 and curry paste.

PHILOSOPHY

Its philosophy is to provide world class trendy lifestyle products and experience to its customers and in order to execute it, it has opened some new outlets with the facility of music lounges, book cafes etc.

NATURE OF BUSINESS

Caf Coffee Day is a division of India's largest coffee conglomerate, Amalgamated Bean Coffee Trading Company Ltd. It was the first to roll out the coffee bar concept in India with its first Caf in Bangalore. Caf Coffee Day serves the coffee its grows on 6000 acres of its own estates and another 2500 acres of managed estates and is India only vertically integrated coffee company. First caf was opened in Bangalore. It ranges from hot and cold coffees giving a pinch of international flavours. It has a well-equipped roasting unit catering to the specific requirement of the consumers. The process is carried out under the control of experienced personnel to meet the highest quality standards. Coffee Day Comprises of the following Sub Brands Coffee Day - Fresh & Ground Caf Coffee Day Coffee Day Vending Coffee Day - Xpress Coffee Day Exports Coffee Day - Perfect

MARKETING MIX Caf Coffee Day has a well-equipped roasting unit catering to the specific requirement of the consumers. The process is carried out under the control of experienced personnel to meet highest quality standards. The most modern technology available is used to maintain consistency and roast the coffee beans to the demanding specifications of the discerning coffee consumers. Essentially a youth oriented brand with majority of its customers falling in the 15- 29 year age bracket. Each caf, depending upon its size attracts between 400 and 800 customers daily. USP of the Brand: Affordable Price PRODUCT: Caf Coffee Day product mix constitutes a wide range of products like samosa, biryani, masala sandwich, tikka sandwich etc. The best selling item in summer is frappe, which is coffee and ice cream blended together. The young people favor it. In winter it is cappuccino. Their merchandising includes funky stuff like 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 Granitas 350 ml

PRICE: Considering that Caf Coffee Day knows its major customer lies in the bracket of 15- 29,it has tried to derive a policy whereby it can satisfy all its customers. The price for a cup of coffee ranges from Rs.45 to Rs 80. From the time it first started its operations, there has been only minor changes in the pricing policy of Caf Coffee Day. The changes have been more due to the government taxes than any thing else PLACE: The strategy CCD has adapted is to place a cafe in every possible location where some business can be generated. This is a prime factor in determining the success of a retail

chain. Caf Coffee Day looks to cater to their target market with strategically located outlets. Their outlets are generally located in High Street/ Family Entertainment Centers, gas stations, near Colleges etc. PROMOTION: Caf Coffee Day involved in all the areas of serious consumer passion like: Television: Caf Coffee Day held a contest around a very popular programme on Zee English called Friends. All the six lead characters are shown often visiting a coffee shop. They have tied up with Channel [V]s Get Gorgeous contest. Tie-ups: Besides that Caf Coffee Day also tie up lot of the youth brands. So they have a contest going on with Levis, another one with Scooty, Liril, latest one with Airtel Friends. Association with movies: CCD can be seen in movies like Khakhee and Mai Hoon Na Sales Promotion: Caf Coffee Day uses special Caf Citizen Card for rewarding Caf Coffee Days customers. It is a loyalty program to gain new customers and retain the existing ones. PEOPLE Motivation and personal skill are laid emphasize upon. Their employees are like friend to the customer but at the same time they know about the international standards of hygiene and cleanliness and personal grooming. COMPETITION: Direct competitors

Barista This is the closest comp of CCD in the Indian market. They target the same class of upwardly mobile youth and young professionals. But barista is always viewed as a place to unwind after a hard days work or an ideal setting for some business meetings.

Caf mocha-this aims at providing level of experience to the customer is hard to imitate. Inspired by morocco and turkey, mocha offers not just coffee but also sheeshas from Egypt and gourmet desserts. Mocha itself calls a coffee shop for the soul

Indirect competitors

Eateries like Mc Donalds and Haldirams pose competition to cd as they are likely attraction for customers to be drawn to .a consumer can well understand why he should spend around rs.45 on a coffee when he can get a burger and a coffee for the same price at Mc Donalds.

Local tea joints and coffee shops like caf Nescafe they are smaller places but nevertheless target the same set of consumers

Qwicky-based mainly in Bangalore ,q has a strong local hold on south India

Also local coffee houses like Indian coffee house etc are also a major threat to the company as far as affordability is concern.

SWOT ANALYSIS: STRENGTHS

Excellent brand name and brand visibility

Huge young crowd as target group Excellent ambience and service Over 1000 outlets and 300,000

visitors per day It produces/grows the coffee it serves

hence reducing the cost.

WEAKNESSES

Crowd management Improper sitting arrangement. Lacks strength to maintain brand

loyalty.

Follow the competitor strategy

THREATS

Entry of foreign players like Starbucks

Dependent on Govt commodity rates

Large unorganized market.

OPPORTUNITIES

Introduce cheaper versions of coffee

Tap the smaller towns/cities Merchandising. Tie ups with other companies for

promotion

Competitive SWOT Analysis with Barista

Caf Coffee Day Barista Strengths Taste & Quality of their products. Grow their own coffee beans Projected as an affordable brand.

Strengths Strong Brand Image Excellent Human Resource Ambience and Dcor Strong base for expansion and growth

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

Weakness Average taste and quality of products Perceived as an expensive brand Inconvenient Delivery Process

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 (bookstore,etc)

Opportunities Strong Brand recall Presence of large number of outlets Pricing Large number of untapped market

Threats The brand doesnt project a clear image to customers about what Caf Coffee Day is all about. Brand Loyalty is not so strong.

Threats Coffee substitute Rise in the cost of coffee products and substitute Competition from national and international products

BUSINESS STRATEGIES SUGGESTIONS TO INCREASE MARKET SHARE

Price was one of the factors that

served as a hindrance not only to the students, but also to the working executives. Thus the most likely solution to this problem would be nothing but decreasing the price but at the same time the profitability of the joint should not

INNOVATION STRATEGIES

Changing the menu every 4 month to prevent food fatigue

Introducing monthly special and Indian snacks

Introduction of table service than self service

be affected. The next possible step that the

Coffee bar should take is to increase its awareness among its target audience. This it can achieve by various means of advertising and that too keeping in mind the specific categories of its consumers. For e.g. it can target the students by sponsoring the cultural events that are organized in various colleges.

Keeping in mind that a student cannot spend as much as a working executive does, special rates can be introduced for the students.

New varieties of product should be introduced on an experimental basis.

Also to increase the reach of the consumers more and more outlets should be established.

The Coffee bar can go in for competitive analysis to understand the competition and realize its current standings.

LOW COST SERVICE TO THEIR CUSTOMERS The coffee at Caf Coffee day is priced at minimum rate for Rs. 40 for the starters and it increases with the menu.

OPENING THEIR OUTLETS IN THE REACH OF THE CUSTOMERES Customers can easily access the Caf Coffee Day near their homes and do not have to go a far off place in order to get a cup a coffee.

MERGERS AND AQUSITIONS WITH VARIOUS COMPANIES Tie ups with different companies

like Deccan Airlines, Retail Chains. CUSTOMER RETENTION

POLICY

Introducing new drinks

Caf Coffee Day aims at retaining their customer who visit on everyday basis or weekly basis.

PROMOTIONAL STRATEGIES:-LIKE HOOKING UP WITH THE ENTERTAINMENT INDUSTRY FOR PROMOTION.FOR EG:-MUJHSE SHADI KAROGI etc. Caf Coffee day has invested in promotion through various films like Mujhse shaadi Karoge, Mughal-e-azam, Kyun ho gaya na etc.

IT GOES FOR PROMOTION VIA BARTER DEALS.LIKE WITH ENRIQUE IGLESIAS, ELTON JOHN CONCERTS AND WWE. External analysis of the business environment whereby the company waited for the coffee consumer to be educated and adapted to this new market.

Very innovative in their logistic department.

They follow a continuous replenishment policy by integrating vendor upstream.

They have a proactive approach. They introduced table service instead of self service DISTRIBUTION STRATEGIES

Supply chain strategy Decentralized distribution strategy

( for expansion plans) Follow continuous replenishment

policy by integrating vendors upstream

Web based order processing system

Online inventory tracking process Extensive research for identifying

market needs

MARKETING STRATEGIES

Meeting place for 15 29 years old

Want their customers to grow with them

Market associations with youth oriented brands ( levis , TVS , Airtel, AOL )

Affordable Well lit and respectable yet

informal Societal concept of marketing

- Employment to physically challenged - Concept of quality

PROMOTION STRATEGY

Via barter deals In-films promotion deals Low cost strategy

COMPETITIVE INTELLIGENCE STRATEGY

Discover unexplored market segment

Hygienic eating place Opening 100% veg outlet Wi-fi service affordable price tag image

CUSTOMER RELATIONSHIP STRATEGY

Regular cost feedback Rewarding customers for loyalty Caf-citizen programme New customer oriented intimation

(LERA) Book-cafs

COST CUTTING STRATEGIES

Designing of in-house Source their furniture and crockery

from outsource Saving transportation cost Cost cutting feeling in their

employees

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 cant avail

the service. Entering into new products bringing more competition

SUGGESTIONS:

Extending the coffee types Enriching the menu Keeping the menu constant for long time Going to parties Espresso coffee installation menu Promotion strategy other than barter deals

Caf Coffee Day has done extremely well so far to project itself as an affordable youth- oriented brand.

But there are still certain areas where their brand needs to be much stronger. With regard to the physical evidence associated with the brand, Caf Coffee Day

needs to do a lot of work if they hope to catch up with Barista. First recommendation for Caf Coffee Day is to clean up the dcor at every

outlet, wherever unnecessary advertising is taking place. Although it might be an important source of revenue, long-term customer

perception of the brand isnt very positive. Caf Coffee Day would do better to provide promotional space for its partners

with the use of clever collaborations, and not printed advertisements and posters everywhere.

Second recommendation is that Caf Coffee Day looks at its current recruitment, selection and most importantly, its current training policies.

Customers are not happy with the behavior and service of the staff, and Caf Coffee Day is lagging far behind Barista is this aspect.

REVIEW OF PROBLEM AREAS Caf Coffee Day has under performed or not lived up to potential in certain areas. The areas are weaknesses, which need to be improved upon, as that both can eliminate any disadvantage that may have, and improve customer satisfaction. Weak brand image: The Caf Coffee Day brand, although clearly a youth- oriented brand, lacks the power and strength expected to maintain brand loyalty. The brand doesnt project a clear image to customers about what Caf 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, Caf Coffee Days staff received only an average rating for their behavior and service. Caf Coffee Day needs to work hard at this aspect, especially considering they are a service sector organization that is looking at large expansion. Ambience & Dcor: The Ambience & Dcor of Caf Coffee Day outlets received a below- average rating from respondents of the market survey. A lot of respondents did not like the fact that Caf Coffee Day outlets and literature served as prime space for a lot of advertising and promotions. They felt as if the cafs had been hijacked just for advertising.

SUGGESTIONS:-

Caf Coffee Day has done extremely well so far to project itself as an affordable youth- oriented brand. But there are still certain areas where their brand needs to be much stronger.

With regard to the physical evidence associated with the brand, Caf Coffee Day needs to do a lot of work if they hope to catch up with Barista.

My first recommendation for Caf Coffee Day is to clean up the dcor at very outlet, wherever unnecessary advertising is taking place.

Although it might be an important source of revenue, long-term customer perception of the brand isnt very positive.

Caf Coffee Day would do better to provide promotional space for its partners with the use of clever collaborations, and not printed advertisements and posters everywhere.

Perception of the brand its training policies Increase promotional plan like T.V channels, boarding radio programs. Business

channel. Small outlets on petrol pumps and in telecom places(small merger with telecom

sector like new arrivals Uninor, DOCOMO)as barista done with TATA Improve internal marketing strategy. Segment market for penetration strategy. Pricing strategy regarding to population factor as how much people are belong to

such market. Make more attractive promotion plan for attractive features.