CCD: A case analysis Authors: Sachin Bansal Head- Strategy & Brand Marketing
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Professor Manoj Joshi* Amity Business School, Amity University, Lucknow Campus, Uttar Pradesh, India, 226010 ®: +91-522-2330934, (M) +91-9415017498 E-mail:
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Electronic copy available at: http://ssrn.com/abstract=1920827
INDEX Section 1: Introduction 1.1 Growth of the Café Industry in India 1.2 Corporate Profile Section 2: Case Study on Café 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
Electronic copy available at: http://ssrn.com/abstract=1920827
INTRODUCTION
Logo
Parent Company
Café 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 Café 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 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 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 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 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 Café Coffee Day alone maintains more than 1000 Café’s in 141 cities in India. This forms the main focus of this project.
1.2 COPORATE PROFILE Café 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 Café’s in 141 cities. “Running café is a hospitality business and one needs to create the right ambiance and experience and back it up with strong logistics” Café 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 Café 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 café coffee day expects to vend its brand through departmental stores. VISION “To be the best café 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 Café 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 Café in Bangalore. Café 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 café 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 Café Coffee Day Coffee Day – Vending Coffee Day - Xpress Coffee Day – Exports Coffee Day - Perfect
MARKETING MIX Café 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 café, depending upon its size attracts between 400 and 800 customers daily. USP of the Brand: Affordable Price PRODUCT: Café 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 Hot Coffee Cold Coffee Smoothies Granitas
SERVING SIZE 210 ml 350 ml 350 ml 350 ml
PRICE: Considering that Café Coffee Day knows its major customer lies in the bracket of 1529,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 Café 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. 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, gas stations, near Colleges etc.
PROMOTION: Café Coffee Day involved in all the areas of serious consumer passion like: Television: Café 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 Café 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: 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 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 day’s work or an ideal setting for some business meetings. Café 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 Donald’s 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 Donald’s. Local tea joints and coffee shops like café 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.
THREATS
WEAKNESSES •
Crowd management
•
Improper sitting arrangement.
•
Lacks strength to maintain brand loyalty.
•
Follow the competitor strategy
OPPORTUNITIES
•
Entry of foreign players like Starbucks
•
Introduce cheaper versions of coffee
•
Dependent on Govt commodity rates
•
Tap the smaller towns/cities
•
Large unorganized market.
•
Merchandising.
•
Tie ups with other companies for promotion
Competitive SWOT Analysis with Barista Café Coffee Day Strengths
Barista Strengths
Taste & Quality of their products. Grow their own coffee beans Projected as an “affordable” brand.
Strong Brand Image Excellent Human Resource Ambience and Décor Strong base for expansion and growth
Weakness
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
Average taste and quality of products Perceived as an expensive brand Inconvenient Delivery Process
Opportunities
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)
Strong Brand recall Presence of large number of outlets Pricing Large number of untapped market
Threats
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.
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 Café 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 Café 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
Café 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. Café 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
CUSTOMER RELATIONSHIP STRATEGY • • • • •
COMPETITIVE INTELLIGENCE STRATEGY • • • • •
Discover unexplored market segment Hygienic eating place Opening 100% veg outlet Wi-fi – service affordable price tag image
COST CUTTING STRATEGIES
Regular cost feedback Rewarding customers for loyalty Café-citizen programme New customer oriented intimation (LERA) Book-café’s
• • • •
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
• • • • • • • •
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 their brand needs to be much stronger. With regard to the physical evidence associated with the brand, Café Coffee Day needs to do a lot of work if they hope to catch up with Barista. First recommendation for Café Coffee Day is to clean up the décor 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 isn’t very positive. Café 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 Café 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 Café Coffee Day is lagging far behind Barista is this aspect.
REVIEW OF PROBLEM AREAS Café 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 Café Coffee Day brand, although clearly a youth- oriented brand, lacks the power and strength expected to maintain brand loyalty. 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. Café Coffee Day needs to work hard at this aspect, especially considering they are a service sector organization that is looking at large expansion. Ambience & Décor: The Ambience & Décor of Café Coffee Day outlets received a below- average rating from respondents of the market survey. 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.
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 their brand needs to be much stronger. With regard to the physical evidence associated with the brand, Café Coffee Day needs to do a lot of work if they hope to catch up with Barista. My first recommendation for Café Coffee Day is to clean up the décor 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 isn’t very positive. Café 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.
