MARKETING MANAGEMENT

CASE STUDY
Barista Coffee Company Limited

PGP/17/322
PGP/17/332
PGP/17/342
PGP/17/352
PGP/17/355
PGP/17/335
PGP/17/364

JITHIN JACOB
PEEYUSH PATIL
ROHIT DHALL
TANVI MANGLIK
VENU MERH
PRIYA YADAV
PURBA TRIPATHY

1) Where is Barista positioned in the market?

Ans.: Baristas positioning is based on Experiential marketing rather than the
conventional model. It has positioned itself as fine cafes and as experiential cafes.
On the contrary, when we talk of other cafes like Caf Coffee Day , they are more
positioned like coffee hubs.

Target segment:
* People who generally have dislike/aversion towards the loud atmosphere of
coffee hubs.
* During the first half of the day, students community formed the majority of
customers
* Professionals were expected to visit in the afternoon or the early evening
* Family and friends came in the night
* 23 % of the surveyed customer were less than age of 20
* 46 % of them were in the age group between 20 to 35 yrs
Benefits/Points of difference:
* Places where young crowd can hang around comfortably
* Filled the gap between five star coffee shop and corner coffee stars
* Caf ambience is used as a differentiator. Muted music and dcor projects
itself as a place of coffee lovers
* Scrabble board, Books, music to engage customers. Thus offering experiential
coffee
* Maintaining baristas and customers relationship on an equal level
* Letting the customer hang around for a long time

2. Should Barista adopt the franchising strategy?

Ans: No, Barista should not adopt the franchising strategy.
Barista offered a 'chill out' experience with coffee for emerging urban youth and
also created the right ambience for executives to meet over a cup of coffee.

Unlike other coffee outlets that have positioned themselves as coffee hubs,
Barista positioned itself as fine cafes and as experiential cafes. It is not just a
coffee outlet but awhole premiumexperience customers want to enjoy. Giving it
to franchise might dilute the quality and the standard of experience Barista wants
to offer.
Barista offered wholesome experience to the customers creating an exclusive
ambience with music and dcor, well-furnished shops with soothing and light
colors. It was more of a fine caf than just a coffee hub. One of Baristas major
strengths was the relationship it maintained with its consumers, suppliers and
employees. The relationship between employees and customers is also one of
Baristas highlight. All of this cannot be compromised as it is of high importance
for the brand. Hence they should not adopt the franchise model.

3. Should Barista go for price reduction of its product line or should it continue
with its premium pricing strategy?
Ans.: Since Barista is positioned as a fine caf and it is projected as an experiential
coffee, it should not reduce its price. The price was already slashed in 2003 to
make it affordable to consumers. Barista earns its maximum revenue from SEC A
and SEC B income groups consisting mostly of professionals, working couples and
families. These target groups generally prefer the exclusivity of the coffee
experience to the affordability.
While reduction in price might make Barista more affordable to the students and
certain consumers in the Tier 2 cities, it will also lead to moving away of the
original consumers to other premium offerings.
Also differential pricing is not an option as it will lead to loss of standardization
and inconsistency in Barista.
Another strategy that can be used is pricing the food in Barista cafes at lower
prices. This can lead to increase in revenue from food purchase. As of now, food

accounts of only 30% of the revenue and coffee for 70%. Hence if the food is
priced lower, it will lead to increase in revenue.

4. Should company adopt differential pricing strategy or retain the same

across all towns?
Ans.: The Company should adopt differential pricing strategy for two reasons:
It would still maintain its consistency principle in Tier 1 cities and maintain
the same customer experiential strategy to enhance the number of
footfalls. The customer at these cities would have more money to spend
and avail better facilities. Also, the business culture would be more
prevalent in these areas and thus, people are greater purchasing power and
people at these areas prefer quality for price.
The lower prices at Tier 2 cities would attract more customers and would
increase the number of footfalls as people at these areas prefer a quick
coffee at reasonable rates. Thus, the competition is mainly driven by
differentiating at the price level and thus, the operational costs can be
reduced by trading off with some facilities like WiFi.
Also, coffee can be provided at subsidized rates at the tie-ups like banks
and other corporate offices which would provide Barista popularity by word
of mouth. People at corporate offices prefer ambience to discuss and the
tie-up would let the Barista owner lower down the price and earn more as
few companies have the land owned in SEZ areas which avail special benefit
from the government.
5. Should Barista contribute with the current product mix strategy or should
it offer wider assortment of food/snack items alomg with its core
offerings of coffee?
Barista has a coffee is to food ratio of 7:3 presently. Indians (especially the
ones belonging to the middle income groups ) have a certain typical

perception of getting value for money. A certain class of people would be

more willing to buy a snack, instead of coffee, if both offered at the same
price. Eg. A person seeking right returns would buy a Chicken Croissant at
Rs. 40 instead of Caffe Mocha that is offered at the same price. Therefore,
retaining the current snacks menu is inevitable.
Also, in the short run, in order to capture more market, Barista should
introduce more Indian snacks like Samosa, Vada Pav etc. that are not
usually served by its rivals. This would not only Indianize their products, but
also improve their revenue mix. This would help target those people who
are reluctant or cynical about trying out their products. Once, Barista has
captured adequate market share, they should remove the snacks that are
less preferred from their menu and hence, prevent their brand dilution.
In the shorter run, introducing newer snacks will not lead to loss of brand
exclusivity as Barista is an established brand with tremendous amount of
brand recall ability amongst customers. Hence, people will always recognize
Barista with Coffee ( in Tier I cities where it is widely known) with tid-bits
here and there as add ons. However, they will have to be incorporated in
the Tier II cities to generate demand in the beginning.

6. Recommend a growth strategy and formulate 2006-07 marketing plan for

Barista Coffee Company Ltd.
Ans.: Baristas major competitor Cafe Coffee Day excelled mainly due to an early
foray into the tier II cities and overall affordability of its products. Therefore, in
order to retain its present market share and at the same time boost growth (and
hence, impend penetration of big players like Starbucks) , Barista will have to
expand into Tier II cities. However, in order to establish itself there, they will have
to modify their pricing strategy by reducing prices to begin with, to penetrate into
the relatively new market.

Caffe Mocha
Blue Curacao
Peach/Lemon
Iced tea
Chicken Tikka
Savoy Cake

Tier I city
Tier I prices
Tier II city
price(current) (proposed)
price(proposed)
Rs. 40
Rs. 34.00
Rs. 30.00
Rs. 45
Rs. 38.25
Rs. 33.75
Rs. 40
Rs. 60
Rs. 410

Rs. 34.00
Rs. 51.00
Rs. 348.50

Rs. 30.00
Rs. 45.00
Rs. 307.50

Differential pricing strategy should be adopted by Barista based on its

actual cost of operations in various cities. A reduction in prices is
mandatory if Barista wants to expand itself and penetrate into markets
easily. As shown in the table above, a difference of Rs. 4 in Caffe Mocha is
crucial in luring customers from tier II cities to try their products and hence,
can be termed as the deciding factor. As the standards of living are much
higher in Tier I cities as compared to tier II cities, consumers will not be
much concerned about paying that extra Rs.4 for a coffee.
As far as the product is concerned, there should be some addition of new
beverages for drinking, however, they should be carefully chosen according
to the region in which they have to be sold. As in North of India there is a
strong culture and hence, demand for tea, different variants of tea
including ginger tea, green tea, lemon tea etc. should be introduced at
affordable prices.
There is a strong need for Barista to come out of that mould of being type
casted as a high profile product. The entire coffee experience should be
extended to a fun loving experience enjoyed by youth and adults alike.
Barista has a coffee is to food ratio of 7:3 presently. Indians(especially the
ones belonging to the middle income groups ) have a certain typical
perception of getting value for money. A certain class of people would be
more willing to buy a snack, instead of coffee, if both offered at the same
price. Eg. A person seeking right returns would buy a Chicken Croissant at
Rs. 40 instead of Caffe Mocha that is offered at the same price. Therefore,
retaining the current snacks menu is inevitable.

 Also, in the short run, in order to capture more market, Barista should
introduce more Indian snacks like Samosa, Vada Pav etc. that are not
usually served by its rivals. This would not only Indianize their products, but
also improve their revenue mix. This would help target those people who
are reluctant or cynical about trying out their products. Once, Barista has
captured adequate market share, they should remove the snacks that are
less preferred from their menu and hence, prevent their brand dilution.
In the shorter run, introducing newer snacks will not lead to loss of brand
exclusivity as Barista is an established brand with tremendous amount of
brand recall ability amongst customers. Hence, people will always recognize
Barista with Coffee ( in Tier I cities where it is widely known) with tid-bits
here and there as add ons. However, they will have to be incorporated in
the Tier II cities to generate demand in the beginning.