A lot can happen over coffee

RETAIL MANAGEMENT ASSIGNMENT-I

Submitted by:
Supratim Sinha PRN-11020541131 Marketing & finance SITM-2011-13

INTRODUCTION
Caf Coffee Day is a venture of the AMALGAMETED BEAN COMPANY. It is a large organized retail cafe chain with its distinct brand identity of its own, offers a world class coffee experience to its customers at affordable prices. It has positioned itself as a place for hangout especially for the youngsters and for the informal meetings. With increasing demand of liquid coffee among public, since 1990s there has been a drastic increase in the number of coffee parlours, with Cafe coffee day opening its 100 th outlet in Delhi. Coffee parlours have witnessed an increase in their customer base as in now, consumption of coffee being not restricted to the elite class only. The increase in the disposable income and the lifestyle are the two major factors contributing towards the visit of all people of all ages and classes visit coffee parlours, thus helping in the market penetration and expansion of outlets for CCD. Strategic alliances of Cafe Coffee day with brands like Garfield, Levis, Elle 18, etc that are youth centred helped CCD in increasing its sales at less cost and creating a youth oriented brand image. It is also giving the gift and the discount vouchers to the customers who are frequent visitors. CCD, with its first outlet in Bangalore basically had an urban market. People of all age groups visit it, but their main target is the youth. CCD has positioned itself as a place for having coffee and fun together at the same time.

Few questions:
Q1. What environmental factors are responsible for the popularity of liquid coffee retailing? The environmental factors that contributed to the growth of liquid coffee retailing were: a. Demographic factors: Demographic factors as well as income shift was prompting more and more people of all age groups to visit these coffee parlours. 80% of the population of India consists of people between the age group of 15-29yrs, this being an added advantage as CCD mainly focus on youth. The increasing stressed life of the youngsters and the corporate during the work days make them to visit places like CCD to relax and to have fun time.

b. Psychographic factors:
Psychographic factors such as people are ready to spend and they prefer to enjoy their leisure hours outdoor also lead to the popularity of coffee parlours. c. Urbanization and changing lifestyle: Increased adaptation to urbanization and changing lifestyle of people was another factor contributing to their growth. Q2. What prompted marketers to use coffee parlours as media vehicles? There were various reasons for coffee parlours being used as media vehicles. Some of them can be as follows: a. b. c. Increasing popularity of coffee outlets among all age groups, as a result of which the companies can reach to more people at a single point of time. Large customer base Demographic factors that are people of all age, culture, and region visited these outlets which act as a tool for the media to address their issues and their promotional offers directly to the large group.

d. e.

Geographic factors such as coffee parlours were easily accessible by the people and also rendered the product at a comparatively cheaper price. These outlets were not merely coffee parlours but also a place where people came to relax. Thus advertisements of other brands created a long lasting impact on the people.

These were various reasons for coffee parlours being used as media vehicles.

Q3. How can coffee parlour chains benefit from running promos of other companies at their stores? Benefits that coffee parlours extracted from running promos of other companies were: a. b. c. Being backed by big companies such as Elle18,Garfield etc helped them to create market positioning, Market penetration is led by running special promos on Valentines Day, Christmas etc. Tendency among people to follow brand names in turn increased the customer base of these outlets,

HISTORY:
V.G. Siddhartha, chairman of the Bangalore-based Amalgamated Bean Coffee Trading Co. (ABC) and the man behind India's largest caf chain, Caf Coffee Day (CCD), has set his team a stiff target: By March he wants to expand the chain to 950 cafs. From where it stands today, with 595 cafs across 100 cities in India, three in Vienna, and two in Karachi, this means opening more than one caf a day -- and not just in India. Siddhartha has strong global ambitions: He wants 50 of these cafs to be located outside India. While this might appear to be a tall order, CCD's investors feel otherwise. They see enough potential in the coffee retail market for CCD to ramp up even faster. According to Naresh Malhotra, formerly CCD's chief executive officer and now a director at the venture capital firm Sequoia Capital: "This space has enough potential for Coffee Day to open a caf every 200 yards in the country, within five minutes' walking distance of one another." Sequoia invested $20 million in ABC, one of India's largest integrated coffee conglomerates, two years ago. Industry analysts estimate that fewer than 1,000 cafs make up India's organized space, but they put the potential at around 5,000. The largest player after Coffee Day, Barista, has about 200 cafs. Java Green (around 75 cafs) and Mocha (around 25 cafs) are further behind. Venu Madhav, head of operations at Caf Coffee Day, has started quietly thinking about a farther-out caf target number for his team: 2,000. The Coffee Day story is not just in its numbers, though. Coffee Day has been a pioneer. According to Harish Bijoor, a visiting professor at the Indian School of Business (ISB) at Hyderabad and CEO of Harish Bijoor Consults, "Coffee Day has brought about a paradigm shift in the caf space in India." Subroto Bagchi, cofounder of the IT and R&D services company MindTree Consulting, and author of the book, The High Performance Entrepreneur, adds: "Caf Coffee Day has redefined the coffee experience; it has been a trendsetter in the caf space. Siddhartha has raised the coffee from a brew to an experience." Bagchi's association with Siddhartha dates to MindTree's first days, in 1999, when Siddhartha's technology holding company, Global Technology Ventures, invested in MindTree. When Siddhartha opened the first Caf Coffee Day outlet in Bangalore, India's silicon capital, in 1996, it was positioned more as an Internet caf. This was the very early days of the Internet in India, and customers trooped in to Coffee Day to experience the Internet. Coffee was just an extra. Siddhartha, though, had other plans. The Internet was the bait. Coming from a family of coffee plantation owners and as chairman of ABC, which owns more than 10,000 acres of coffee plantations in the southern Indian state of Karnataka, Siddhartha's aim was to sell coffee. The space he was operating in, as an exporter of green coffee beans, offered low margins and these fluctuated depending on the vicissitudes of pricing in the world coffee market. A caf, in contrast, operates at the highest end of the value chain. Its margins can be 35% to 40% higher than those of bean exports, notes Bijoor.

"At that time, coffee drinking in India was limited to South Indian traditionalists, the intellectuals and the fivestar coffee shop visitors," Siddhartha says. "I saw that in the neighboring international markets of Southeast Asia there was a popular culture of consumers visiting a caf for experiential purpose in addition to consuming a glass of beer. These cafs were also promoting cyber-culture and offering Internet access. These trends inspired us. We realized that there was a potential for building a coffee brand for the India market, and we launched the first cyber caf model based on the international lessons, but replaced beer with coffee. This is when Coffee Day was born."

SWOT ANALYSIS
Strengths: Very strong market penetration In house sourcing of coffee beans Tie ups with companies Affordable price(average price is Rs.40) Customer friendly employees It is ISO902 certified company

Weakness: Loud & noisy:- Its not a good place to have business talks

Congested(improper sitting arrangement) Follow the competitors strategy Unable to categorize either as a premium product or as a mass product Quality of food as compared to the competitors

Opportunity: Tie ups with other companies for promotion Diversification in food industry Large untapped market To use media for effective advertisement

Threat: Competitors like Caf Mocha, Barista & international players like Georgia, Starbucks

MARKETING MIX:
Products: Caf Coffee Day product mix constitutes a wide range of products that appeal primarily to Indian coffee and snack lovers. products have a decided Indian taste to it - be it food or coffee. Most of the eatables have been adopted to meet the Indian taste buds like samosa, masala sandwich, tikka sandwich etc. Thus they have been trying to capture the Indian taste along with classic coffee. Prices: 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.17 to Rs.54. Promotion: Caf Coffee Day has used mass media promotions. But they are involved in all the areas of serious consumer passion. They promote via Television, tie-ups with different brands, contest, sales promotion, association with movies, etc. Place:

This is a prime factor in determining the success of a retail chain. Caf Coffee Day is focusing mainly in malls and main markets.

INSIGHTS GAINED:
In Terms of Advertising to create Brand Awareness: CCD does not advertise itself via traditional media ads

 Growth has been Organic. Physical presence is sufficient to create brand awareness CCD advertises ABCs other offerings such as The Serai Resorts. CCD as a meeting place: CCD is not just in the business of coffee, Its in the business of enabling businesses/people to meet each other Given CCDs presence in every major city and most major towns, the simplest and most convenient meeting point that everybody knows is a CCD (its an easily identifiable landmark), unlike Barista/Lavazza While others are building coffee business, CCD is building real estate/meeting-point business where coffee is just a by-product. They wish to have a caf in any location where some business can be generated CCDs growth story closely resembles Starbucks. Expansion to the Rural market? Not at the moment. As of now, Non-essential goods wont do well, penetrating the tier 2 & 3 towns though

RECOMMENDATIONS:
Focus needs to be on product innovation and experience to meet rising customer expectations. With time, the rural market will be ready for CCDs entry. It will have to create the same caf culture craze it managed to do so well in the cities to a people unaccustomed to it. CCDs strength lies in it being able to provide quality matching its competitors for relatively cheaper prices. This is due to: The ABC group has complete control from production of Coffee in its fields of Chikmagalur, Karnataka to its 1001 outlets around the world. It cannot afford to let that advantage slip CCD has expanded out of India. They now have Cafs in: Pakistan, Austria and Germany CCDs expansion into the International market will be fraught with more difficulties as: They will face stiff(er) competition Customers have higher expectations CCD will have to raise the bar even higher in terms of product innovation and service offerings.