A Case Study On Cafe Coffee Day by CaseStudyInc - Aug 2008
A Case Study On Cafe Coffee Day by CaseStudyInc - Aug 2008
A Case Study On Cafe Coffee Day by CaseStudyInc - Aug 2008
Case Study
Please note: This case study was compiled from published sources, and is intended to be used as a basis for
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1. Introduction........................................................................................................................3
2. Background Note...............................................................................................................7
“CCD today has become the largest youth aggregator, and from a marketing stand point,
the success has come by focusing on the 3As: Accessibility, Affordability and
Acceptability.”
Cafe Coffee Day (CCD) has an established brand image in India and ranks No 2 in the
Brand Equity’s Most Trusted Brands 2008 survey - in the food services category. Rival
Barista is at No 5. CCD has been able to make a connection with the Indian consumers,
predominantly among the youth. CCD is the market leader in India and was awarded the
'Exclusive Brand Retailer of the Year' by ICICI Bank in its Retail Excellence Awards
2005 for the organized retail sector.
CCD has been able to make its brand presence felt through the sheer number of stores.
CCD has 620 cafes at present and it has ambitious plans to launch more than 900 cafes
by the end of the current financial year. This means launching one store every other day
which is not surprising from a company which launched a cafe (in 2005) in Vienna, the
coffee capital of the world. CCD also has three cafes in Vienna, and two in Karachi,
Pakistan. Lagging behind CCD in the Indian market, Barista has about 200 cafés, Java
Green (around 75 cafés) and Mocha (around 25 cafés). The Indian organized sector has
potential for around 5,000 cafés but fewer than 1,000 cafés exist currently.
1.3. Exhibit 1: Total number of stores/cafes of Café Coffee Day and its
competitors
CCD launched its first cafe store in Bangalore’s Brigade Road in 1996. At the time it had
18 cafes from its 1996 launch. It now has a network of 620 cafes in 102 Indian cities
which are more than its close competitor Barista. CCD has the competitive advantage
over Barista not only in consumer reach (with its wide network), but also with the
innovation in areas of customer service, logistics and supply chain efficiency. CCD plans
to become a big global chain by 2012-131.
"During our college days, we would be satisfied drinking coffee in the canteen or the
roadside dhaba, but young people today want a posh environment to chill out."
– Sudipta Sen Gupta, Marketing head, Café Coffee Day.
“The three formats—movie, sports and books—will attract all kinds of customers. The
average age of visitors to CCD currently ranges from 18 to 30. With the new formats, the
company will cater to a varied customer base.”
- Café Coffee Day president (marketing) Bidisha Nagaraj
CCD’s experiment with various formats (like cafes, garden cafes, lounge cafes and
Xpress Cafes) depending on the target audience has been fairly successful. CCD has
targeted different catchments area like high streets, malls (30 of CCD’s 620 cafes are
located in malls), multiplexes, offices, educational premises, and railway stations.
Rising disposable incomes have made unique lasting experiences more valuable to the
consumer. Therefore, CCD is all set to add more formats to its portfolio like the book
cafes, movie cafes and sports cafes2. During the afternoons, when the footfalls are less,
CCD is planning to tie-up with publishers and producers for organizing book launches
and having movie festivals. The plan includes selling books in the cafe premises where
authors can also read excerpts and sign autographs for book lovers. A Cafe Coffee Day
pick of the month will also be organized. CCD also tied up with BPCL petrol pumps to
have outlets in their premises3. CCD has even adapted its’ formats to be present in
educational institutions and corporate campuses either in the form of detailed Cafes or
its economical model of CCD express. As per the new strategy, around 15% of the
stores will be based on the new formats while the remaining ones will follow the ‘vanilla’
format.
1
In December 2007, CCD raised $100 million from Darby Templeton and Deutsche Bank for expanding its
café network.
2
CCD has already tied up with IPL (Indian Premier League) cricket teams to introduce the new format—the
sports café.
3
Barista tied up with Indian Oil Corporation.
Ever since its entry in India, CCD created an entry barrier for competition with as many
as four CCD cafes dotting a single street. The cluster/blanket strategy aimed at getting
consumers habituated to the brand. Within the Mumbai suburb of Bandra, for instance,
CCD has six outlets. At another location it has six cafés within a span of half-a-kilometre.
The latent need in the market countered the cannibalization of footfalls as was evident
from the four successful cafes at its single catchments area at Indira Nagar in
Bangalore4. The strategy also made operations easier with supplies management and
quick replenishment whenever one cafe ran out of stock. Having one manager for a set
of cafes improved efficiencies and reduced costs.
A crucial part of CCD’s business strategy is that all its outlets are company-owned. None
of CCD’s outlets is a franchise. While self-owned cafés are more expensive in the short
term, the company believes that a too-hasty switch to the franchisee model may cost it
its brand value. Besides, self-owned cafés mean greater control on product quality,
service and training.
Though competitor Barista had the first mover advantage5, CCD brand pitch aimed at
‘the young and the young at heart’ and lower price offering (lower by 30%-40 % when
compared to similar offerings at Barista) helped it overcome and leave Barista behind.
The age group from 18 to 29 (and above 29 also) flocked CCD cafes while the brand
Barista lost out due to constant change in management. Barista changed ownership
from Turner Morrison to Tata Coffee to Sivasankaran to Lavazza further destroying
brand equity.
“We’ve seen the hard days when every customer had to have every item on the menu
explained. That’s one reason we waited until 2000-01 to start expanding nationally.”
- CEO, Naresh Malhotra in a conversation with Business Standard
While CCD was among the first coffee cafés to start operations in India, it was the last to
go national (by end of 2001). Till the late 90’s, India was restricted to the intellectual, the
South Indian traditionalist and the five star coffee shop visitors. CCD faced a huge
challenge from being recognized primarily as a south Indian brand. North India was not
primarily a coffee drinking market compared to the south. Even the south Indians loved
pure filter coffee instead of instant coffee). Besides, India was always known to be a
‘chai country’ (Tea-drinking nation). Another problem was logistics. Transporting fresh
roasted coffee from its estates in Chikmagalur to faraway places like Mussourie in the
north and Jamshedpur in the east was a nightmare.
4
There are 6 CCD outlets in a 2 km radius and over all 120 cafes in Bangalore alone.
5
In 2002, Barista had some 85 cafés around the country, while Coffee Day had just 35.
1.10. Co-branding
CCD never opted for mass media advertising and believed the chain’s 600 stores would
speak for the brand. The retail chain has involved itself successfully with co-branding
activities with reputed brands like Levi’s, Apple iPod and Airtel. This made sense as
these brands also targeted the audience, CCD targeted. CCD was first seen in an ad
when the brand appeared in a co branded TV commercial for one of Yamaha’s
motorbikes. CCD also promoted its brand via barter deals (in-film promotion deals). E.g.
the brand was placed smartly in two Bollywood movies starring India’s topmost actors
like Amitabh Bachchan, former Miss World’s Aishwarya Rai & Priyanka Chopra and
Salman Khan. The movies chosen had a target audience that matched with that of the
consumers at Cafe Coffee Day. Shooting a few scenes in the café helped prominent
Cafe Coffee Day brand placement. CCD also got into a barter deal with Enrique Iglesias,
Elton John concerts and WWE (and also HDFC bank where the ad was shot in the cafe).
Consumers, especially the youth, are no longer just a ‘target audience’, but partners that
brand must connect with. Various in-café collaterals (like Posters, Tent Cards, Danglers,
Leaflets, Brochures, Coasters, Drop boxes, Contest Forms, Stirrers, Standees etc.) to
impart brand visibility and to add the element of interactivity to a campaign are available
inside the café. In 2002, CCD launched a 12-page tabloid – Café Beat with articles on
fashion, general interest and news about the chain. The tabloid was published monthly
and circulated at all cafés. New uniforms were designed by students from the National
Institute of Fashion Technology (NIFT).
In August 2008, CCD announced that leading international brand consultant Landor will
help it to reinvigorate its brand and take it to the next level. Only the brand name and
logo saying ‘A lot can happen over coffee’ will remain the same. CCD will now focus
more on projecting a feeling of togetherness (friendship, romance or office meeting in an
informal environment) and celebration which are critical core values. Accordingly the
cafe ambience, the look and feel inside is set to be changed.
6
Bangalore-based NGO.
“ Hence, even as our first café was set up in Bangalore in 1996 — an idea that struck
our chairman V G Siddhartha, while on a visit to a coffee shop in Singapore — it proved
to be an idea whose time came only by the turn of the century. By then, most other
players had joined the bandwagon.” – CEO, Naresh Malhotra
Café Coffee Day (popularly known as Coffee Day) is a division of India's largest coffee
conglomerate, Amalgamated Bean Coffee Trading Company Ltd. (ABCTCL). CCD is
worth more than Rs. 300 crore and is an ISO 9002 certified company. CCD’s head
quarters in India are located in Chikkamagaluru, Bangalore, Karnataka known as the
home of some of the best Indian Coffees. CCD pioneered the café concept in India in
1996. In the first five years of operations, CCD had just a handful of cafés in six cites.
But by 2004, CCD was the largest chain in the country with 153 cafés in 37, while
Barista, its closest competitor, had120 outlets.
The company sources coffee from 10,000 acres (40 km²) of coffee estates, the 2nd
largest in Asia, that is owned by a sister concern and from 11,000 small growers. It is
one of India’s leading coffee exporters with clients across USA, Europe & Japan.
Sequoia Capital invested $20 million in ABCTL around two years back. ABCTL
announced plans to expand CCD outlets in 10 countries7 (including Germany,
Switzerland and Eastern Europe). ABCTL has 775 Xpress outlets, 7,000 vending
machines in diverse locations such as railway stations, hospitals, gas stations and office
campuses, and 400 Fresh 'n Ground outlets.
7
At the time, ABCTL’s coffee-café expansion into international markets is routed in the EU through the
Coffee Day International Company it has registered in Cyprus. In addition to Austria and Pakistan, CCD
plans to open in markets like Poland, Hungary, Russia, Dubai, Saudi Arabia, Kuwait and China.
• Coffee Day Fresh n Ground (354 Coffee bean and powder retail outlets)
• Coffee Day Xpress (341 Coffee Day Kiosks)
• Coffee Day Take away (7000 Vending Machines)
• Coffee Day Exports and
• Coffee Day Perfect (FMCG Packaged Coffee) division
The font used for “Café” is called SLURRY and looks as though the letters have congealed out of
a liquid. The word is still forming itself and evolving into something new and better.
3.4. Exhibit 5: Sample Consumer profile by Age group at Café Coffee Day
Teenagers
Young
professionals
20-24
25-29