Indian Retail Foundation Team Retallions
Barista Lavazza Institute : Jamnalal Bajaj Institute of Management Studies
Team Members: Ajay Satpute Pramod Kanojia Rakesh Tatikonda
Barista Lavazza
IRF Rising Star Challenge
Table of Contents Table of Contents .......................................................................................................................................... 2 Indian Coffee Industry................................................................................................................................... 5 INDUSTRY SIZE ............................................................................................................................................. 5 PRODUCTION TRENDS .................................................................................................................................. 5 INDIA COFFEE PRODUCTION ( MILLION KG ) ..................................................................................................... 6 SEGMENTATION ON THE BASIS OF VALUE CHAIN ............................................................................................. 7 PLANTERS .................................................................................................................................................... 7 PLANTERS -CUM-TRADERS (INTEGRATED) ....................................................................................................... 7 NON-INTEGRATED PLAYERS .......................................................................................................................... 8 SEGMENTATION ON THE BASIS OF CONSUMPTION .......................................................................................... 8 TRANSITION O F CAFES ................................................................................................................................. 8 DEMAND ..................................................................................................................................................... 9 DOMESTIC MARKET .................................................................................................................................... 10 TRENDS IN DOMESTIC DEMAND: ................................................................................................................. 10 Market Research ......................................................................................................................................... 11 Research on Consumer Attitude towards Coffee Joints ......................................................................... 11 Food & Beverages Market In India ............................................................................................................. 25 GROWTH DRIVERS OF INDIA’S FOOD INDUSTRY ........................................................................................... 25 MARKET SIZE OF INDIAN FOOD INDUSTRY ................................................................................................... 26 EXPORTS ................................................................................................................................................... 26 Food Processing Industry ............................................................................................................................ 26 SEGMENTS ................................................................................................................................................ 26 BEVERAGES ............................................................................................................................................... 27 INVESTMENT TRENDS ................................................................................................................................. 28 PLAYERS & STRATEGIES .............................................................................................................................. 28 GOVERNMENT INITIATIVES ......................................................................................................................... 29 ROAD AHEAD ............................................................................................................................................ 29 Indian Retail Industry .................................................................................................................................. 32 RETAIL: BRIEF OVERVIEW ........................................................................................................................... 32 RETAIL – MARKET SIZE ............................................................................................................................... 32 Team Retallions, JBIMS
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RURAL RETAILING ON A HIGH ..................................................................................................................... 32 ROLE OF FDI IN RETAIL ............................................................................................................................... 35 PROS: ....................................................................................................................................................... 36 CONS: ....................................................................................................................................................... 37 CHALLENGES: .............................................................................................................................................. 37 WAY AHEAD: ............................................................................................................................................. 37 RETAIL – INVESTMENT TRENDS ..................................................................................................................... 38 RETAIL - GOVERNMENT INITIATIVES ................................................................................................................ 39 RETAIL – ROAD AHEAD ................................................................................................................................. 39 Coffee Industry............................................................................................................................................ 40 INTRODUCTION ........................................................................................................................................... 40 COFFEE IN INDIA .......................................................................................................................................... 40 KEY PLAYERS ............................................................................................................................................... 44 PRODUCT OFFERINGS: .................................................................................................................................. 45 PRIME CUSTOMERS: .................................................................................................................................... 45 Barista Lavazza ............................................................................................................................................ 53 BACKGROUND ............................................................................................................................................. 53 ACHIEVEMENTS ........................................................................................................................................... 54 INNOVATION ........................................................................................................................................... 55 MARKETING STRATEGY OF BARISTA ................................................................................................................ 56 ANALYSING BRAND BARISTA .......................................................................................................................... 63 MERCHANDISING ......................................................................................................................................... 67 DISTRIBUTION OF STOCK ............................................................................................................................... 69 HUMAN RESOURCES .................................................................................................................................... 69 SWOT ANALYSIS ......................................................................................................................................... 71 CONSUMER DECISION MAKING...................................................................................................................... 72 ANALYZING COFFEE RETAILING INDUSTRY USING PORTER’S FIVE FORCE’S MODEL ................................................... 77 CAFÉ COFFEE DAY ....................................................................................................................................... 79 JAVA GREEN ............................................................................................................................................... 82 MOCHA ..................................................................................................................................................... 82 QWICKY’S................................................................................................................................................... 83 CAFÉ NESCAFE ............................................................................................................................................ 84 Team Retallions, JBIMS
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COFFEE BEAN AND THE TEA LEAF ................................................................................................................... 84 COFFEE WORLD .......................................................................................................................................... 85 THE CHOCOLATE ROOM ............................................................................................................................... 85 GLORIA JEAN’S ............................................................................................................................................ 85 THREAT’S OF NEW ENTRANTS ........................................................................................................................ 86 STARBUCKS ................................................................................................................................................ 86 GEORGIA.................................................................................................................................................... 87 Fast Food Industry in India.......................................................................................................................... 88 BRAND VALUE PYRAMID FOR BARISTA ............................................................................................. 92 MARKETING STRATEGY OF CCD ........................................................................................................ 96 MARKETING TACTICS.................................................................................................................................... 98 OPERATIONS STRATEGY .............................................................................................................................. 101 SWOT ANALYSIS ............................................................................................................................... 102 NEW BUSINESS MODEL FOR BARISTA L AVAZZA ............................................................................ 103 HUMAN RESOURCES PLAN .......................................................................................................................... 106 MARKETING PLAN ...................................................................................................................................... 106 FINANCIAL PROJECTIONS................................................................................................................................. 111 EXPANSION IN OUTLETS .............................................................................................................................. 111 PROFIT AND LOSS ACCOUNT PROJECTIONS FOR NEXT 5 YEARS .................................................................... 112 RATIO ANALYSIS ........................................................................................................................................ 113 FINANCIAL SNAPSHOT ................................................................................................................................ 114
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Indian Coffee Industry INDUSTRY SIZE The total global market for coffee was estimated at 7,423 million kg in 2009-10. India is the fifth-largest producer in the world, with a share of 3.9 per cent in total global production. It is also a major exporter, with exports constituting 76 per cent of the country‟s production.
PRODUCTION TRENDS India is one of the few countries in the world that produces both varieties of coffee: Arabica and Robusta. Arabica is the more expensive variety owing to its richer flavour and lower caffeine content. However, the share of Robusta in India‟s total coffee production has increased from 53.9 per cent in 1990-91 to 67 per cent in 2009-10. Production of Robusta beans has grown at a CAGR of 5 per cent over this period. Growth in Robusta has been much slower during 2000-2010 compared with 1990-2000.
Being biennial in nature, Arabica witnesses an alternate cycle of production, with production declining every alternate year. Production of Arabica beans has augmented at a CAGR of 2.2 per cent from 1989 to 2009. Since 2002-03, Arabica production has slowed down to 1.8 per cent due to the following factors:
White Stem Borer infection has affected the Arabica crop, leading to a drop in production
The decline in coffee prices also encouraged growers to switch to Robusta, as its cost of production is lower
The growing preference for instant coffee over filter coffee, as instant coffee requires Robusta beans.
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INDIA COFFEE PRODUCTION (MILLION KG )
Source: Indian Coffee Board
Area under cultivation
Karnataka is the largest contributor to coffee production in India. While it contributes 78.5 per cent of total production, it accounts for around 58.4 per cent of the area under cultivation. Kerala is the second-largest state, accounting for 22.6 per cent of the production and 24 per cent of the land under cultivation. This is followed by Tamil Nadu, which is relatively smaller with an 8.6 per cent of land under cultivation and 7.4 per cent share of total production.
Chikmagalur, Hassan and Kodagu are the three major coffee growing districts in Karnataka. In Kerala, coffee is primarily grown in Wayanad whereas in Tamil Nadu it is grown in the Pulneys and the Nilgiris. The five coffee-producing districts (of Chikmagalur, Hassan, Kodagu, Wayanad and the Nilgiris) fall in the Western Ghats and
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are contiguous. Close to 80 per cent of India‟s hectarage under coffee cultivation is concentrated here.
Growth in land under cultivation has decelerated from 3 per cent CAGR between 199091 and 2000-01 to 1 per cent CAGR between 2000-01 and 2010-11 due to shortage of suitable land for coffee cultivation. The fluctuating price trends have also restricted increase in hectare.
Indian coffee cultivation is dominated by small farmers. In 2007-08, there were about 2.21 lakh coffee plantations, covering an area of around 3.84 lakh hectares. About 98.8 per cent of the number of coffee plantations belongs to small growers having less than 10 hectares of land. However, these plantations cover 74.4 per cent of the area under coffee and account for 70 per cent of coffee production. Large holdings, accounting for the remaining (1.2 per cent) number of plantations, represent about 25.4 per cent of the total area under coffee and almost 30 per cent of total coffee production, indicating that large growers are more productive than small growers.
SEGMENTATION ON THE BASIS OF VALUE CHAIN
On the basis of player presence in the value chain, the industry can be segmented into (i) planters (ii) planters-cum-traders and (iii) non-integrated players.
PLANTERS Planters are coffee growers who primarily sell their produce at farm gates or auctions.
PLANTERS-CUM-TRADERS (INTEGRATED) These are coffee growers, who have diversified into the packaged coffee segment to insulate themselves from the fluctuations in bean prices. They are present throughout the value-chain, from estate operations such as curing and blending to marketing and selling in the domestic retail or export markets. Team Retallions, JBIMS
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NON-INTEGRATED PLAYERS These are players without their own coffee plantations, who purchase cured beans from curers, agents, cooperatives and auctions, and then grind, blend, pack and market the same (For example, Hindustan Lever Ltd (HLL) and Nestlé India Ltd. Although HLL has some plantation facilities, it primarily sources from the auctions.
SEGMENTATION ON THE BASIS OF CONSUMPTION From the consumption point of view, the industry can be segmented into filter coffee and instant coffee. Of the total domestic consumption, about 45 per cent is consumed as filter coffee and the remaining as instant coffee. Both filter coffee and instant coffee can be classified further into pure coffee and coffee blended with chicory. Chicory is mixed with coffee to enhance taste and flavor. The quantity of chicory mixed with coffee determines the taste, flavor and price of the end product. Since the price of chicory is significantly lower than that of coffee beans, blended coffee costs less than pure coffee. However, the Prevention of Food Adulteration Act, 1954, allows an addition of only up to 49 per cent chicory. Instant coffee is also sold in different flavours and cold coffee forms such as vanilla, mocha and lemon.
TRANSITION OF CAFES Coffee remains in the outer periphery of interest in the minds of consumers. Other aggressive beverages like tea and the colas of every hue have a substantially higher degree of interest and of course advertising backing them. Coffee consumption is down in the last four years. From a level of 55,000 tpa, the numbers are down at 52,000 tpa today. Per capita consumption hover around 52 gms. This signifies a measly 10 cups of coffee per Indian per year! Branded coffee consumption is a small percentage of the total. Only 19 per cent are branded and the rest is in loose forms. However, a significant increase in consumption in the branded segment anticipated. This is going to be spurred by the liquid coffee cafes and of course, the inroads foreign brands will make in the domestic market soon.
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Liquid coffee bars and vending machines are going to spur consumption on in the country for coffee. These are going to be front-ended efforts that will make coffee that much more consumer-friendly and will make the beverage accessible at arms length reach and available at the end of a desire. It is expected to have 100000 coffee vending machines in the country in the next three years and expect to see at least 5000 Cafes across the country in the next five years. The market for vending products in India is opening up. Towards the end of the review period, with organized retailing coming in, consumers started believing in brand names. Vending products through machines started not only for coffee and tea, but also for soft drinks, chocolate confectionery and magazines, amongst others. The total strength of vending machines in the country is approximately about 1,20,000 machines by the end of 2011, which includes a large number of unbranded machines too. Coffee pubs and cafes mushroom throughout India, with vending machines also on the rise. Over the review period, there was a mushrooming of coffee pubs and cafes across regions, and across the country as a whole. Coffee chains like Barista, Qwiky's and Cafe Coffee Day (run by Amalgamated Bean Coffee Trading Co Ltd) have become hugely popular hangouts for Indian cities' young and trendy consumers. The cafes and pubs are not just places where people buy coffee; they also try to sell a certain lifestyle. The chains, with their glitzy interiors and designer furniture, are targeted at urban, upper-middle-class and rich Indians.
DEMAND With exports constituting around 75 per cent of production, India is the fifth largest exporter of coffee in the world. Thus, the Indian coffee industry‟s prospects are largely dependent on the export market. However, the domestic market has also been registering strong growth in the past few years, with the domestic demand estimated at 100 million kg in 2009 (Coffee Board of India). Hence, we expect the domestic market to play a major role in the growth of the coffee industry, going forward.
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DOMESTIC MARKET Domestic demand for coffee is determined by changes in the consuming population base, affordability and movements in per capita consumption. Per capita consumption of coffee is driven by affordability, consumer preference (influenced by region-specific traditions and climatic conditions), and changing demographics. In addition, prices of substitutes like tea also affect the per capita consumption of coffee. Tea is a widely consumed beverage in India, with its penetration being as high as 94 per cent. As compared to this, penetration of coffee is around 62 per cent, with the southern markets contributing almost 80 per cent to consumption volumes.
TRENDS IN DOMESTIC DEMAND: Domestic demand for coffee has been showing a fluctuating demand in the past depending on domestic availability and prices.
1981-1988: Demand for coffee has remained in the range of 50-55 million kg. 1989: Fall in farm gate prices from 75 cents per lb to 57 cents per lb spurred higher consumption, thus pushing up demand to 63 million kg during 1989. 1990: although prices remained low, consumption fell to 54 million kg due to lower availability for domestic consumption. 1991-1998: A fairly stagnant period of demand due to a gradual increase in prices. 1999: Fall in prices spurred demand. Period from 2000: Increasing cafe culture, player initiatives in brand development, aggressive promotion of filter coffee in the northern and eastern markets have contributed to the recent increase in domestic consumption.
Although growth in consumption has been a slow pace of 2.3 per cent CAGR over a 20 year period between 1999-2009, consumption since 1999 has almost tripled at a CAGR of 6.2 per cent with the growth being the fastest during 2004-2009 (CAGR of 5.9 per cent)
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Market Research Research on Consumer Attitude towards Coffee Joints
Q) Have you ever visited a cafe coffee day / barista outlet?
CCD/Barista Costumer 2% 2%
22%
Barista CCD Both
74%
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Neither
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As we can see there are only 2% of respondents who have visited Barista store as compared to 22% of respondents who have visited CCD. We can conclude that customers are inclined towards CCD rather than Barista though many of them around 74% have visited both the cafes.
Q) If companies like cafe coffee day, costa coffee, café mocha make their prices comparable to barista, would you still buy a barista day coffee ?
Comparable Prices
35%
Yes 47%
No Can't Say
18%
We can see that even if all the chains make their prices almost equal, there are 47% of the respondents who will still prefer Barista which shows how their loyalty towards the brand Barista. Q) Which of the following qualities do you associate with café coffee day/ barista ? Barista
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Barista 11%
CCD Dull, boring & mundane
9%
17%
11%
Elegant & Sophisticated 72%
Fun loving, Cheerf ul & Lively
Dull, boring & mundane
80%
Elegant & Sophisticated Fun loving, Cheerf ul & Lively
We can clearly differentiate the different segments targeted by both Barista and CCD. CCD is more preferred by the young population as a fun, cheerful and lively place whereas Barista is for the high class upper segment sophisticated business professionals. We need to cater to both the sophisticated and non-sophisticated population so that the sales will increase.
Q) On the following occasions which joint will you prefer? - Birthday Party
Birthday Party 22% Barista CCD 78%
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We can see that CCD is preferred for celebrating birthday parties as it is most preferred by youths. We need to channelize this segment and attract the youngsters with the help of store design and marketing strategies
Q) On the following occasions which joint will you prefer? - Casual Get-together
Casual Get Together 1%1% 12%
Barista CCD 3rd Qtr
86%
4th Qtr
We can see that CCD is preferred for casual meetings and get together as it is a happening place for socializing with others. Here again we need to set up a place and ambience in such a way that it will attract both the segments.
Q) On the following occasions which joint will you prefer? - Formal Meeting
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Formal Meeting 29%
Barista 71%
CCD
We can see that Barista is preferred over CCD for formal business meetings and functions. We need to leverage it and try to expand our horizon to gain market share.
Q) On the following occasions which joint will you prefer? - Self- introspection
Self Introspection
43%
Barista 57%
CCD
We can see that Barista is a quiet place where people come here for peace and self introspection just to spend time for themselves. Team Retallions, JBIMS
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Q) When you buy coffee, how important is the following factors for you. Please give a rating from 1 to 4 (1 being the highest and 4 being the lowest ) - Price
Price 12% 25%
Rank 1 Rank 2
25%
Rank 3 38%
Rank 4
Price is a an important factor for almost 50% of the respondents which shows that the products should be reasonably priced providing quality at a premium to attract the customers.
Q) When you buy coffee, how important is the following factors for you. Please give a rating from 1 to 4 (1 being the highest and 4 being the lowest ) - Quality
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Quality 11% Rank 1
8%
Rank 2 52% 29%
Rank 3 Rank 4
Clearly quality is a differentiating factor when it comes to preference for coffee. So, coffee prices should be comparable to its quality. Though if we plan to cut down the prices we should see to it that the quality is not compromised.
Q) When you buy coffee, how important is the following factors for you. Please give a rating from 1 to 4 (1 being the highest and 4 being the lowest ) - Taste
Taste 15% Rank 1
5%
Rank 2 15%
Rank 3 65%
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Rank 4
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Along with quality, price of the coffee taste is very important factor which needs to be considered. If taste is not good the customers will not cone again back to the caf to have a cup of coffee and it is a immediate turn off as compared to quality and price.
Q) When you buy coffee, how important is the following factors for you. Please give a rating from 1 to 4 (1 being the highest and 4 being the lowest ) - Ambience
Ambience 20%
23%
Rank 1 Rank 2 Rank 3
18% 39%
Rank 4
Nowadays people want to have comfort and convenience while having either tea, coffee or snacks. So ambience plays an important role which attracts costumers towards the store as it is pull factor for the customers.
Q) Which country do you associate with coffee café day / barista culture? - Barista
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Barista 12%
India
25% 26%
UK Italy USA
37%
Barista is associated with Italy culture. This may be the reason because of its acquisition by Lavazza brand based in Italy. Though Barista is an Indian brand it is not positioned to attract the Indian consumers. This has to be looked upon in the marketing strategy.
Q) Which country do you associate with coffee café day / barista culture? - Cafe Coffee Day
CCD
25%
India UK
3% 11%
61%
Italy USA
CCD is an Indian brand of ABCTL company which is a result of forward integration and which has its reach in almost every corner of the country with around more than 1000 stores. Team Retallions, JBIMS
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Q) Which of the following taglines do you most identify with?
Taglines 3%2%
A lot can happen over coffee Where the world meets The best coffee in the world 95%
As we can see people identify themselves with CCD tagline the most. So we have to create awareness and market the Barista brand so that it makes a name for himself and is identified by the target group. So we have to position our brand using different media formats.
CCD and Barista Comparative Analysis
Q) Which Coffee shop would you prefer?
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Preference 21% CCD Barista 79%
Consumers prefer having coffee from CCD rather than Barista. CCD is a clear leader in this market. Our objective would be to close down this gap between the two.
Q) How frequently do you visit a coffee joint, average spending in terms of hours and money?
Frequency of Visit Not often
41%
13%
46%
2-3 Times a Week 2-3 Times a Month
Average Spendign (in Rs)/Visit 15%
62%
23%
Rs 50100 Rs 101200 Above Rs 200
Average Spending (in Hrs)/Visit 30min1hr
8% 26% 66%
1hr2hrs Above 2hrs
As we can see that the people visit 2-3 times a week and many of them visit occasionally, but whenever they visit they spend a couple of hours but spend very less as compared to amount of time spend at the café.
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We have to try to lure customers to come and have a coffee at the café which in turn will result in sales of coffee. We have to orient our strategy towards this aspect. Q) Which of the following factors decides your choice of a coffee joint?
Factors influencing choice 18% Value for Money 8% 74%
Taste Ambience/Experience
People visit these cafes and have café at leisure because of the ambience and peace of mind they get at the café. So we need to have an ambience for each target group so that can enjoy sipping coffee.
Q) Please rate Barista & CCD on the following parameters - Taste & Quality of Prime Products
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BaristaTaste&Quality of Prime Products
CCD-Taste&Quality of Prime Products 0%
8% 3%
13%
Rank 1 21%
Rank 2
18%
Rank 2
15%
Rank 3
Rank 3
31% 37%
Rank 1
Rank 4
Rank 4
54%
Rank 5
Rank 5
As we can see the quality of products of Barista is slightly better than CCD or we can see that they are comparable. So we need to differentiate on other aspects so that we can stand out from CCD.
Q) Please rate Barista on the following parameters - Eatables
Barista-Eatables
CCD-Eatables
3%
20%
18%
13%
Rank 1
8% Rank 1
Rank 2
Rank 2
Rank 3 25%
34%
Rank 4 Rank 5
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38%
41%
Rank 3 Rank 4
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As we can see that Barista has a wide product portfolio range in terms of eatables. We can interpret that people not only come to cafe for having coffee in a café but also to have some eatables with it.
Q) Please rate Barista on the following parameters - Prices
Barista-Prices
CCD-Prices
3% 15%
Rank 1
27%
18%
13% Rank 1
Rank 2
Rank 2
Rank 3 29% 26%
Rank 4 Rank 5
32%
37%
Rank 3 Rank 4
As we can see barista products are costlier when compared to CCD. So we need to have a wider portfolio range of products so that it will cater to all the segments.
Q) Please rate Barista on the following parameters - Overall Experience
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Barista-Overall Experience
13%
CCD-Overall Experience
14%
13% 26%
Rank 1 Rank 2 34%
Rank 2
21%
Rank 3 39%
Rank 1
Rank 3
Rank 4
Rank 4 40%
As we can see the overall experience has been good for CCD as compared top Barista. It‟s a gap we need to identify and strategise so that we can improve the experience of customers coming to the store.
Food & Beverages Market In India GROWTH DRIVERS OF I NDIA’S FOOD INDUSTRY The growth of the food industry is driven by:
Higher disposable incomes
Change in spending pattern
Increasing organized food retailing
Increasing export opportunities
Favorable regulatory environment and Government support and investment inflows
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MARKET SIZE OF INDIAN FOOD INDUSTRY The Indian food industry is projected to grow by US$ 100 billion to US$ 300 billion by 2015, according to a report by a leading industry body and Technopak. The industry, estimated at US$ 200 billion in 2006-07, is projected to reach US$ 300 billion by 2015. During the period, the share of processed food in value terms is expected to increase from 43 per cent to 50 per cent. EXPORTS Exports of organic food products are expected to grow five-fold by 2015, according to the Agriculture and Processed Food Products Export Development Authority (APEDA). The Government agency expects exports to touch US$ 1.43 billion by 2014-15 against US$ 280 million in 2010-11. Exports of floriculture, fresh fruits and vegetables, processed fruits and vegetables, animal products, other processed foods and cereals stood at US$ 5.45 billion as on November 2010-2011, according to DGCIS annual data published by APEDA. Spice Board has revealed that the export of spices from India during 2010-11 has registered an-all-time-high both in quantity and value. During the year, a total of 5, 25,750 tones of spices and spice products valued at US$ 1,502.85 million were exported, as against 5, 02,750 tones valued at US$ 1,173.75 million in 2009-10. This is an increase of 5 per cent in volume and 28 per cent in dollar terms of value. Food Processing Industry Food processing Industry is one of the largest industries operating in India, and is highly fragmented. SEGMENTS The Food Processing Industry operates across various segments that include:
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Fruits & vegetables
Meat & poultry
Dairy
Marine products, grains and consumer foods (that includes packaged food, beverages and packaged drinking water).
Value addition of food products is expected to increase from 8 per cent to 35 per cent by the end of 2025. Fruit & vegetable processing is also expected to increase to 25 per cent of total production in 2025 from the current level of 2 per cent, states the CCI report. Dairy sector – that holds highest share in processed food market – holds large potential to be exploited. The report reveals that 37 per cent of the total dairy produce is processed of which only 15 per cent is done by the organized sector. Hence, there still lies a lot of scope for investment and development. The sector has attracted foreign direct investment (FDI) worth US$ 1,253.79 million from April 2000 to April 2011, according to the data provided by Department of Industrial Policy and Promotion (DIPP). The amount of FDI inflow for Food Processing Sector in India during the financial year 2010-11 up to November 2010 (8 months) is US$ 129.2 million. BEVERAGES The Indian non-alcoholic drinks market was estimated at around US$ 4.43 billion in 2008 and is expected to grow at a CAGR of around 15 per cent during 2009-2012, according to a report published by market research firm RNCOS, titled "Indian NonAlcoholic Drinks Forecast to 2012". As per the report, the fruit/vegetable juice market will grow at a CAGR of around 30 per cent in value terms during 2009-2012, followed by the energy drinks segment which will grow at a CAGR of around 29 per cent during the same period.
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INVESTMENT TRENDS
Dan Cake, Portugal, one of the leading names in the world of bakery and confectionery industry and one of the largest butter cookies producers worldwide is set to enter the Indian market. For this, the company has formed a 66:34 joint venture with Pune-based Phadnis Group.
US based McCormick & Co, a leading spice maker, will invest close to US$ 115 million in a joint venture it will form with Kohinoor Foods Ltd, a leading marketer of branded Basmati rice and other food products. McCormick's investment, through a Singapore-based subsidiary, will include picking up an 85 per cent stake in the new joint venture Kohinoor Speciality Foods India Pvt Ltd. Kohinoor will hold the balance 15 per cent.
Quick food service restaurant chain Subway will set up 45 outlets across the country by 2011-12 entailing investment of almost US$ 9 million. The company has now 205 outlets in India and plans to take its count to 250 by the end of this fiscal.
French dairy firm Danone is chalking out a measured expansion plan in India. The corporation has been in India for a little over a year and has introduced yogurt, dahi (curd) and smoothie product range in Pune and Mumbai. It is now focusing on Hyderabad.
PLAYERS & STRATEGIES Presence of numerous segments across the food industry has generated scope for the players to foray into diversified portfolios and avenues. For instance, domestic player Dabur India ltd. deals in beverages and culinary products and foreign company HUL offers beverages, staples, dairy and snack foods. Where on one hand overseas firms like ITC, HUL, Britannia and Pepsi offer wide product range and quality, Indian players like Haldirams, MTR and Parle leverage their position on competitive pricing and mass reach.
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GOVERNMENT INITIATIVES The Indian government has approved funds for establishing 15 mega food parks across the country, Food Processing Secretary Ashok Sinha said. In the wake of social responsibility, the Food Ministry is considering a new law restricting the amount of food wasted at Indian weddings. The Union budget 2011-12 has also allocated US$ 135 million to the Food Processing Ministry from the previous US$ 90 million. As a measure to boost investment in agriculture the minister extended the Viability Gap Funding Scheme (VGFS) for public private partnerships (PPP) for setting up modern storage capacity besides giving infrastructure status to cold chains. ROAD AHEAD The food industry in India has taken off significantly well and will continue to grow rapidly given the unexplored potential in the sector. The growth in this sector is not only indicative of changing development patterns of the country, similar to the developed nations, but also the promise it holds in propelling growth of a certain section of society that has remained constrained for a long time. The government of India had also announced Vision 2015, which lays focus on enhancing the competitiveness of food processing industry in both domestic as well as international markets along with ensuring stable income levels to farmers. The Vision 2015 provides for enhancing the level of processing of perishable to 20 per cent, enhancing value addition to 35 per cent and increasing the share in global food trade from 1.5 per cent to 3 per cent, by 2015. India ranks first in the world in production of cereals, livestock population and milk. It is the second largest fruit and vegetable producer and is among the top five producers of Rice, Wheat, Groundnuts, Tea, Coffee, Tobacco, Spices, Sugar, and Oilseeds, yet India‟s share in international food trade is a minuscule 1.5%. Value addition to foods by
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processing is a mere 8% of total production. Organized food retailing industry is still at infancy stage with share less than 1 per cent of food retail market size in India. This is despite the fact that food is the largest category in consumers spending basket. Indian consumers are deprived of quality food products, variety and value-added services at the retail end largely because of the highly fragmented nature of food retailing. Organized food retail has the potential to bridge this gap - and herein lies the opportunity. The Indian food retail industry is of a highly fragmented nature and consumers are deprived of quality food products. Organized food retail has the potential to bridge this gap. Organized retailing is also emerging as an important gateway for the sale of food products. In Chennai, about 17 per cent of food sales flow through supermarkets. In the metros, most women have shifted to supermarkets from street corner grocers. The world of food retailing is witnessing a paradigm shift that will have long-term implications for the way food retailing evolves in emerging economies like India. Retailers are looking to capture a larger share of consumer spending by expanding their product portfolios. Increasing pressure on financial performance is also prompting food retailers to look at high-margin categories, which include non-food products and services. Retailers have also realized that they need to become multi-format if they are to expand their customer base and gain a competitive edge. Differentiation on the basis of value for money and value-added services will, however, become increasingly important. Retailers across the world are experiencing a wave of consolidation that is being driven by the desire for economies of scale, saturation in domestic markets and the desire for access to new markets. In line with international trends, the Indian market has already seen organized food retailers going multiform and multi-category with an increasing focus on private labels. Consolidation is likely to be triggered by the entry of leading Indian corporate and Team Retallions, JBIMS
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international retailers into the food-retail arena. The share of spending on at-home food consumption has fallen from 90 per cent to 80 per cent in the last five years between the top two socio-economic strata. Significant spending on food and increasing out-of-home food consumption represent opportunities for food retailers and food-service companies. India has the highest number of retail outlets in the world – 12 million outlets with a total retail space of about 2 billion sq ft. Owing to this fragmentation, the availability of retail space per capita in India is among the lowest in the world – 2 sq. ft per capita compared with 19 sq ft in the US. Some 5 million of these outlets engage in retail of food and food products. The degree of fragmentation is much higher among food retailers than among non food retailers. The majority of food and food products are retailed through neighbourhood kirana stores. The organized food retailing sector in India is on the verge of a boom with almost all the big corporate houses including Tatas, Reliance, ITC Group, Lohias-promoted Indo Rama, Mumbai-based RK Hospitality, Kishore Biyani with his Big Bazaar, RPG group with its hypermarket and supermarket chain eyeing the sector aggressively.
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Indian Retail Industry RETAIL: BRIEF OVERVIEW The Indian retail sector is highly fragmented with more than 90 per cent of its business being carried out by traditional family run small stores. This provides immense opportunity for large scale retailers to set-up their operations – a slew of organized retail formats like departmental stores, hypermarkets, supermarkets and specialty stores are swiftly replacing the traditional formats dramatically altering the retailing landscape in India. India is the third-most attractive retail market for global retailers among the 30 largest emerging markets, according to US consulting group AT Kearney‟s report published in June 2010. RETAIL – MARKET SIZE The total retail sales in India will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 2015, according to the BMI India Retail report for the third quarter of 2011. Robust economic growth, high disposable income with the end-consumer and the rapid construction of organised retail infrastructure are key factors behind the forecast growth. Along with the expansion in middle and upper class consumer base, the report identifies potential in India‟s tier-II and tier-III cities as well. The greater availability of personal credit and a growing vehicle population providing improved mobility also contribute to a trend towards annual retail sales growth of 12.2 per cent. Indian retail sector accounts for 22 per cent of the country's gross domestic product (GDP) and contributes to 8 per cent of the total employment. RURAL RETAILING ON A HIGH Rural retailing enjoys an intense focus from big brands.
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Future Group and Godrej Agrovet's joint venture (JV) in rural retailing, 'Aadhar', is all set for a revamp. The group promoter Kishore Biyani has revealed that the JV is planning to come up with wholesale distribution centers across different districts and franchisees would be rolled out to local entrepreneurs who would have a better understanding of the concerned area. They would be able to source the products from these wholesale centers and then sell it in their villages. The alliance operates stores in Gujarat, Maharashtra, Haryana and Punjab and mainly sells wheat and paddy apart from daily need products. The company also provides farmers with solutions to problems regarding their agricultural output, which includes what kind of crop can they plant and when, along with techno-commercial suggestions to help them give a better output. Meanwhile, Rajkot based Champion Agro Ltd is planning to come up with single window shopping facility for farmers. The company already has 35 agri-retailing outlets in the Saurashtra region, and is expected to open around 400 outlets at a taluka level across Gujarat by 2016. It will open 50 new outlets by the end of 2011with an investment of US$ 3.3 million. The overall investment planned is between US$ 66.7 – US$ 88.94 million. On similar lines, Vadodara based ACIL Cotton Industries is all set to come up with around 40 outlets of 'ACIL Krishi Store' in Gujarat. Of these, four outlets got operational in April - May 2011. As for 2011, ACIL has decided to focus on the Gujarat market. ACIL stores will sell all types of seeds, fungicides, fertilisers, micronutrients. Also, FMCG and retail giants are making good use of technology to reach out to rural India. From low-cost handsets to tablet PCs, the Indian FMCG and retail sector is latching on to technology and applications to reach out to rural India. For instance, Marico is using mobile technology innovatively to arm its field representatives in their procurement process. The IT team at Marico developed a mobile-based application for Nokia 5235 series handsets. The company gave these GPS-enabled phones to 120 of its field representatives, with mapped routes. This helped the agri-representative to get the exact route and also saved on time. The
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mobile application can also get real-time data from farmers. Pictures of crop and soil taken from the camera are used for monitoring progress of contract farming, seed information and weather condition. Since the data is available online, this also helps the company analyse and take decisions quickly. Meanwhile Hindustan Unilever Ltd (HUL) is experimenting with tablet PCs in its attempt to increase its rural reach. It has been able to reach to 500,000 outlets in a year‟s time. According to Nitin Paranjape, managing director, HUL, “We put all the villages on an IT map. The name of the village, its total strength, nearest distributors available, whether it has a school, a hospital, a primary health centre, all of this was mapped. We used this information to determine the opportunity the village presented to us. Organised vs Unorganised Retailing The Indian retail market, over the last decade, has been increasingly leaning towards organised retailing formats. The pattern in domestic retailing is altering in the favour of organised modern retailing, a big change from the traditional plethora of unorganised family-owned
businesses.
Rapid
urbanisation,
changes
in
shopping
pattern,
demographic dividend and pro-active measures by the Government are abetting the growth of the retail sector in India. Organised retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by 2015, according to a McKinsey & Company report titled 'The Great Indian Bazaar: Organised Retail Comes of Age in India'. Furthermore, according to a report titled 'India Organised Retail Market 2010', published by Knight Frank India, during 2010-12 around 55 million square feet (sq ft) of retail space will be ready in Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Besides, between 2010 and 2012, the organised retail real estate stock will grow from the existing 41 million sq ft to 95 million sq ft.
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Driven by the growth of organised retail coupled with changing consumer habits, food retail sector in India is set to be more than double to US$ 150 billion by 2025, according to a report by KPMG. ROLE OF FDI IN RETAIL Unorganised retail in India accounts for well over 90% i.e. around 94% of India‟s retail sector whereas only 6% of the sector is organised. Though India is the second largest producer of fruits and vegetables in the world, at 180 million metric tonnes
It remains under invested in logistics
It has only 5386 standalone cold storages with a total capacity of 23.6 million metric tonnes (Source: Department of industrial policy and control(DIPP)) i.e. lack of storage facilities especially for perishable goods like fruits and vegetables
It lacks an integrated cold chain infrastructure system
Post harvest losses of farmers are at over 1 lakh crore a year (Source: DIPP)
About 30% of food is wasted through the supply chain due to poor harvesting techniques
It has inadequate storage and transport facilities
The farmers are exploited by the middlemen/intermediaries who dominate the traditional supply chain system
The demand is more than the supply even though India is the 2 nd largest producer which in turn reveals the bad state of our supply chain management system in place
All these have given rise to increase in food prices i.e. food inflation levels are spiralling out of control. The issue of FDI in retail is being looked at favourably as one of the measures to control this food inflation. The government did allow 100% FDI in cold chains from 2010 but they will take off only when organised retail takes off.
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Bharti Walmart collects the farm produce directly from the farmers and pays a premium to them over the mandi price. Now there is just one intermediary between the farmer and the customer i.e. the organised retail store Bharti Walmart thus benefiting the farmers and customers. Farmers are assured of a definite cash flow and they can produce crops that are good for them. Also customers are benefited as intermediaries are reduced resulting in decrease in selling price as it brings in high level of transparency in pricing. Also there will be no wastage of goods as the retailers will source the required quantity from the farmers with respect to the demand in the market. This is possible only when organised retail stores come up in India which is possible if FDI in retail sector is allowed. Now let‟s look at the pros and cons of FDI in Retail in India: PROS :
Facilitate the entry of strategic investors who will bring their expertise and understanding of areas like logistics, inventory management, warehousing, coldchain management and waste management
It will create a robust supply chain management system as retails chains will procure goods directly from the
farmer thereby reducing the number of
intermediaries or handling points and thus benefiting both the farmer and the consumer
Boost the agro processing food industry and agricultural productivity through the use of the best global scientific practises and the organised retail in India
Can help in closing the demand-supply gap as well as can aggregate demand through warehouses and distribution centres by working closely with farmers and reducing the number of middlemen
Huge opportunity for suppliers (e.g. farmers) to work closely with retailers to produce as per demand which will ensure stable and consistent supply of commodities
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CONS :
Small retailers may be marginalised. The retail sector is highly unorganised i.e. 94%. This is due to the fact that only 15-20 % of the population is employed with the rest being self-employed and most of the self employment is generated in the retail sector. For example, owners of kirana shops, pan/cigarette shops, convenience stores etc
Large retailers could form a union and control the prices i.e. cartelisation which may not be good for the consumer
This move may cater only to large cities and we may not see stores outside large cities
CHALLENGES:
Availability of space for large retailers to enter the crowded city market
Presence of number of such stores which may not be in close proximity of every consumer. So consumers will have to make an effort to reach them due to infrastructure and road connectivity/traffic issues in large metros/cities
Provision of extra services such as free home delivery, monthly khata/budget and personalised approach of kirana shops
WAY AHEAD: FDI in retail should be allowed but this should be executed in a phased manner to benefit and improve the growth of the organised and unorganised retail sector as FDI will bring in investments in technology, infrastructure, cold storage, manufacturing, processing and distribution facilities which will boost the agricultural industry and the Indian economy along with keeping the interest of both the modern retailers and the marginal retailers. Thus it‟s a win-win situation for all. For example, successful execution of FDI in retail in phased manner in China which dominates global trade through exports and large scale FDI investments where marginal retailers still hold a majority share.
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RETAIL – INVESTMENT TRENDS Foreign direct investment (FDI) inflows between April 2000 and December 2010, in single-brand retail trading, stood at US$ 66.69 million, according to the Department of Industrial Policy and Promotion (DIPP).
Singapore-based CapitaMalls Asia, which develops, owns and manages malls across Asia, has pledged US$ 400 million to its growth in India up till 2014. Mr Kevin Chee, CEO and Country Head of CapitaMalls Asia, has said that apart from funding the two malls that are operational now, this money would be used to develop seven more malls in India.
Reliance Retail will enter the cash and carry market with "Reliance Market" in Ahmedabad; the first one to be opened by August 2011.
Ujala fabric whitener maker Jyothy Laboratories has bought Henkel AG's 50. 97 per cent stake in its Indian subsidiary for US$ 137.02 million, including debt and preference shares, the two companies revealed. The deal includes Henkel's entire portfolio that includes Henko and Chek detergents, Pril dish cleaners and Fa deodorant, and rights to the multinational's future launches.
With the launch of its first 'Arvind Experience Store' in Gujarat at Vadodara, denim major Arvind Ltd. is looking at 100 stores by the end of the financial year 2011-12. The store in Vadodara is the company's eighth in the country after seven stores in Andhra Pradesh.
Quick food service restaurant chain Subway will set up 45 outlets across the country by 2011-12 entailing an investment of around US$ 9 million. The company has now 205 outlets in India and plans to take its count to 250 by the end of 2011-12.
Max Hypermarkets, the food retailing chain of the Dubai-based Landmark Group is investing US$ 122.14 million for its store expansion business across 30 cities in India.
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RETAIL - GOVERNMENT INITIATIVES India will announce new rules for foreign investment in retail by April 2012, paving the way for companies such as Wal-Mart Stores and Carrefour to open stores, according to Junior Trade Minister Jyotiraditya Scindia. A government panel has issued a report that recommends easing a law that prohibits non-Indian companies from operating multibrand outlets. Allowing foreign investment in multi-brand retail may help moderate food prices, said Kaushik Basu, chief economic adviser in the finance ministry, who sits on the panel. India currently allows 51 per cent FDI in single-brand retail and 100 per cent in wholesale cash-and-carry operations. In a landmark decision, the government has eased norms for investments by foreign companies that are present in India through a joint venture (JV) or a technical collaboration. Now, the foreign company will not have to seek a no-objection certificate (NOC) from the Indian partner for investing in the sector where the joint venture operates. The government has also relaxed norms for downstream investments and convertible instruments, giving foreign companies more powers. The changes are part of the third revision of the Consolidated FDI Policy. RETAIL – ROAD AHEAD There is a huge untapped opportunity in the retail sector, thus having immense scope for new entrants, driving large investments into the country. A good talent pool, huge markets and availability of raw materials at comparatively cheaper costs are expected to make India lead one of the world‟s best retail economies by 2042. The industry is also slated to be a major employment generator in future.
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Coffee Industry INTRODUCTION Coffee is one of the most popular beverages in the world. The coffee bean comes from an evergreen tree grown in the narrow subtropical belt around the world. The history of coffee begins in Ethiopia (Abyssinia) where coffee plants were discovered growing wild. According to ancient writings, the Arabs brewed coffee nearly one thousand years ago. The Venetians were the first to import the beans and the French first took coffee plants to the Americas. The three major growing regions are Latin America, Africa and Indonesia. Coffee is also grown in Hawaii, India and in Southeast Asia.
COFFEE IN INDIA The beverage industry in India has gained importance in the last few years. The beverage retail has become a fashionable concept today. A significant change in this industry in particular has been the growth of coffee industry. India had been traditionally tea drinking country for ages. Recently, a new mode of distribution for coffee has emerged in form of coffee chains. The coffee consumption by Indians has increased in the last 4 to 5 years. The coffee demand was 169 MT in 1990-91 has increased to 306 MT in 2003-04 and had increased to 405 MT in 2010. Traditionally coffee in India was restricted to the south and that too, predominantly in people‟s home. The main reason responsible for this proliferation of cafes is the increased spending power among the youths apart from other reasons. The size of organized coffee retailing is $185 million.
By the turn of the 20th century, the face of the Indian retailing industry had changed significantly. Earlier this was largely dominated by unorganized sector but the entry of organized sectors bought significant changes in this industry. The coffee drinking revolution has had its biggest boost due to opening of thousands of coffee parlours like Barista, Café Coffee Day, Qwicky‟s among others in the country. These bought prominent changes in the eating habits of Indian consumers. In India, Café Coffee Day opened its first outlet in 1996 at Bangalore which is a chain from amalgamated coffee. Team Retallions, JBIMS
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Soon Qwiky‟s started in Chennai and Barista opened its first outlet in Delhi. Barista coffee parlour established in 1999 introduced a new concept to India-coffee drinking. These chains have initiated a new coffee culture in India. With coffee becoming so popular in India, Starbucks, the world leader in the coffee retailing market and counted as one of the strongest brands in the world is also planning to enter the Indian market very soon. Starbucks C.E.O Howard Schultz guessed that American consumers would enjoy drinking fresh, gourmet coffee if exposed to it in the right atmosphere. He also recognized that consumers were beginning to place higher value on customer service and were also seeking a third place between work and home. Inspired by the espresso bars in Milan, Italy, Howard Schultz wanted to introduce the coffee bar culture to America. So, Starbucks was founded in the early 1970s, and opened its first location in Seattle‟s Pike Place market in 1971. Starbucks, with about 17000 stores worldwide, has the long-term expansion goal to have 30,000 cafes worldwide. It especially aims to enter the Russia, India and Brazil markets. Starbucks has plans of expanding its operations in India as India over the past few years has become a favorable destination for a lot of foreign companies, for exampleFast food joints like McDonald‟s and Pizza-Hut among others have entered the Indian market In India, People go to the coffee parlours to just sit over a cup of well-brewed coffee, chill out and chat for hours at length with friends or simply to be with oneself in such a relaxed atmosphere. Even working people meet to discuss work in the peaceful environment. These chains offer a wide variety of things. These coffee chains offer the "total experience" which consists of right coffee, food and ambience with Wi-fis and jukeboxes for customers. For example, Barista offers latte to cappuccino, flavored coffee and even desserts. It offers games and television for the customers. A single Barista outlet claims to get around 200-300 customers everyday. It is open for 14 hours a day from 9.00 am to 11.00 pm. Barista has even set up outlets in Sri Lanka and UAE and has ambitious plans to open 2000 outlets in different countries by 2015.When anyone enter a typical Barista outlet, one notices its design and ambience where a warm orange colour dominates. It has cedar wood furniture, round tables with wooden Team Retallions, JBIMS
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seat chairs and recently it has introduced lounges which enable one to sit comfortably for hours.
Inside there are posters which are witty and interesting. For example one of the most common one which is found in all outlets is. “In the old days to get a cup of coffee you had to smuggle beans from Arabia at the risk of death. Now all you need to settle for is self service.” The good quality coffee, the great ambience with the aroma of fresh coffee is the positive points of Barista. Barista follows a typically Italian model which believes in providing a world class experience and very specialized coffees. The idea is to provide an ambience where anyone could walk in and feel comfortable. These coffee chains work because they provide an ambience where people can enjoy and have a nice time. Some branches of Barista have bookstores in them. Ravi Deol MD of Barista says‟ we don‟t sell coffee, we sell an experience”. As is evident from the fact that People like to go there to just sit and chat for hours with no interference. People spend Rs.50-100 for a cup of coffee at Barista because it is not the coffee that we pay for but the Barista Experience i.e. we are willing to pay so much to be a part of the experience. Coffee has now become a lifestyle drink. There was a time when everyone liked tea and now almost everyone is drinking coffee because it is cool to be Team Retallions, JBIMS
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seen drinking coffee in these parlours. “A café is all about recharging and relaxing the customer” says Brotin Banerjee, Barista chief of marketing and strategy “That‟s where value additions such as music and books come in”. The people visiting these places are just everybody. Some youngsters feel a good cup of coffee inspires good conversation while some of them feel that it was a nice meeting joint and place to hang out. Most of them are teens, even working professionals to old couples visit these coffee parlour. Barista coffee company ltd has been recently listed among the top 100 brands in India by “Super Brands” India. It will be featured as one of the strongest Indian Brands in the “Super Brands” volume to be printed in Italy.
1.2 Coffee consumption increases despite economic meltdown Consumption of coffee across the world has increased despite the global economic meltdown. The International Coffee Organisation (ICO) made an upward revision for consumption for the year 2008, indicating continued dynamism in the annual rate of increase. The ICO estimated that the global consumption during 2008 was 130 million bags (60-kg per bag). During the period between 2000 and 2008, the world's annual consumption increased at an average rate of 2.4%. In 2009, there has not been any indication so far to suggest that the world economic crisis has had a significant impact Team Retallions, JBIMS
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on consumption, Nestor Osorio, executive director of ICO, said in a statement.This assessment is reinforced by the performance of exports in July 2009, which stood at 7.8 million bags, bringing the cumulative total for the first ten months of the coffee year (October 2008 - July 2009) to 82.3 million bags compared to 80.2 million bags for the same period in 2007-08, an increase of 2.6%. Brazil, the largest coffee producing country, exported 26.32 million bags during the first 10 months of the current year, up from 22.77 million bags exported in the same period a year ago. Coffee exports of Vietnam, the second largest producer in the world, increased to 15.7 million bags from 14 million bags.
KEY PLAYERS CCD: Taking pride in 130 years of coffee growing heritage, CCD is the first chain to enter retail by incorporating Amalgamated Bean Coffee Trading Company Ltd (ABCTCL) in the year 1994. Pioneering the café concept in India in 1996 by opening its first café at Brigade Road in Bengaluru, ABCTCL today is one of Asia‟s top 500 companies and aims to be among the top three coffee retailing companies in the world.
Barista: Barista traces its roots back to the old coffee houses in Italy – the hotbeds of poetry, love, music, writing, revolution and of course, fine coffee. Offering alternative options and pleasures of coffee to millions, the chain is also revolutionising the coffee drinking experience in most Indian cities. Barista owns more than 200 stores currently in India and has cafes in other countries as well. Costa Coffee: As part of its overseas expansion, British coffee retail chain Costa Coffee launched its outlet in New Delhi, becoming the first international coffee chain to start operations in India in September 2005. It has also been expanding its business through exclusive franchisee partnership with Devyani International and expanding aggressively to tap this potential market.
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Coffee World: Coffee World is a premium specialty coffee house that offers a comprehensive range of hot, iced and ice blended beverages. The brand is known for its premium quality products and its signature „Frappes‟ – ice blended coffees.
CBTL: The Coffee Bean & Tea Leaf is a California-based coffee chain, owned and operated by International Coffee & Tea, LLC and has opened its first store in India in the last quarter of 2007 opening stores in Rajiv Gandhi International Airport, Hyderabad followed by a store in Select Citywalk mall, New Delhi in March 2008.
Besides, retail players like Reliance Retail and Shoppers Stop are also retailing coffee with their multi-products offering outlets like Reliance TimeOut and Desi Café respectively.
PRODUCT OFFERINGS: In keeping with the global coffee culture, purveyors in India have been offering the products in a wide range of variants that include hot coffee, cold coffee, coffee add ons, powder coffee etc. The chains have also been adopting state-of-the-art store formats and some even offer wi-fi access to their customers. As a step forward achievement, CCD has incorporated formats like music cafés, book cafés, highway cafés, lounge cafés, garden cafés and cyber cafés targeting a diversified customer profile. PRIME CUSTOMERS: These cafés are increasingly filling in a sorely felt gap by becoming a meeting place for people in the age group of 15-29. India, with its huge young population flooded with disposable income, offers an exciting and ideal market to coffee retailers. According to researches, teen-agers form 25 per cent of the customer profile while 38 per cent of them are between 20 and 24 years and another 23 per cent belong to the age group of 25-29 years. Students and young professionals comprise around 72 per cent of the customers.
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As a matter of fact, these chains, nowadays, have been opening small-sized coffee parlours to provide a neighbourhood coffee experience and lure more people. Despite their best efforts, the question still haunting many of these players is how long will they be able to sustain these high cost, high turnover business models? How long before they are able to turn a tea drinking nation into coffee lovers? The marketing environment consists of Task and Broad environment. 1.) Broad Environment: The broad environment consists of various components Vis Demographic, socio-cultural, economic, political, natural, technological, and legal and Government policies. 2.) Task environment: The task environment includes immediate actors involved in producing, distributing and promoting the offerings. It consists of supplier groups, distributors, public, labour, intermediaries, and customers.
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Demographic Factors:
As in the case in many other markets, the Cafe Coffee Day industry is being driven to a large extent by the given factors: 1) Age mix: Consumers with age varying from anywhere between 15-60 years are responsible for sales in most of the stores. So we found that elderly consumers are more health conscious and young crowd is more calories conscious and the preferences vary. 2) Income: Consumers in the higher income group tend to spend more in the product than what the middle income groups do. As the product is not a necessity but a want, consumers in middle income group use the product occasionally. 3) Urban and Rural: There is almost no consumption in rural areas and under progress in semi-urban areas but fully operational in urban areas, as the product is not very cheap and out of affordability for major segment of the population in semi urban and rural areas. 4) Occupation: Working executives have a higher purchase potential and also they tend to hold meetings over coffee and students need places to hang out and spend quality time. So the product is more famous in these segments. Industry PEST Analysis Political: The relationship and the trade practices between the coffee producing nations and where the retail chain is operating should be good so that it propels the market growth in the operation country and in turn benefits both the countries. Also land acquisition is an important factor for setting up the store which is influenced by many political factors. Also there are many state and local government norms and legal procedures which need to be satisfied. Economic:
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India‟s GDP and per capita income is on the rise. It clearly depicts the improved and increased purchasing power of the people as disposable income has increased. Also urbanization is expanding which will fuel the economic growth story.
There are also issues of concern like inflation and recession which will have an impact on the commodity prices leading to an increase in price which in turn affects the consumer spending power, may lead to slow economic growth, job loss, scarce employment opportunities etc
Socio-cultural:
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The taste and preferences are influenced because of different social and cultural factors. Some consumers may prefer tea over coffee and vegetarian food over nonvegetarian food. Some may prefer to have coffee as a means to socialize among friends and relatives whereas some may not have leisure to have coffee at the physical stores
All these customer needs and requirements have to be satisfied by the company. Technological: Technological developments in the industry have focused on the fresh coffee segment ignoring the soluble coffee segment. However, fresh coffee developments have failed to address significant issues in both milk-based and filter varieties. Milk-based Coffee Equipment/machines must be cleaned regularly to maintain the output quality and standard which otherwise may lead to significant amount of substandard coffee being sold at a premium. Filter-based Coffee Equipment Filter coffee must be discarded approximately every 30 minutes which otherwise will lead to inefficiencies if not done properly. In busy restaurant environments, this policy is often forgotten which leads to substantial substandard coffee being served to customers. Also technology can be used to improve the operational efficiencies of the stores.
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OPPORTUNITIES FOR THE COMPANY IN INDUSTRY:
•
MARKET DEMAND: Market demand has a direct impact on the sales; moreover this demand varies with the consumer for various requirements, as per the taste and flavour preferences. Coffee acts as an energizer and stress reliever for some people, as the stress level in an average human being is rising, demand for coffee may rise too.
•
CONSUMER: Consumer is the king for every producer. So Customer Relationship Management, consumer satisfaction, continuous supply of the product, flooding the stores with new products and creating a brand impact on every consumer are desirable. The company should tend to entertain the tastes of all consumers by introducing new products; this could be achieved by using feedbacks and suggestions.
•
INDUSTRY: Repositioning the company‟s image and reframing the business strategies to suit the changing consumer needs. Diversification of the business into related and unrelated products to tap the potential market. For e.g. as Cafe Coffee Day has already entered into selling food items such as sandwiches, rolls, pastries, mineral water etc and it could introduce more products.
•
SUPPLIER RELATED FACTORS: E-procurement of the raw material, reducing the procurement time, relationship management and getting raw material at reasonable rates.
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MICROENVIRONMENT IN THE INDUSTRY:
Microenvironment deals with all the factors internal to the coffee industry. They are suppliers, distributors, public, labour, intermediaries and consumer. Consumers: The growing concern among consumers that they must be provided with products that have a nutritional value and are not harmful to health. Consumers want product that fits their particular tastes, often made with natural ingredients, fit the bill. Many consumers have become more wary of using products containing harsh chemicals used for colouring. Barista does basic sound science, selecting the best coffee beans, applying rigorous Standards of product policy to meet consumer needs.
Distributors: The major outlets for Barista products are company outlets itself. Stores exist in major cities and multiple stores in most big locations, malls and in areas where the residents have a good purchasing power. An online menu is available, so consumers could even decide upon their choices by knowing about the nutritional contents.
Intermediaries: Barista has a strategic
alliance with Tata Coffee to source its drinks. Also it has done alliance with Taj to take care of all its food products and maintain high quality requirements.
Public and Share holders: Creating brand awareness, brand impact and brand loyalty are the major objectives of Barista. It enjoys the kind of success that rewards its shareholders.
Employees: Barista provides its employees with clothes and caps, flexible timings and proper trainings as to how to behave with costumers, regarding the
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accounts and billings and how to help the consumers to the fullest. Barista will not use any form of forced, compulsory or child labour.
Media: Barista does not promote itself much on media, but has a plan to spend 2cr in one year to advertise in newspapers and magazines. 5lacs on tent cards, danglers and posters and through internet via blogs and cafe coffee day community.
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Barista Lavazza BACKGROUND Barista was promoted by the New Delhi based Java Coffee Company. It is the fastest growing retailing chain in India. The brand takes its name from the Italian term for a coffee brew master. The first Barista outlet was started in March 2000 in New Delhi. Barista Lavazza is noted as a pioneer of Indian café culture. The Barista Lavazza chain of espresso bars delivers a truly Italian coffee experience in warm, friendly and relaxed environments. It aims to provide a comfortable place for people to unwind over interesting conversations and a cup of coffee. In the main, Barista Lavazza clientele comprises young adults exposed to global lifestyles and appreciative of the authentic flavours and taste of coffee. Currently over 230 Barista Lavazza Espresso Bars and Barista Crème Lavazza's dot 30 cities in India and in several locations across Sri Lanka, Bangladesh, Oman and the UAE. Barista Coffee Company Limited is owned by Lavazza, Italy's largest coffee company. The brand traces its origins back to 1895, when Luigi Lavazza purchased a little grocery store, Paissa Olivero, in the old commercial section of Turin for 26,000 Italian Lire, about US$ 20 at current prices. In the early 1900's, he invented the concept of the blend – a complex art of mixing coffee of different origins to obtain a distinctive taste and harmonious flavour in the cup. Before the turn of the century, the name Lavazza evolved into an international powerhouse and became the unofficial ambassador of Italy. Today, it is a legendary name recognized across the world as the symbol of Italian espresso. Back in Italy itself it enjoys an impressive 47% share by value in the Italian retail market (Source: Nielsen). It operates in over 90 countries in the home- and awayfrom home sectors comprising foodservice, vending and cafes. Earlier Coffee was made with high quality Arabic beans and Barista‟s from Italy were invited to create blends. Due to strategic alliance with Tata Coffee in 2001, coffee beans are provided by Tata coffee as well. It has access to top grade raw material, and even infusion of capital from TATA which has enabled extensive expansion. it has completed the process of integration with Italy- based player 'Lavazza'. After the completion of integration process, all the Barista Espresso and Barista Crème outlets across India will Team Retallions, JBIMS
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be known as Barista Lavazza and Barista Crème Lavazza respectively, the company said in a statement In April 2007, the Italian company has bought Barista and since then, Barista brand has adapted itself to several nuances of the Lavazza brand identity in various stages, it added. Lavazza is the sixth largest coffee roaster in the world and has a 46.5 per cent share in the Italian retail market and the company has recorded sales worth USD 1.6 billion in 2008. Barista even offers branded merchandise like caps, T-shirts, coffee mugs and other coffee paraphernalia. Their menus consist of traditional favorites like cappuccino, espresso, iced mocha and other varieties of coffee and tea, juices and other beverages, sandwiches etc and variety of desserts, breads like Paninis, ciabattas and French baguettes Barista coffee was establishes with the aim of identifying growth opportunities in the coffee business. Increasing disposable incomes and global trends in coffee indicate immense growth potential in one particular segment. More significantly, they believe they have been quick to spot a latent need waiting to be tapped. Coffee lovers seek a complete experience. One that combines intelligent positioning with the right product mix and carefully designed cafés. In other words, customers seek an “experiential lifestyle brand”.
ACHIEVEMENTS Barista Lavazza's leadership position can be attributed to a remarkable expertise in specialty coffee. Added to sound technical competence, an evolving retail experience, a growing distribution network and top-end maintenance support and it's easy to see why the brand has retained its numero uno position. Recognition was swift in coming. BBC, The Times of India and Business Standard all named it the Brand of the Year. Barista Lavazza also received the TOPS Award for Specialty Coffee Excellence by the Specialty Coffee Association of America (SCAA) which recognizes specialty coffee retailers who differentiate themselves through better business practices. It was ranked by the HT Food Guide as the Best Place to Have Coffee and was honored with the Café of the Year accolade by The Times Group – in the Times Food Guide. For three successive years, Barista Lavazza was also voted a Superbrand while Images Retail
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Forum, 2007/08 awarded it the Most Admired Retailer of the Year –Catering Services. It was also included in the list of 100 things that changed India.
INNOVATION Research Research is the backbone of Barista‟s menu refreshment process. We leverage Consumer Trends to launch products with higher acceptance and thus launch Guest Centric Product Development. Their R&D and Product teams spend 4 hours each month at stores / behind the Counter & Product ideation is thus based on observation and guest feedback. They track F&B studies across the world & understanding Indian trends and fitment. Our research helps us to identify key global trends & refresh our product line accordingly.
Innovation Barista Lavazza is a 3 dimensional brand experience. Their focus has always been to provide a differentiated offering. We do this by using a guest touch point model that focus on the product innovation, refreshing ambience and warm service. At Barista Lavazza, they launch a new line of food and beverage - every quarter. The launches are based on international trends, guest feedback and internal research. We will continue to innovate along these lines and launch products that delight our guests. The target audience has a global lifestyle and a truly international outlook. Their guests appreciate the truly international line of beverages served at Barista Lavazza and warm environment. Their focus will be on innovation and continuously providing guest relevant experiences within the Barista Lavazza store.
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MARKETING STRATEGY OF BARISTA
Segmentation: Barista follows the psychographic lifestyle segmentation strategy which considers lifestyle, age group and the income. It has positioned itself as a lifestyle brand, with concentrated positioning aiming at young students, professionals and working couples. The target age is about 15-25 years. The premium segment is the domain of the Barista chain. Now Barista is changing its positioning from a premium retail outlet to that of a hangout or a meeting place frequented by young people. Company officials say this is because the nature of Barista's clientele ranges from young college-goers to young professionals Barista is not only satisfying the coffee need of the customers but what came across during our study was a major reason why people go to Barista, apart from other reasons, was lifestyle. Differentiation: In the case of coffee parlors, the differentiators identified on the basis of the study are as follows
Ambience and Décor
Quality of staff Service
Food
Presentation
Cleanliness
Price
Wide product range
Quality of products
Barista opted for the differentiation strategy to gain a competitive advantage over its competitors. The most important attribute of Barista is ambience. This is the actual uniqueness in a broad market consisting of various coffee players. Barista did realize that the consumers were not just looking for a place to have a cup of coffee but were looking for a place to hang around and relax. Thus, they decided to create a place where the consumers would feel at home. Team Retallions, JBIMS
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The ambience inside is comforting and casual which is one of the major reason of its success. They created a coffee bar with a typical Italian environment where people could get together over a cup of coffee and enjoy themselves in a comfortable and relaxing environment. It offers customers a very interactive social environment by providing newspapers, magazines, a guitar, games and television on, music playing as well as message boards to pen down your thoughts. Some stores also have an outlet of Corner Bookstore (they joined hands in November 2003) which sells all varieties of books. Moreover, most of the people feel that its ambience and aroma of coffee which is a major driving force. It has games like scrabble, pictionary etc and books available to keep one engaged. People can also play guitar which is kept against the corner wall. It also has magazines and newspaper which can be read while sitting there and a take away newspaper which is quite popular. The strategy of Barista coffee parlour is shown in the figure below.
Broad Target
Narrow Target
Cost leadership
Cost focus
Differentiation
Focused Differentiation
Narrow Target
They have promoted themselves as a fine café and not as a coffee pub that Café Coffee Day is or Qwiky's did. Thus, the experience of having a coffee at a Barista is definitely different than having it at any other coffee parlor.
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Positioning: Consumer Profile: According to research, over 65% of Barista‟s customers are in the 15- 30 age- group. The majority of these are students and young urban professionals.
Barista positions itself as a brand for anyone who loves coffee. Their products, services and outlets are more like the traditional European cafés, where people would meet for the love of coffee, and for an intellectual appealing time. They position their outlets as a place “where the world meets”, and they look to appeal to anyone in the 14- 60 age group that loves good coffee and looks for a nice quiet time.
Barista is a place where the world meets. People come to Barista to have a meet or to relax. A lot of them actually come alone as well. This is actually one of those places with people coming in alone because they are comfortable with themselves. It is a place where people are meeting each other in an environment, which is fulfilling social and intellectual needs.
Targeting: Barista is mostly targeting the elite section of the society. In particular it has targeted the corporate sector and built a image as that of a place for formal meetings. It provides a wi-fi support in all its cafes, further provides a testimony of their target audience. They are targeting young and middle level managers.
Marketing Tactics of Barista:
Product: Though the main product is coffee, it is available in number of varieties. Also other snacks and desserts are available
Barista goes beyond providing coffee at the bars, offering a more complete experience by combining the coffee drinking experience with books, magazines and merchandise. On offer besides a large variety of premium coffee, is a selective range of sandwiches Team Retallions, JBIMS
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and desserts. The product offerings of Barista include a diverse range food and beverages with coffee remaining the main focus. To begin with, there's the Barista House Blend – Barista‟s signature blend of coffee and select international coffees from some of the most noted coffee growing regions of the world. Followed by an extensive list of steaming hot espressos, cappuccinos and lattes made from the finest Arabica beans. During the first four years Barista focused on two categories of foods: sandwiches and desserts. Today the list includes more items. In addition to this, Barista has been evolving its menu, keeping pace with the changing consumer needs. Barista also launched one of the most affordable cold coffees across India, Iced Latte. Barista maintains that the rationale behind introducing more food items in its menu is that while providing the „coffee experience‟ remains its motto, to improve the experience of food is also an on-going affair. The special focus on Indian food is because, typically, a consumer who walks into a Barista spends 30 to 45 minutes and often the consumer would like to have something along with her coffee. Simultaneously, it continues to sustain the beverage experience through promotions, offerings to include non-coffee lovers through ice tea, tea, smoothies et cetera. Barista Lavazza serves an indulgent range of coffees straight from its international offerings: hot coffees with exciting flavors‟ such as the Hazelnut Mocha and the bestselling Cappuccino Cookie 'n' Cream, signature cold coffees such as Barista Blast, Swiss Mocha Frappe and Barista Cookie Crunch plus perennial favorites such as Cappuccinos, Mochas and Lattes in a variety of serve sizes. Besides coffee, the menu also boasts refreshing mock tails and 100% natural ice teas, freshly brewed and flavored with natural fruit extracts. The internationally acclaimed I Piaceri del Caffè – a fine collection of Lavazza designer Italian espressos – launched in 2008 extended the Barista Lavazza franchise. Coffee and conversations often lead to food, which is why Barista Lavazza has a variety of eating options as well. The increasing number of health and fitness addicts prompted Barista Lavazza to launch natural foods and salads, along with fresh fruit smoothies and thirst busters. Its other health and low-calorie beverages and foods Team Retallions, JBIMS
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include a range of sugar-free and low-fat coffees smoothies, low-fat muffins and sandwiches, with speciality multi-grain breads and healthy fillings. The business and expatriate crowd is addressed in the form of healthy breakfast options branded, Quick Bites. The teens are enticed with sinful indulgences like the ever popular Dark Temptation and Wicked Brownie along with a delectable choice of sandwiches and a host of vegetarian and non-vegetarian snacks. Barista Lavazza also introduces special seasonal and occasional menus featuring innovative products like coffee cocktails with ground chocolate, cappuccinos with toasted almonds and hazelnut lattes. Barista Crème Lavazza – Barista Lavazza's premium lounge format and the next level of luxury for the coffee connoisseur – also has a fresh deli station with an elaborate food menu with wholesome breakfast options, international club sandwiches, healthy crisp salads, delicious pizzas, lasagnas and pastas. Those with a sweet tooth can indulge themselves in the most alluring desserts such as the sinfully delicious Tall Chocolate Cake and Blueberry Cheese Cake. Barista Lavazza also has a wide range of coffee merchandise like signature coffee blend and plungers, coffee mugs, quirky steel coffee coasters, premium sippers so guests can take home the Barista Lavazza experience. Pricing: Barista has a „Skim Pricing Policy‟. They began with a higher price, and skimmed the cream for the market. With the sudden spurt of growth in number of outlets, came the benefits of economies of scale. Because of this, they have been able to gradually lower their prices, and appeal to different segments of their target market. Currently, their prices are the lowest they have ever been, and they can competitively match their prices against Café Coffee Day‟s prices. This gradual price reduction meant that Barista could maintain its profit- maximization policy until it could earn large cost savings because of the benefits of high volume. The main factors that affect their pricing are their cost of goods sold. The costs are quite high because imports a majority of its products and product- sources.
The pricing of Barista beverages is quite high as unique brands often command higher prices. It is much highly priced than its competitors. Team Retallions, JBIMS
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Place Barista looks to cater to their target market with strategically located outlets. Their outlets are generally located at High Street/ Family Entertainment Centers. Considering their generic appeal, there are Barista outlets in and around Malls, Cinemas, Colleges, and Offices etc. this endorses their brand image of a café that appeals to coffee lovers of all ages.
Barista has opened its outlets in various offices, i.e. HSBC, GE. Barista has also tied up with BPCL- Bharat Petroleum Corporation limited to open coffee kiosks in its retailing outlets. Barista bar chain, has tied up with Taj group of Hotels for setting up exclusive Barista espresso bars at the Taj hotels in metro cities recently. The company also plans to have a new concept bar called “pavement bar” at the Taj poolside which would be a 24 hrs coffee shop. It is also opening outlets at Planet-M and PVR Cinema. Barista is seeking to expand through the franchisee route model and plans to enter B-class towns in the country and middle-class localities in the metros such as North and East Delhi. In the past year Barista has expanded through tie-ups with major retail chains and setting up outlets in their premises. With ABN Amro, Barista has introduced a concept called Bancafé - a café in the bank premises. By 2010-2011, Barista plans to have over 300 outlets across the country up from 230 at present
Promotions: Barista currently carries out mass promotion campaigns. This is mainly in the form of promotions in the Press, TV and Radio Medias. At present, they do not rely heavily on advertising, but rely more on sponsorships and strategic alliances with other corporations. Barista also takes part in various sales promotion activities to help increase sales at their outlets. a) Sponsorships: Barista sponsors various events and festivals, which provides them valuable promotion directed at strategic markets. The sponsorships are mainly in kind, although major events are sponsored in cash also. b) Collaborations: Team Retallions, JBIMS
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Barista has entered into special collaborations and alliances with various partners for co- marketing brands. For example, Barista entered into a deal with Leo Mattel toys to provide the popular board game Scrabble at every Barista outlet across the country. This is an ideal alliance for both the organizations, because it provides Leo Mattel with an important avenue for promoting their product, and it provides Barista‟s customers an added attraction for spending more time at Barista outlets. Barista has also entered into partnerships with various movies, for promotions through Barista, and recently, they tied up with Star World for its “AbsolutelyEverybody” campaign. d) Sales Promotion: Barista uses a special “Barista Coffee Card” for its sales promotion activities. The Barista Coffee Card entitles you to one complimentary hot beverage when you are done sipping seven. It is available to all Barista coffee regulars. No membership fees, no references required. Fill out the card and you are a member. As a Coffee Card holder, you earn one stamp on the card every time you purchase a beverage. Simply present the card to the cashier when you place your order at any of their outlets. Once you have collected seven stamps, you can hand over the card to receive your complimentary hot beverage. Barista hopes this card can help drive sales growth, and increase customer retention.
People: The people at Barista are characteristically trained to be Pleasant, Polite and Positive. They ensure you have a quiet, uninterrupted visit and provide an escape from the daily pressures of life. Their uniforms are in sober shades of brown and orange, and contribute to the overall laid-back feeling of the café.
Process: The order and delivery process at Barista is based on table service. Also there are options available for take away of your coffee or food.
Physical Evidence: Team Retallions, JBIMS
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a) Logo, Colors, Images: Barista, since the beginning has looked to use colors in its café interiors, logos and images; to project a “warm, earth glow, synonymous with coffee”. Barista uses shades of Orange & Brown to good effect to promote its “laid- back” atmosphere. The logo is a combination of Brown, Orange and Light Yellow; with the word “Barista” written in an upward curve, and the word “Coffee” underneath. A simple logo that perfectly expresses Barista‟s brand image: A traditional café for coffee lovers.
b) Décor and Architecture Barista‟s internal décor and architecture expresses the simplicity you would normally associate with traditional cafés. The furniture is made of light shades of wood, and there are comfortable sofas in bigger cafés. The walls are shades of orange, with various photographs of the love for coffee spread around each outlet.
c) Literature: The literature provided by Barista is indicative of its brand image. The menus, posters, pamphlets are all traditionally designed, with a classic and simple look. One aspect of particular note is their magazine, which is privately circulated in the cafés. The magazine encourages customers write, draw, make etc anything creative; and this is then published in the magazine. The magazine not only provides an avenue for advertising, but also an opportunity for Barista to express its brand image.
ANALYSING BRAND BARISTA
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Situational Analysis
Footcone Bending Model Analyzing the competition we realize that CCD is a low involvement and emotional. Barista on the other hand is rational and high involvement. Mocha which has established itself as a niche player, the involvement is higher. Qwicky‟s and Georgia coffee are low involvement and rational purchase decisions. Footcone Bending Model helps us in deciding the media that will attract our target audience.
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Perceptual Mapping
We realize that people perceive CCD as a low price café which has a causal ambience. Also people like the quality of products that CCD has to offer. Barista is considered as an expensive brand and it has a formal ambience. However quality perception of barista products is lower than CCD. Mocha is perceived to be a super expensive brand which has a casual ambience and its products are considered to be of lower quality. Perceptual mapping can point out if there are any gaps in the market and hence we can position our product accordingly.
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BRAND IDENTITY PRISM
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MERCHANDISING Barista sells various kinds of merchandise through its stores. The table details the different merchandising products.
Merchandise Tiramisu Flavors Coffee Mugs Blue Curacao Barista French Press Barista Coffee Beans
Operations Strategy used by Barista: Quality Sources: Barista has a check on the quality of its products every 14 days. Barista also incorporates TQM at its headquarters in Delhi. Since Delhi is the base for all its distribution, quality Team Retallions, JBIMS
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control measures are adopted there to avoid any poor quality products being distributed.
Location: this is a prime factor in determining the success of a retail chain. However, Barista Coffee has adopted a top down approach, wherein they first identify the cities and then decide on precise locations within its limits.
Selecting a city: Barista has devoted substantial management time and effort in zeroing in on the cities where they are now situated. The selection of the cities was based on the following criteria. ��Sizeable population of executives, students and families in SEC A & Barista category; ��High disposable income with people looking for new vistas in leisure and lifestyle oriented concepts; ��High level or organized retail activity; ��Rapid socio- economic development; ��Level of commercial importance (Industrial cities, state capitals etc.) ��Number of educational establishments and opportunities available for employment. On the basis of the above criteria, they had initially targeted cities like Delhi, Mumbai, Bangalore, Chennai and Hyderabad. Chandigarh and Ludhiana were later added due to tie- ups with „Planet M‟ and „Ebony‟ to set up store-in- stores at their outlets. They are also pursuing an equally aggressive international business expansion strategy. They have over 50 overseas locations presently under their consideration. They have already done their groundwork in terms of getting brand and name registrations in over 30 of these locations. To facilitate their global expansion, they plan to work with strategic partners, who share the same vision of expanding and promoting the brand worldwide. Currently they have opened new outlets in Sri Lanka and Dubai as a part of their international strategy. Team Retallions, JBIMS
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DISTRIBUTION OF STOCK The distribution of stock at Barista begins from the coffee beans being sent abroad for roasting. The roasting takes place in Venice, and the beans are then supplied to the main warehouse in Delhi. Stock is then distributed to the various Regional Warehouses, and then to the local Warehouses. The outlets get their stock from the Local Warehouses. Barista uses a Re-Order Level system for the distribution of their stock. Barista out sources its transportation needs from external organizations, and currently uses trucks as the preferred means of distribution.
HUMAN RESOURCES Barista‟s boom in growth has sparked of a greater need for more and more human resources. This poses a challenge for Barista to ensure that their employees all across the country are well trained and provide consistent service at every outlet.
Recruitment & Selection Barista currently opens a new outlet somewhere in the country every 10-12 days. The spurt of growth can only be successful if they have the right people working for them. The high expansion means that more staff is needed immediately at the Counter Staff and Field Staff Level. This is only possible is Barista uses the correct recruitment and selection policy
Sources of Recruitment Barista‟s main sources of recruitment are: i. Walk- ins ii. Referrals iii. Placement Agencies Recruitment & Selection Process Barista hires people for their counter staff from external sources, and follow the Team Retallions, JBIMS
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following process for recruitment: i. Collection and review of Curriculum Vitae ii. Personal interviews with H.R. Manager iii. Personal Interviews with Area Manager/ Regional Manager. Recruitment is usually done on a monthly basis, depending on the number of outlets and expansion taking place in that month. Training & Development: To insure consistent employee performance, training and development policies are very important- even more so in service sector organizations. Barista Coffee has a set, 14 days rigorous training procedure for each employee. With training modules customized to fit the professional needs of each employee. In the case of their brew masters, the training programs are drawn up and conducted by trainers who have been trained by Italian brew masters. Barista has a Training & Development policy, which basically consists of two parts, Induction Training and Refresher Training.
i. Induction Training Induction Training occurs when a new employee joins Barista. The employee is taught about the Barista culture, what it means to be a Barista employee, the sort of attitude and behavior expected from him, and product and technical training. ii. Refresher Training Refresher Training usually happens ones every two months, in the form of technical training and soft skills training. This ensures that the employees are constantly aware of what is expected from them, and their required level of performance. Employee Working Hours: Barista employees work on an average for 9 hours, and there are usually 3 shifts per day. Employee Code of Conduct: Team Retallions, JBIMS
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Barista employees are trained with regard to their code of conduct at the induction level. It is at this stage Barista tries to infuse, what it refers to as key qualities for its employees: pleasant manners, polite behavior and positive attitude. The code of conduct of each employee is supervised everyday by territory managers. Promotion Policy: Barista prefers promoting from within, rather then externally. The amount of training and development programs that go into developing an employee, they would like to harness that potential for higher posts. The current promotion policy is based purely on performance.
Performance Appraisal: Barista currently carries out performance appraisals every quarter of a year. Direct supervisors in most cases carry out these appraisals. Currently Barista doesn‟t have any other kind of appraisal programs like upward/ 360o appraisals. Barista does conduct Exit Interviews though, and uses it to improve employee retention. Employee Turnover & Retention: Barista‟s current rate of Employee Turnover is about 10 %. The company attributes this to the fact that some of the employees in the 19-22 age group, look at this job as a temporary source of income, and have no long-term commitment to Barista. To increase employee retention, Barista focuses on the following key aspects: ��Right hiring ��Right working environment �Grievance handling and redressal. Merchandsing
Analyzing Barista in Detail
SWOT ANALYSIS
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Strength:
Claim to sell the best coffee
Large Number of outlet
In house sourcing of coffee beans
Espresso-Highest selling coffee
Weakness:
Expensive coffee
Self service for the customers
Quality of food- Stale breads
Opportunity:
Large Untapped Market
Tie-ups with other companies for promotion
Threat:
Entry of Foreign players like Georgia, Starbucks etc
Large unorganized market
CONSUMER DECISION MAKING The consumer decision making model is used to understand how the consumer makes the decision to purchase coffee from the coffee parlours. The following stages take place. 1) Problem Recognition 2) Information Search 3) Alternative Evaluation Team Retallions, JBIMS
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4) Product choice 5) Outcome 6) Dissonance The following flow chart explains the process. PROBLEM RECOGNITION Consumer realizes that he wants to have a coffee outside his home.
INFORMATION SEARCH Magazines, newspaper, peer groups/friends, families
ATERNATIVE EVALUATION Café Coffee Day, Nescafe, Qwiky’s,
PRODUCT CHOICE Barista most preferred
OUTCOME People go to Barista coffee parlour and consume the product
DISSONANCE Dissonance is very high since it is a service industry
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The various stages under the consumer decision making are: Problem Recognition The need arises when the consumer realizes that he wants to have a coffee outside his home. Indian customers want to have coffee in a new and more relaxed setting as provided by these coffee parlours Information Search To find out about these parlours, search for information by inquiring about it from through magazines and newspaper. The information of the coffee parlours can be either internal i.e. by scanning our own memory banks to gather information. It is further divided in to information actively and passively acquired. The actively acquired are through word of mouth, magazines, newspaper or Internet, which took place before deciding to go the coffee parlours while on the other hand it can be external that is information obtained after making the decision to go to the coffee parlours. This information is obtained by magazines and by actually visiting the place by chance. External information can only be actively acquired. Evaluation of Alternatives The consumer compares Indian brands of coffee parlours like Barista, Café Coffee Day, Nescafe, Qwiky‟s. Product Choice Most of the people choose Barista because of its ambience and decor, quality of coffee, variety of coffee at a single spot and the staff service provided at the outlet. Outcomes People go to Barista coffee parlour and consume the product
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Dissonance Dissonance is very high since Barista is a service industry. As a result the company has to take steps to overcome dissonance which is overcome by the quality of coffee, ambience of place and personalised service provided at the outlet. In case of dissatisfaction, Barista changes the coffee or any other food item without charging anything extra for the replacement. CATEGORIES OF DECISION ALTERNATIVES Potential Alternatives Barista Café coffee day Nescafe Qwicky
Awareness Set Unawareness Set
Barista Café coffee day
Finca speciality coffee Nescafe Qwicky
Evoked Set Barista Café coffee day Nescafe
Inert Set
Inept Set
Qwicky
Passion
Specific alternatives purchased
Alternatives considered but
Barista, Café coffee day
Nescafe
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Cha bar
not purchased
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Categories of Decision Alternatives This stage is explained in detail. The potential alternatives that are considered by the consumers are Barista, café coffee day, Qwicky, Nescafe, passion, Finca speciality coffee and Cha bar. The customers considered Finca specialty coffee and Cha bar in the unawareness set and rest all were categorized under the awareness set. The awareness set is further divided into three sub categories within which the customers considered Barista, café coffee day, Nescafe in their evoked set. Further, the brand Qwicky was considered in inert set of the customers, i.e. they do know much about this brand and considers buying it only after the evaluation of the brands considered in evoked set. Passion is categorized under the inept set, as they are avoided alternatives i.e. the customers do not prefer them as compared to the other alternatives though they still have knowledge about these brands. Evoked set is further divided into two categories, specific alternatives purchased and alternatives considered but not purchased. People usually visit Barista and café coffee day as they are considered as parlors which usually provide good quality products and experience and so it is under the category of specific alternatives purchased while Nescafe is considered but not purchased.
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ANALYZING COFFEE RETAILING INDUSTRY USING PORTER’S FIVE FORCE’S MODEL Potential Entrant Starbucks, coffee club, coffee world Threat of New Entrants Industry Suppliers
competitor’s rivalry
Buyers
coffee
Among existing firms
students, Professionals,
plantations
old couples
Bargaining Power
Bargaining Power
of Buyers
of Suppliers
Substitutes Other fast food joints like Mcdonalds, Pizza Hut and Amoretto Threat of Substitute Products or Services
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The Porter‟s five force model is applied to the coffee parlors in India and helps to understand the existing players in this industry, their substitutes and the threats that they face. Competition among the existing players in the Industry: The huge growth potential promised by coffee retailing has brought many big players into the industry. Each one of them is trying to woo the consumer by unique offering in terms of product and experience. Players in this industry include Barista, Barista: Barista has the following competitive advantage over others which it can leverage in future. The advantages can help Barista to tap the opportunities coming its way and fight the competition. 1. Strong Brand Image: Barista has a strong and clear brand image. Their customers can easily identify and relate to the Barista brand. This helps foster brand loyalty. 2. Excellent Human Resource: Barista is perceived as excellent for the service and behaviour of their staff by their customers. It has also opened training facility to nurture more talent. This is a huge advantage, especially in a service organization. Barista must strive to keep this advantage. 3. Ambience & Décor: Another significant area of excellence is the kind of ambience and décor Barista cafés have. It has been able to recreate the Italian ambience in the neighbourhood store which liked by customers. 4. Strong base for expansion & growth: Barista have worked hard on their brand, image and human resources and have a strong base for future expansion and growthwhether nationally or internationally. 5. Linkages: It has worked hard on tie ups and have pre-empted a number of linkages which can be leveraged for growth. The company initially had a model to expand by owning stores but it later shifted to a franchisee, which has paid rich dividends but it carries a risk of brand dilution, so it must have a strict HR policy and see to it that all staff in the franchisee are recruited from its own training institute. The company needs to shatter its image as a costly brand by aggressive promotions. It also need to build on its coffee resources as it is dependent
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on TATA coffee foe its supplies. However Barista lack in few areas where immediate attention is required: 1. Average taste & quality of products suited for Indian consumer: Barista has a strong brand image of being the coffee- lover‟s traditional café, but the taste of food products served is not upto the mark for traditional Indian consumer. They need to come up with food suited for Indian taste. 2. Perceived as an expensive brand: Barista need to engage in some promotional strategy which would shatter its image as an expensive brand among the middle class Indian consumer because they will be the real volume driver in coming times 3. Inconvenient delivery process: Although started as a new concept and to recreate the image of Italian café`, the concept of self service is not mingling with the Indian consumer, Indian consumer find it inconvenient to go back to the counter just to receive their order. 4. Supplier power: Since the USP of Barista is the taste and quality of the coffee that it serves, it must look to ensure supply of good quality coffee beans. Presently it is in strategic alliance with TATA coffee for supplies and thus lacks the bargaining power when it comes to quality or price. The acquisition of Barista by Lavvaza has brought in the much needed financial chest to expand. CAFÉ COFFEE DAY The Café coffee day has got the maximum number of coffee stores in India. Café coffee day is amongst the big guns in coffee industry. 1. Highly rated Taste & Quality of products: Café Coffee Day is perceived better by their customers for the Taste & Quality of their products. There lies a great potential to attract the customers who give emphasis on “money for value”. This is also helped by the fact that they grow their own coffee beans, and this provides an important base for future expansion and growth.
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2. Value for money proposition: Café Coffee Day is projected as an “affordable” brand. This strategy has worked extremely well so far, and Café Coffee Day is seen as a value for money brand. 3. Strong youth orientation: The Café Coffee Day brand is, and always has been, extremely youth- oriented. In a country where over 40% of the population is under the age of 20, there is huge potential for Café Coffee Day to become one of the country‟s largest youth brands. The untapped market share and potential for growth is enormous. 4. Capacity to expand easily and appeal to the mass market: CCD has advantage in easily replicating its earlier opened stores and expand quickly compared to its competitors. It has a undeterred focus on the mass market which will be the drivers of all volume growth in coming times. CCD has a distinct brand identity of its own in the mind of youth.
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It is the largest organized retail café chain in India. The main strategy of CCD is cost leadership, and it takes pride in being affordable despite its good quality. The future goal of CCD is primarily rapid growth by establishing affordable omnipresent cafés, and thus it has opened up outlets at such a scorching pace. CCD has an advantage in giving good service at an affordable price, CCD has been targeted the student and mainly the middle class and its focus on this segment has been unwavering. This segment is fast becoming the largest chunk of customers for these coffee chains. Barista broadened its focus with a price cut in 2003 to capture this segment which did not have pockets as deep. The primary strength of CCD is its large number of outlets nationwide (1151 against Baristas 230), lower capital requirements for setting up stores, vertically integrated supply chain and franchisees. As CCD sources its coffee from its own plants it hedges risks which arise due to fluctuations in the price and supply of coffee beans. Barista on the other hand is entirely dependent on Tata Coffee for its supplies. CCD also has larger volumes of sales per outlet, with each CCD cafe, on average, attracting around 500 and 600 customers per store everyday as against Baristas 350-400 per store per day. The primary weaknesses of CCD lie in their lack of strategic tie-ups (unlike Barista), inconsistent quality across outlets and weak image. For food items, CCD uses multiple suppliers whose products vary from region to region. This reduces standardization in taste and quality. Barista on the other hand enjoys the expertise of the Taj chefs ensuring standardized quality products at all its outlets. Café coffee day has less brand loyalty, and many of its patrons aspire to move up to Barista due to its better coffee and premium image. Due to its target of college students, CCD tends to alienate some of the higher age group who prefer a more sober atmosphere. To sustain in the highly competitive coffee café companies need to pre-empt the middle class mass market which will be the key drivers of all volume growth in the coming years. Café Coffee Day has done well in entering the mass market by rapidly penetrating into 72 cities. But this has brought about a deterioration in the brand image of it, which is needed to sustain between brand conscious urban youth. Another factor needed to sustain is a upper
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hand on the supply side of coffee beans, the company has a safe and secured supply of coffee beans via the coffee garden in owns in south India. This also insulates the company from any future variation in the price of coffee beans which is a commodity and hence volatile in price and supply JAVA GREEN Java green raison d‟être was to provide an additional service to customers of Reliance web world. Java green was designed to add on a basic product in already existing offering. The Branding, interiors and the marketing strategy of Java Green reflects very clearly that Java Green believes in adding on value and they are not competing with any chain. Java green which was started as a chain of In-Store Cafés within Reliance Web Worlds has expanded into other locations outside Reliance and operates over 100 cafes operating within a host of retailers, food courts and corporate campuses. Reliance wishes to opens Reliance infocom at the rate of 200 per annum, which is a whopping number. Reliance petroleum and gases, starting June 2010, will have their fuel outlets all over India. That will help Java green to grow further. The sustainability advantage for java green lies in the fact that it can leverage on reliance fuel and web world outlets. Moreover since the services at reliance web world are increasing like it is offering conference, ticket booking, gaming portals etc, the consumer will tend to spend more time which will give java green more opportunity to sell their products to customers. Reliance is positioning “Java green as a neighborhood cafe, that is, fast, friendly and fun,” In addition to coffee, consumers get to surf net, play games, view movies and video chat with people across the globe through their broad band services. This makes Java green a truly connected café and java green enjoys an edge over others. Java green aims to be a business focused on continual value to its customers on the backbone of an efficient business operation. MOCHA Mocha provides wide range of products including a whole range of flavored sheeshas which sets it apart from the other existing coffee players like CCD and Barista. Mocha Team Retallions, JBIMS
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sells experience rather than simple drink or food beverage. Each Mocha is as individual as you are.” with each new Mocha, something new evolves in its décor, its menu and ambience. Mocha does not replicate itself but follows a continuity of design through all its outlets. The location of each mocha is of prime importance in its sustainability as they portray themselves as a premium brand and hence it is essential that they are located in a city with their required customer base and where it would be visible and accessible to them. They have not got into frenzy to open random stores. They are taking a careful path so that they keep their identity of differentiation. Formation of committees: Mocha believes we are not just a restaurant but a community centre. Communities are just not restricted to geography, but also communities of likeminded people who share a common passion. Mocha endeavours to provide a platform for communities of likeminded people, to congregate & discuss their passions over steaming cups of coffee. Mocha life shop: Mocha provides to its consumers music, it be from the past and even contemporary music. Anything that gives them that feeling which good music always does. That‟s mocha musica.Mocha living provides consumes by varied ambience, they don‟t have a standard theme for furniture and they keep anything that they like which attracts a lot of costumers. Starting off with a better take away service. Beautiful lamps and hookahs that make the consumer‟s experience at mocha much better.
QWICKY’S Qwiky‟s strategy was that to make their customers make them feel comfortable and have fun. The staff at Qwiky‟s was trained to understand body language. They were very frankly with the customers. Qwiky‟s objective was to target the “young at heart” that were looking for fun and a place to unwind. They offered different varieties of coffee. Customers were given a choice of drinks that were not common in India. It had a separate vending area for chocolate products. Qwiky‟s coffee pubs were located at Team Retallions, JBIMS
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strategic points which were frequented by youth. Qwiky‟s pubs were located at intersection of roads in a corner were two side of café were made of glasses and faced the road. It even had coffee making machines for sale and also a trainer to teach how to make perfect espresso. It also planned to launch ready to drink coffee sachets. Their prices were based on the real-estate prices in that particular area. Qwiky‟s positioned itself as a place where people can come for fun and relaxation it targeted people who having fun and young at heart. People who were quite interactive and friendly were appointed as staff to make their customers feel comfortable and while away their time. It was a place to hangout. There are about 100+ Qwicky‟s in the country. CAFÉ NESCAFE Bravo Coffee begun its successful collaboration with Nestlé in the year 2002 and since then has established a number of branches. In the last few years substantial work has been done to successfully establish the Café Nescafé brand in the South African market and is now ready for the next level, further expanding the concept and going beyond the concept of a coffee shop. Nescafe is a pocket -friendly outlet. It offers cappuccino Frappe and iced for prices which is very less as compared to the other outlets. It has outlets in Delhi and is suited for those people who like quick snack and drink. Nescafe do not feature any sitting arrangements. Moreover the drinks are not freshly brewed. The café host serves from the vending machines. Their menu consist of hot and cold coffee, badam milk, ice tea, hot tea, Maggi soup, muffins, chocolates and roll. Nescafe made an early jump by giving its product at low price and made ties with many colleges but lacked in the variety of products this led failure in its growth.
COFFEE BEAN AND THE TEA LEAF Coffee Bean and Tea leaf is the oldest family run coffee company in the country. It targets the higher end consumers. They were brought in India as a franchise of Blue Foods.
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COFFEE WORLD When you walk into a Costa store you'll notice it's different to other coffee shops. First of all, there's the warm and welcoming atmosphere. Then, the great range of authentic coffee drinks. Next, the Ferrari of coffee machines. And finally, the most passionate and well-trained baristas around. It's this unique combination that makes us stand out from the others, and we're incredibly proud of it. Currently they have around 73 stores in India which they want to expand to about 300 by 2014.
THE CHOCOLATE ROOM The Chocolate Room India pvt. Ltd. started operating since October 2007. It is an Australian Master franchisee. The Chocolate Room has been runnig since 2005 in Australia
by
its
owners
named
Jim
Richardson
and
Kathy
Richardson.
The response to the chocolate room cafe concept has been overwhelming and the customers loves the total experience – the drinks –beautiful coffee too! – the food – the atmosphere –the health virtues of chocolate – in moderation of course! Currently they have 40 stores in India which they want to expand to 50 by year end. GLORIA JEAN’S Gloria Jean‟s Coffees an Australian owned global specialty coffee company, and is a brand synonymous with coffee quality and leading franchise systems. The Gloria Jean‟s Coffees story began in the USA in 1979 when Gloria Jean and Ed Kvetko opened a specialty gourmet coffee outlet in a small town just north of Chicago. With appreciation for quality coffee growing, it wasn‟t long before Gloria Jean‟s Coffees outlets started to appear around the USA.
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Currently they have 16 outlets which they intend to expand to 25 by year end. By 2014 jump to around 200 stores. THREAT’S OF NEW ENTRANTS With the government on the verge of allowing FDI in multi-brand retail, many foreign coffee brands are eyeing for an entry into the Indian market. The potential of growth in liquid coffee retailing is huge as coffee consumption in the country is considerably low. In the North, coffee consumption is eight grams per persons as compared to 40 gm in the South. After attempts by Barista, Coffee Day and Qwicky's to provide Indian consumers the foreign players have finally decide to enter Indian markets. Café Coffee Day and Barista dominate Indian café market. The entry of foreign player is a treat for these players to maintain their market share. The foreign player would also target the similar segment of target market thus causing the problem for the local players. There is a tendency of Indian customers to visit once and if they get satisfied than they turn to be loyal customers. STARBUCKS Starbucks is one of the fastest growing brands in the world, after entrepreneur Howard Schultz bought the chain 15 years ago. Starbucks Coffee - with its 5,689 outlets in 28 countries - has grown in sales at an average of 20% annually to $2.6bn in '02. The Starbucks Corporation is reviving its plans for entering India. The company is expected to actively scout for prime real estate in metro markets in the next few months, and plans to open its first store in the next 12-14 months. Starbucks has identified Delhi, Mumbai, and Chennai as the potential entry points for the chain in India. Starbucks is presently working on the franchisee model. The Starbucks target audience is the hip, urban, on-the-go caffeine addict, and the chain that originated in Seattle has got megaplans for India. Starbucks has pinpointed high-potential localities like a few in South Mumbai and Bandra. In keeping with its international strategy, Starbucks will only open shop in the best of prime locations. The company's practice is to acquire real estate at a
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premium over market price, in order to squeeze out competition, and it is planning to do the same in India. GEORGIA Coca-Cola India found a good market for the hot beverages. They announced the launch of low-price ready-to-drink coffee and tea in a bid to capture a larger share of the domestic beverages market. The drinks will be marketed under the brand name Georgia and sold through a large number of retail outlets all over India. According to them, it is time to take the product from the class market to the mass market. Hot tea and coffee form the biggest combination in India's burgeoning beverage market. Georgia has launched two types of cafes, one where normal tea and coffees will be sold and would be priced at a low rate; the other is Georgia Gold, which is for the premium segment. Georgia Gold has also merged with Mc-Donald‟s. More and More foreign players would enter into this segment. The company will have to differentiate their product from the others in terms of price, flavor, and ambience and also target audience.
Substitutes The core-competency of these companies is their ambience and décor that is the lifestyle they provide , these lifestyle needs of the consumers are also been satisfied by other fast food joints like Mc Donald‟s, Pizza Hut, Dominos , Subway etc. Also tea is a natural substitute for coffee in India. Some players are also setting up specialty tea shops. Beverages like Pepsi , Coke can also be regarded as substitute to coffee in the minds of the consumer.
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Fast Food Industry in India The fast food industry is growing at a fast pace and its growth can pose a serious threat to café retailing as the core values provided by both is the same. In a global sense there is no doubt that McDonald's, KFC, Pizza Hut and Subway are amongst the most prominent restaurant brands. All these names and many others are instantly recognizable as fast foods outlets in most countries throughout the world. In 2013, the global fast food market is forecast to have a value of $200 billion, an increase of 29.3% and a volume of 94.7 billion transactions, an increase of 10.4% since 2008.
With a rapidly growing middle class population and a changing lifestyle, India is blessed with one of the fastest growing fast food markets of the world. The Indian fast food market is growing at the rate of 30-35% per annum. Almost all big fast food brands of
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the world have succeeded in making their presence felt in the country and most of them are posting appreciable growth. The Indian fast food market has been witnessing rapid growth on the back of positive developments and presence of massive investments. Currently, market growth is largely fuelled by the rising young population, working women, hectic schedules, and increasing disposable income of the middle-class households. Some of the unique properties of fast food like quick served, cost advantage, etc are making it highly popular among the masses. Thus, India offers enormous opportunities for both domestic as well as international players. When western fast-food chains such as McDonald‟s, Domino‟s Pizza and KFC initially opened their doors in India in the mid-1990s, they struggled to compete with spicy street food and the elaborate home-cooked meals Indian women regularly prepared for their families. But more hectic schedules, rising incomes and demographic realities – about 60 per cent of Indians are under 30 years old – have created new appetites among Indian consumers. Now, sales at western fast-food chains, and local rivals, are taking off, growing at an average of 28 per cent a year, as dining out moves from being a special occasion, to a routine part of Indians‟ busier schedules. Indians spent an estimated $1.3bn on dining out in “chain restaurants” in 2009, of which about 400m was accounted for by fast food, according to research group Euromonitor. It is not just India‟s biggest urban agglomerations, but smaller, second-tier cities where such restaurants are finding growing favour. “Whatever a guy anywhere in the world wants, a guy in India wants that as well,” said Amit Jatia, vice-chairman of McDonald‟s India – south and west. “The consumer is beginning to recognise that quick-service restaurants mean quality and value for money.” Team Retallions, JBIMS
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Domino‟s Pizza is growing at a blistering pace, with 364 outlets in 55 cities, all run by Domino‟s Indian franchisee, Jubilant Foodworks, in New Delhi. Jubilant, which raised $71m in an initial public offering last year, increased sales by 61 per cent from April to December, compared to the previous year, buoyed by 54 new stores opened in the period. “The Indian market has been growing and evolving at a very fast pace,” says Hari Bhartia, Jubilant Foodworks co-chairman. Last month, US-based Dunkin‟ Donuts, owned by the private equity firms Carlyle Group, Thomas H. Lee and Bain, announced a partnership with Jubilant to bring its deep-fried products to India. Subway is also gaining popularity in India, with 200+ outlets, and Starbucks is gearing up for an Indian market launch this year in partnership with Tata Coffee. Hardcastle Restaurants, one of two Indian partners to McDonald‟s, is buying out the US hamburger chain‟s stake in the 50-50 joint venture that operates the chain in southern and western India, paving the way for accelerated expansion. Hardcastle aims to open 30 McDonald‟s outlets this year. The field is getting extremely competitive. Western fast-food brands have gone through a tough learning process to cater to Indian tastes. Traditional menus were spiced up, vegetarian options enhanced, and low price, entrylevel items developed to make the restaurants more accessible in a highly pricesensitive market. Such efforts have won the loyalties of consumers such as Sahal Amlani, 30, a store manager, who spends at least Rs50 ($1.10) on an afternoon snack at McDonald‟s twice a week, and treats his wife, and one-year-old son to a McDonald‟s meal, spending up to Rs300, every weekend.
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“My child likes French fries so much, and even my wife has a desire to go out and have some junk food,” he says. While fast-food chains have finally adapted their recipes to local tastes, they face other trials. Finding suitable real estate in crowded Indian cities is difficult. “Real estate is the single biggest challenge,” said Mr Jatia. Near McDonald‟s at Phoenix Mills, cheery food stalls like Dosa Hut, On a Roll, Thai Chi, do brisk business serving up Indian and Asian dishes – which for many Indians are still more appealing than spiced up versions of Western fare. Bargaining Power of Buyers With so many options now available to the youth for coffee consumption, the bargaining power the buyers have is definitely more say tan before. Buyers
The potential buyers are
teens i.e. students, working professionals and old
couples in the cities
The volumes of customers coming into these outlets are very large as the target segment for such outlets is the young generation.
The buyer‟s knowledge about the product is large and they are well informed as to the choices that they make as many choices are available for the buyer.
Bargaining power of Suppliers
The production done in these outlets are not outsourced but are done by resources owned by the companies themselves, most of the companies own coffee plantations. For example café coffee day
In case of Barista coffee parlor, earlier coffee was made with high quality Arabic beans and Barista‟s from Italy were invited to create blends. Due to
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strategic alliance with Tata Coffee in 2001, coffee beans are provided by Tata coffee as well
Substitution is very low in this business as the main focus of the producers is not economy but more towards the quality of the product produced.
BRAND V ALUE PYRAMID FOR BARISTA The Brand value pyramid helps to evaluate Barista brand and helps us to understand it better from the customer‟s point of view. It involves three parts which are explained below.
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Beliefs and values Place to relax and hang out Causal and informal environment Different experience
Benefits Quality coffee Variety of food Good Experience Lifestyle Quality staff service Features Wide variety of coffee and food products Books Game Wi-Fi Merchandise
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The Brand Value Pyramid best demonstrates the power of a brand. Barista brand has been studied here using the brand value pyramid. It has the following stagesBelief and Values These are beliefs and values which the customer associates with a particular brand. In case of Barista, the customer believes it be a place to relax and hang out with friends. It is an informal and casual place. It provides a different experience of having coffee in a relaxed setting outside home Benefits The benefits provided by a brand are in terms of the functional or emotional benefits provided by it. The various benefits provided by Barista are Quality coffee ,Variety of food, Good Experience and Quality staff service Features and Attributes The features and attributes are wide variety of coffee and food products, Books, Game, Wi-Fi and Merchandise that it offers in its outlets Analyzing Café Coffee Day in Detail CCD is the clear market leader in the business of coffee retailing. And Barista is the clear no.2. The gap between CCD and Barista is quite big. In order to increase our market share, we have to take away the market share from CCD. This is the reason we have decided to make a detail study about CCD. Corporate Profile It was in the golden soil of Chikmagalur that a traditional family owned a few acres of coffee estates, which yielded rich coffee beans. Soon Amalgamated Bean Coffee Trading Company Limited, popularly known as Coffee Day was formed. With a rich coffee growing tradition since 1875 behind it coupled with the opportunity that arose with the deregulation of the coffee board in the early nineties, Coffee Day began exporting coffee to the connoisseurs across USA, Europe & Japan. In the calendar year 2000, Coffee Day exported more than 27000 tonnes of coffee valued at US$ 60 m to Team Retallions, JBIMS
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these countries and,for the second time in its short career of 7 years retained the position as the largest coffee exporter of India. Coffee Day has a wide and professional network in the major coffee growing areas of the country comprising over 48 agents and 50 collecting depots. Coffee Day's two curing works at Chikmagalur and Hassan cure over 70,000 tonnes of coffee per annum, the largest in the country. 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.
Coffee Day Comprises of the following Sub Brands
Coffee Day - Fresh & Ground: Major player in the roast and ground filter coffee segment. It provides a unique assortment of blends at affordable priced
Café Coffee Day- It is a place where customers come and rejuvenate themselves. It is the meeting place for the young and the young at heart. Hot and cold coffee along with merchandise is sold there.
Coffee Day – Vending – It is meant for the man on the move. It is for people who are in hurry but do not want to compromise on the quality of coffee. Coffee day has its vending machines placed at vendor outlets all throughout the city.
Coffee Day – Xpress – Bridges the gap between the leisurely cuppa and the bite at the café and a quick drink at the vending point. In this segment you would notice kiosks strategically located where a customer may not only buy coffee but also grab a quick bite on the move.
Coffee Day – Exports – India‟s largest exporter of coffee. Owns about 10,500 acre of coffee plantation. The value of coffee produced is about $12 billion.
Coffee Day – Perfect – For mass in-home consumption section where filter coffee is consumed every day. The filter coffee is sold in packaged form to consumer.
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Formats in which CCD operates: CCD since its inception has been experimenting with the formats providing unique touch points to consumers.
Music Cafes: Provide customers with the option of playing their favorite music on the digital audio juke boxes installed in the café. Some café provide the option of viewing their favorite
Lounge Cafes: At certain venues CCD has combined the style and luxury of the lounge with the lively ambience and comfort of a café. These style of café are known as lounge cafes. The interiors are very exquisitely done, exotic menu and a team of hostesses who take the experience to a altogether new level
Highway Cafes: These cafes provide a traveler en route not only with the best coffee and delicious snacks, but also with clean restrooms where one can relax.
Garden Cafes: These café combine the joy of rejuvenating in the midst of landscape and a cup of coffee.
Cyber Cafes: They allow an individual to get connected to the outside world by browsing the internet and at the same time enjoying perfectly brewed cups of coffee. CCD is also experimenting with sports café, fashion café and singles café.
Book Cafes: Book cafes are perfect solution for people who think that a coffee experience is incomplete without browsing through a bestseller.
MARKETING STRATEGY OF CCD Differentiation CCD has been able to differentiate itself from the competition by using the cost leadership model. Also it successfully built a image for itself as a hangout place for the youth. Segmentation Demographic Age (15-35) Income-middle Occupation-working executives, students Team Retallions, JBIMS
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Generation-Youth Geographic Major Cities, urban sector, IT Hub, near malls and Theaters Psychographic Lifestyle- outdoor Personality-ambitious, gregarious Behavioral occasion-regular, special Benefits-quality, service Brand loyalty-split loyal Attitude- youthful TARGETING Working executives Young youths Premium customers Travellers POSITIONING •
It positions itself as “Urban Youngster‟s favourite hangout.”
•
Tag Line „A lot can happen over coffee…‟
•
It is for those who are young or young at heart.
•
Offers its customers a variety of coffee and coffee product.
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MARKETING TACTICS Products: Café Coffee Day product mix constitutes a wide range of products that appeal primarily to Indian coffee and snack lovers. Products have an Indian taste to it - be it food or coffee. Most of the eatables have been adopted to meet the Indian taste buds like samosa, biryani, masala sandwich, tikka sandwich etc. Thus they have been trying to capture the Indian taste along with classic coffee. 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.
Prices: 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. 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 anything else.
Physical Evidence: a) Logo, Colors, Images: Café Coffee Day has used bright red and green colors in its logo. RED stands for leadership and vitality. It also stands for passion (… for coffee). The GREEN stroke harks back to their coffee growing heritage and the coffee plantations that they own. Café is noticeably larger than the rest of the text inside the logo box. This denotes that Café Coffee Day pioneered the café concept in India way back in 1996. Café Coffee Day would like to own the word “café” in the minds of its customers. When one thinks of a café it‟s got to be Café Coffee Day. The font used for “Café” is called SLURRY. The font looks as though the letters have congealed out of a liquid. It gives the impression that the word is still forming itself and evolving into something new and something better constantly. This is the characteristic of Café Coffee Day‟s customers and this is the characteristic that the brand too wants to adopt. The upward SWIRL inside the logo box stands for the invigorating and Team Retallions, JBIMS
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uplifting nature of coffee and the ambience at Café Coffee Day.
Décor & Architecture: Café Coffee Day had gone in for image change and revamping of interiors in the last quarter of 2001. Café interiors have been given a whole, new look. In a change from the largely wood and granite based interiors, there is more of steel and lots more color now. The young colors of today, lime green, yellow, orange, and purple predominate. Literature: The literature provided by Café Coffee Day is indicative of its youthful image. The Menus, posters, pamphlets are all designed to attract young and young at heart. They also have their magazine called as „Café Beat‟, which is published monthly at their Bangalore head office and distributed throughout the branches. Place: 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. Considering their generic appeal, there are Barista outlets located in and around malls, cinemas, colleges, offices etc. This endorses their brand image of a café that appeals to coffee lovers of all ages. Promotion: Café Coffee Day does not believe in mass media promotions. But they are involved in all the areas of serious consumer passion. Through 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 and a lot of youth like watching the programme. That is why they had a contest running where customers could win Friends' merchandise. The linkage was that it is a youth based programme and it had a coffee house. They have tied up with Channel [V]'s Get Gorgeous contest. The reason being that a lot of their young consumers are interested in careers. Modeling is a career that a lot of youngsters are interested in and this was an excellent platform. They have also done Team Retallions, JBIMS
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promotion for History Channel, where they have run promotion for Hollywood Heroes. They had asked a few question and a lucky winner won a trip to Hollywood. Ticket sales: Café Coffee Day is involved in ticket sales in quite a few events, Enrique being one of them. They were involved in WWE, Elton John, and Bryan Adams ticket sales. These acts are very much appreciated by their consumers. It helps both the organizers as well as Café Coffee Day. Organizers need to tell people where the tickets are available and single Café Coffee Day logo says it all. From Café Coffee Day‟s point of view, they always ask for a certain amount of tickets around which they have a contest. Couples can win ticket for free. This in turn raises the awareness level as cafe staff approaches the consumers to inform them about the contest. There is not a better publicity mechanism then the person who is serving you telling you about the same. Tie-ups: Besides that Café Coffee Day also tie up lot of the youth brands. Their promise to the customer is that a lot can happen over a coffee. So every time they try to ensure something good happens to their customer. So they have a contest going on with Levis, another one with Scooty, Liril, latest one with Airtel Friends. Another placement area they have is with HDFC. HDFC wanted to promote their debit card and they choose Café Coffee Day. So 21 cafes have debit card machines.
Association with movies Café Coffee Day also decided to stick with the next big thing i.e. Bollywood. Earlier a few movies, whose target audience matched that of the consumers at Cafe Coffee Day, started shooting a few scenes in the cafe. So they had a Hindi movie Bas Yun Hi and a couple of Telugu and Tamil films with prominent Cafe Coffee Day brand placement. Later they took a conscious decision of being seen in certain movies like Khakee and Main Hoon Na.As part of this effort, the brand was placed smartly in two Bollywood ventures,the Amitabh Bachchan, Aishwarya Rai, Vivek Oberoi starrer Kyun Ho Gaya Na,Sajid Nadiadwala's Salman Khan, Priyanka Chopra starrer Mujhse Shaadi Karoge, forthcoming movies like Salman Khan starrer Lucky and Socha Na Tha. Team Retallions, JBIMS
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A lot of serials are shot in Cafe Coffee Day. Recently, Kahaani Ghar Ghar Kii was shot.
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. The Café Citizens Card entitles members to a 10% discount on all food and beverage bills. The members also receive surprise gifts, along with special offers and invitations from Café Coffee Day from time- to- time.
OPERATIONS STRATEGY
Distribution of outlets: Every Café Coffee Day outlet is a part of India‟s largest coffee conglomerate named Coffee Day. Since all the cafes are owned by the company, it becomes easier for them conduct feedback surveys like dipsticks etc. Coffee day‟s most unique aspect is that it grows the coffee it serves in its cafes. Pioneers of the Café Concept in India with the its first Café at Brigade Road, Bangalore in 1996. This Café was opened as a Cyber Café (first of its kind) but later, with the burst of cyber cafes it reverted to its core competency…. Coffee. Café Coffee Day currently operates 1151 outlets all over the country. They have a market presence in over 75 cities. Delhi, NCR alone has 50 plus outlets, and the number of outlets in the area is increasing at a phenomenal pace. Each café, depending upon its size attracts between 400 and 800 customers daily.
Distribution of stock: Coffee Beans The distribution of coffee beans start from their roasting plant at chikmagalur. The coffee beans are sent to the main offices of north and south India on monthly basis. The outlets contact the Head Distributors on weekly basis.
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SWOT ANALYSIS
Strength:
Large Number of outlet.
In house sourcing of coffee beans.
In house furnishing department which makes all the furniture required
Tie Ups with good companies.
Weakness:
Follow the competitor strategy.
Quality of food- Stale breads.
Loud and Hard Music.
Improper sitting arrangement.
Opportunity:
Large Untapped Market
Tie-ups with other companies for promotion.
Threat:
Entry of Foreign players like Georgia, Starbucks etc.
Large unorganized market.
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NEW BUSINESS MODEL FOR BARISTA LAVAZZA Barista was acquired by the Italian company Lavazza in 2007. As per the vision that Lavazza has for barista, they want to introduce Indians to the brand Lavazza in a very subtle way. They want to move from 100% barista to 50% barista and Lavazza to finally 100% Lavazza. They have acquired another company is India known as Fresh & Honest food. Fresh & Honest sells vending machines to institutional clients. Globally Lavazza is a coffee company and the coffee shop is only for building the brand Lavazza. Lavazza group has expressed that they would like to follow their global strategy in India as well. For them their main business is selling coffee vending machines to corporate and supplying coffee beans for them. The next big business for them is selling packaged coffee. The third in line is the coffee shop business which is mostly for brand building. So we have formed our new strategy taking into consideration the vision of Lavazza for Barista and also taking into consideration the ground realities as of now. The strategy will allow Lavazza to establish their brand India and at the same time help Barista in regaining their market share. Barista started its journey as a premium coffee shop. It was a place where one could get a real coffee experience. Its products were priced significantly higher than that of CCD. Barista always targeted the consumer who had a taste for finer things in life. But around 2003, it cut down the prices of its products by 25%. It was said to be done because barista wanted to increase profits by having higher volumes. Also at the same time positioning of barista was changed from indulgence to hangout. It started targeting college going audience while earlier its prime focus was always the corporate managers. This changed positioning and pricing strategy created confusion in the minds of the consumer. The youth still considered Barista as an expensive brand because nothing was done to communicate the changed perception. While some of the target audience, the corporate people moved to café like mocha which had created a premium image for itself.
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Another problem that Barista has had since inception is that of management instability. Its top management has changed thrice since inception. Different managements with their own set of objectives have tried to shape the future of Barista. Since the last five years the Lavazza group of Italy has been managing it under the brand name of Barista Lavazza. Today Barista Lavazza manages about 230 shops. These are basically operated in three formats. Espresso Bar: This is the most common format. It provides a comfortable and cozy atmosphere for people to have discussions. Café Crème: This format is targeted towards the upper class of the society. These formats contain comfortable lounges, exotic food and exquisite interiors. EB Kiosk: This is the scaled down version of Espresso bar. Usually about 100-150 square feet provides refreshing coffee on highways and other such places.
Using a multi-brand Strategy: Basically considering the confusion in the minds of the people, the coffee retail market analysis and the plans of Lavazza for the Indian markets, we have decided to demerge brand Barista Lavazza as two separate brands. One range of coffee shops will be launched under the brand name of Barista, while the another set of coffee shops will be launched under the name of Lavazza. Coffee shops under the brand name of Barista will be positioned as a hangout and will be targeting the college students, BPO and KPO workers and in general the youngsters who want a place to meet friends and at the same time have some privacy. Coffee shops which will be launched under the brand name of Lavazza will be those targeted towards the elite section of the society. The positioning in this case will be that of indulgence. These are people who are well travelled and since Lavazza is an established brand abroad, they can easily relate to it. Also the major focus will be on
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corporate clients. We want the corporate to consider the Lavazza coffee shop as a substitute to their meeting rooms. Objective: By 2016 we want to have 1100 coffee shops around the country. At present there are about 1500 .Market analysis shows that the total size for café in this country is about 5000. We will reach this point by next 5 years. If we look at the industry and the plans that its players have, CCD by 2016 will have 2500 outlets, Gloria jeans 300, Dunkin Donuts 100, Costa Coffee 400, Java Green 200 and Qwicky‟s 200. Also Starbucks is about to enter the country through a JV with Starbucks. We want to have a 30% market share in the coffee retailing by 2016. Operations Plan: In order to set up 900 shops within 5 years time will require lot of planning and supply chain efficiency. We have hence decided that we are going to enter into some strategic partnerships to fulfill our need. Location Selection: Since we are going with two different brand names, selecting location for the coffee shop is going to be very crucial. The most important criteria is going to be the demographic and the purchasing power of the people leaving in that area. Lavazza brand of coffee shops will come up at high end at malls, where most people come looking for an experience. While the Barista coffee shops will come at places which are nearer to colleges and IT hubs. Interior Designing requirement: Since we intend to set up a large no of stores within a short span of time, we intend to get into a partnership with a interior designing firm. This will help us reduce cost in terms of getting the furniture done, interior designing services. Coffee bean sourcing: As of now Barista sends its beans for roasting to Italy. These beans attract a 112% of import duty. Due to increase in the cost of basic raw material, the price of the products in store goes up. Since India is a price sensitive market, passing on the price to consumers can lead to adverse effects. Also if this cost is borne
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by the company, the profit margin for the company decreases. So we have decided to roast coffee beans in India itself. Sourcing of food items: Almost 50% of revenues in a coffee shop come through sale of food items. Presently Taj group handles this for Barista Lavazza. We will continue with policy for our high end restaurants under the brand name of Lavazza. However for our Barista group of coffee shops we intend to develop in-house capabilities. This will help us to reduce our operating cost. Another reason being, the target audience we expect at our Barista Café is not one looking for indulgence, but a quick bite with coffee.
HUMAN RESOURCES PLAN Training: Being in the service industry, people form the core of any business. Also it is difficult to attract as well as retain talent. Since we will be expanding quickly, we intend to tie up with retail management institutes. This will be our source for quality talent. For a coffee shop the most important role is that of a Barista-one who makes coffee. For this purpose we intend to develop an in-house training schedule. Employee Retention: We acknowledge the role that a employee plays in the development of an organization. So we are going to make our employees our share holder through employee stock options. MARKETING PLAN We intend to introduce different formats under the two brand names. Brand Barista
Brand Lavazza
Espresso Bars
Crème Café
Coffee Carts
Café Clubs
Kiosks
Lounges
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Mobile Vans
Espresso Bars: These have independent retail shops like architecture. The seating arrangement is very informal and the entire shop décor is designed to give a very radiant and youthful vibration. Coffee Carts: These are carts which sell coffee. This is a very successful format in foreign countries. Can be managed by 1 or 2 people and calls for low investment. These are great for creating touch points in areas where it is difficult to establish a large size shop. Kiosks: These are usually 100-150 sq. feet in size. These are ideal when you want to set up a shop within a limited area. Also during corporate exhibitions, kiosks can be set up for serving people. Can also be set up within college and school canteens, office premises. Mobile Vans: These are best suited to be placed at highways. People can have a quick coffee and then move ahead. Also the same vans can be used to serve two different traffic points on the same highway. These can also be placed where huge amount of people are expected to gather. Crème Café: These are high end places where along with coffee, you can also have a hearty meal. These will be located along high end malls. Lounge Café: These places are an ideal for having board meetings and also for relaxation. Special boardroom style tables will be set up for meetings to take place. Club Café: These are meant for attracting rich youngsters. Here there will be a live DJ playing, amongst other things. Product Mix The products that we will keep will very much depend upon whether it is the Barista or Lavazza. Also the format of the store is a deciding factor. Person visiting a mobile van is
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likely looking only for a coffee, but one visiting a lounge café is expecting a range of options given to him. Also we intend to have regional flavors in our food and beverages. Very few retail coffee chains sell South Indian filter coffee which is in great demand in that region. Similarly in our kiosks on highways we will have food popular in that region. Pricing For café which is under the barista brand we will price it aggressively. In fact to begin within we intend to price it at 10% below CCD in that region. However for the Lavazza brand of café we are expecting a premium since we will be providing customer delight which is unprecedented in the Industry. Place We will have pan India presence. However the most important region for us is South India which is a coffee drinking region. Also Barista has been slow in that region traditionally which is dominated by CCD. Physical Evidence The consumers will receive value for their money be it the espresso bar or the Crème café. Through use of appropriate décor and giving customer service which exceeds the expectations of patrons we intend to delight the consumer. Process We will strictly have table service for everybody, since our research has shown that customers do not like self-service. Promotions 70% of our marketing budget will be spent on BTL activities while only 30% will be meant for ATL purposes.
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We will tie up with various cinema houses (single screen). In these cinema houses in their food court only our coffee will be sold. As for multiplexes, Barista Lavazza already has a partnership with PVR cinemas
We will tie up with pizza hut to serve our coffee in their outlets
We will follow a strategy where in every customer who has checked in will be given a promotional voucher which can be redeemed only on the next visit. This is to be done only for the Barista brand of cafes. Also this activity will last for only 6 months from the time that the café has launched.
We will encourage various community groups to come and engage in our café. Also we will have special discounts for groups doing tweetup‟s or foursquare meets.
We intend to sponsor a T.V show which revolves around the youth and shows a coffee shop in prominence. Some that we have identifies are Emotional Attaychar and Super Stud. These will be used for promoting the Barista Brand amongst the youngsters.
For promoting the Lavazza brand we intend to sponsor a chat show which will again have coffee in prominence.
For both our brands digital media will be a major contributor. We intend to promote our brand in the cyber space on properties like facebook and twitter
Apart from that we will be using upcoming mobile social networks like Foursquare and Gowalla. Swarm events which allow us to bring a huge number of people together at a place will be conducted monthly.
Also we will tie up with D-mart. This will allow us to tap into the shoppers who shop at D-mart.
With each of our customers we will try to have a personal bond. Each customer will be asked for his email address to stay in touch with us. In return he will get an ecopy of a book that has recipes for making various types of coffee.
We will launch two different set of loyalty cards for these two different brands.
Our different brands will be strategically placed at different locations in serials and movies.
Our market research has revealed that people like to visit cafes to celebrate their birthday. So we will have happy birthday song playing in our café whenever anyone
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visits our café for their birthday. We will also give special discounts to people for celebrating their birthday at our café.
We will promote tweet up‟s and foursquare meets at our café. This will help us target the youth who want to meet people whom they knew earlier only on twitter.
Some people come to café only for self introspection. So we have decided to dedicate a small table at the corner of every shop.
We have decided to have separate coffee loyalty cards for our brands.
We will co-promote our brand with other brands who have the same target audience as our‟s. For our Barista Café channel like UTV Bindass will be a perfect fit as it is also targeted towards the youth. For the Lavazza cafe we would like to tie up with a lifestyle channel like NDTV Goodtimes.
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FINANCIAL PROJECTIONS EXPANSION IN OUTLETS In the next 5 years we intend to open 900 more shops under various formats.
PROJECTIONS Formats
2012
2013
2014
2015
2016
Total
Expresso
45
55
70
80
100
350
Kiosks
10
20
30
40
50
150
Coffee Carts
5
10
15
20
25
75
Mobile Vans
5
10
15
20
25
75
Club Café
6
8
10
12
14
50
Crème Café
10
15
20
25
30
100
Lounges
10
15
20
25
30
100
Bars
900
Expected Sales/day Formats
INR
Expresso Bars
Rs. 30,000.00
Kiosks
Rs. 10,000.00
Coffee Carts
Rs. 3,000.00
Mobile Vans
Rs. 5,000.00
Club Café
Rs. 60,000.00
Crème Café
Rs. 60,000.00
Lounges
Rs. 60,000.00
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PROFIT AND LOSS ACCOUNT PROJECTIONS FOR NEXT 5 YEARS
Rs. Lakhs PROJECTIONS 2012
2013
2014
2015
2016
Existing Sales (30 Mn Euros)
19800
SALES
30,933
35,167
39,948
44,182
49,511
less: COST OF SALES
12,373
12,308
13,183
13,255
13,863
GROSS PROFIT
18,560
22,858
26,765
30,927
35,648
Insurance
50
60
72
86
104
Rental of premises
200
240
288
346
415
& 50
60
72
86
104
Utilities
10
12
14
17
21
Total G&A
310
372
446
536
643
Advertisement
60
69
79
91
105
Printing and stationery
5
6
7
8
9
Commissions
10
12
13
15
17
Travelling expenses
15
17
20
23
26
Total S&M
90
104
119
137
157
18,160
22,383
26,200
30,255
34,848
less: General
&
Administrative
Expenses
Salaries,allowances bonus
Sales & Marketing Expenses
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Depreciation
200
250
313
391
488
PBIT
17,960
22,133
25,887
29,864
34,359
less: Financial Charges
300
420
588
823
1,152
21,713
25,299
29,041
33,207
6,514
7,590
8,712
9,962
15,199
17,709
20,329
23,245
PROFIT
/
(LOSS)
BEFORE 17,660
TAXATION LESS : TAXATION PROFIT
/
(LOSS)
5,298 AFTER 12,362
TAXATION Minority Interest
0
0
0
0
0
Distributable Profit
12,362
15,199
17,709
20,329
23,245
Retained Profit / (Loss) For 12,362
15,199
17,709
20,329
23,245
The Year Retained Profit / (Loss) B/fwd
0
12,362
27,561
45,270
65,599
Retained Profit / (Loss) C/fwd
12,362
27,561
45,270
65,599
88,844
RATIO ANALYSIS
Profitability Ratios x Gross profit percentage
Gross profit
100%
Sales x Net profit percentage
Net profit
100%
Sales Financing Ratios
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Interest cover
PBIT Interest payable
2012
2013
2014
2015
2016
Gross profit percentage
60%
65%
67%
70%
72%
Net profit percentage
57%
62%
63%
66%
67%
Interest cover
59.9
52.7
44.0
36.3
29.8
FINANCIAL SNAPSHOT
Year
2012
2013
2014
2015
2016
Total Sales
30,933
35,167
39,948
44,182
49,511
17,660
21,713
25,299
29,041
33,207
12,362
15,199
17,709
20,329
23,245
Net
profit
(loss)
before tax Retained
Profit
(Loss) For The Year
Team Retallions, JBIMS
/
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Financial Projections 60,000
50,000
Rs. Lakhs
40,000
Total Sales
30,000
Net profit (loss) before tax
20,000
Retained Profit / (Loss) For The Year
10,000
0 2012
Team Retallions, JBIMS
2013
2014
2015
2016
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