Coffee Wars in India - Caf Coffee Day Takes on the Global brands

Managerial Communication 2 - Project Submission

Coffee Wars in India - Caf Coffee Day Takes on the Global brands
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Coffee Wars in India - Caf Coffee Day Takes on the Global brands
Problem Analysis
With the arrival of global coffee chain Starbucks in India, market leader Cafe Coffee Day
CCD! stands to lose out on some of its higher end customers" This has forced the senior
management, CCD #ounder and Chairman, $"G" Siddhartha and Director, $enu %adhav of
CCD to contem&late how CCD can retain its market leadership position in Indi and ward
o any threat to their market share by Starbucks"
CCD, the first mover in coffee retail and coffee chain brand in India, is currently leading 'ith
()* market share" It o&erates Cafes +))-,))) s- ft!, .ounges ,/))-0))) s- ft!, S-uares
0/))1 s- ft! and 23&ress outlets offering variation of coffee, snack, and meal o&tions at a
com&aratively affordable &rice, in Tier-, 4 Tier-0 cities in India" They currently have close to
,/)) stores and ,))) takea'ay, and have &lans to o&en another 5)) stores in ne3t 6) months"
Target segment for CCD is middle and u&&er middle class, aged ,/ to 6)" Indian coee
market has huge potential o growing7 o'ing 'hich CCD has further e3&ansion &lans in
&lace" There already e3ists a small &resence of foreign Coffee chain stores in India, such as
Costa Coffee 89!, .ava::a Italy!, Gloria ;ean<s =ustralia! and Coffee >ean and Tea .eaf
Southern California, 8S!, but these &layers have struggled to make significant in-roads in
the Indian market due to their small scale of economy and the disadvantage of entering India
at the &eak of reality &rices" Starbucks, though, is in a different league due to its
international image and joint !enture with "ata #roup" Starbucks has o&ened ,, &remium
coffee stores in ( months, s&lit bet'een %umbai and Delhi and &lans to have 6)) stores in
ne3t 6 year" Currently Starbucks and CCD are locking horns only for the ?remium segment
but due to "ata group$s access to premium realty space and own coee plantation% there
are strong chances of Starbucks targeting regular coffee chain segment as 'ell"
Decision Analysis
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Coffee Wars in India - Caf Coffee Day Takes on the Global brands
CCD must consider Starbucks a strong threat to their market leadershi& and ado&t an
aggressi!e approach to'ards Global e3&ansion and Customer @elations" It must decide on a
short term, medium term and long term strategy to tackle Starbucks and creating an
international image for itself"
CCD could also choose to go for Aa slight course correction< a&&roach by concentrating solely
on im&roving their &rocesses and offerings and res&onding to 'hat Starbucks bring on to the
Atable<"
In order to Bustify the need for an Aaggressive< a&&roach, it is im&ortant to look into follo'ing
&arametersC
#rowth Potential o Coee chain market in India& D'ing to its global brand recognition,
Starbucks has attracted enormous media coverage and long -ueues of customers at its launch"
It comes 'ith an international image 'hich is very &o&ular in Indian youth culture current
target segment of CCD!"
=lso, CCDAs first mover advantage in terms of access to &remium real estate at relatively
chea&er &rice and, successfully 'orking back'ard integrated model could be nullified by
Starbucks< association 'ith Tata Grou&" Tata Grou& o'ns coffee &lantation and &remium
retail s&ace, similar to 'hat CCD o'ns"
India is a gro'ing retail market and Indian Coffee retail 4 Coffee chains market is no
e3ce&tion" Since both CCD and Starbucks have means, it gives them an e-ual o&&ortunity to
increase their share of the bigger pie. So it comes do'n to the -uestion that 'hich, out of the
t'o, can ca&italise more on this o&&ortunity"
Access to premium realty space ' raw material& >oth CCD and Starbucks in turn Tata
Grou&! o'n &remium realty s&ace as 'ell as Coffee &lantation and hence ca&able of fully
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Coffee Wars in India - Caf Coffee Day Takes on the Global brands
back'ard integrated o&erations model" =gain, this gives both CCD and Starbucks an e-ual
o&&ortunity and a stand a&art from other foreign and local coffee chain retailers"
CCD$s #lobal aspirations& CCD has long term ambition to be recognised as an international
&lan" They as&ire to be number 0 or 6 in 'orld in ne3t 0) years"
Starbucks success in China& Starbucks comes to India on the back of its success in
establishing itself as a big &layer in China" %any 'ere sce&tical 'hen Starbucks entered
China but it &artnered 'ith local firms, as it associated 'ith Tata Grou& in India, in order to
obtain local e3&ertise about consumer tastes in various regions" It 'as also able to educate
Chinese consumers about Coffee and influence the culture of Chinese &eo&le 'orking at
coffee bar" This indicates that Starbucks has the e3&ertise and vision of re&licating its
successful Chinese &olicy in India"
(uality and Ser!ice& CCD<s service and -uality is at a decline, as Starbucks has been able to
&oach ,/-,E* of the CCD staff though no one from CCD management yet! for higher
salaries" Dn the other hand, Starbucks, even though only at ,, stores currently, has sho'n its
focus on service and -uality already"
Action Plan
CCD should continue s&eciali:ing in its &articular strengths and resist tem&tations to mimic
Starbucks< o&erations"
S&ecifically, in the short run , -0 years! CCD shouldC
%ake internal im&rovements to training centres to increase em&loyees< customer service
skills,
>uild loyalty and commitment among its em&loyees by introducing some em&loyee
benefit &rograms like &roviding health insurance to hel& control attrition rates,
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Coffee Wars in India - Caf Coffee Day Takes on the Global brands
Concentrate on maintaining an u&dated menu and store a&&earances 'ith consumer
&references, and
.ook to e3&and ne' cafes in the urban areas of metro&olitan cities"
CCDs market leadershi& &osition is o'ed to customer loyalty so in the medium run 0-/
years! CCD must establish and retain customer loyalty by o&ening more lounges and s-uares
increase from e3isting 6* to 0)* of stores &ortfolio! to maintain customers that are aging
from teens and 0)s into 6)s and 5)s" CCD should also consider increasing their &enetration
further in Tier-0 and Tier-6 cities as they are unta&&ed by Starbucks and other foreign brands
as yet - D&en E)) more stores in ne3t 6) months, including 6)) in tier 6 cities" It should also
increase visibility of the CCD brand and hence increase advertising budget from F6m to F/m"
In the long run /-,/ years!, it must e3&and internationally in e3isting and ne' foreign
locations, and establish itself as a Global brand" 23am&les of China and India, 'hich 'ere
&redominantly tea drinking countries, turning out to be big Coffee chain market suggests that
com&lete =sian market is yet to be ta&&ed" So they should first target e3&anding in South and
South-east =sia in ne3t /-+ years 6)) ne' stores! and then e3&and in 2uro&e to strengthen
their brand"
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