Case Study

NESCAF

Indian Coffee Market - Overview

All India (cups) 100%
INSTANT COFFEE 57 % Roast & Ground (R&G) 43%

100% Coffee 18%

BLENDS (Coffee-chicory) 77 %

COFFEE MIXES
(Just add water)

5%

NESCAF CLASSIC 100%

NESCAF SUNRISE 45%

BRU 55%

All Coffee = In-home + Out-of-home

In-home coffee market snapshot

How to read figures a% @ b%: a% = Market Share b% = Annual Growth Rate
All India (cups) 100%

INSTANT COFFEE 68 % @ +7%

R&G 32% @ -10%

COFFEE MIXES 100% PURE 23% @ +10% BLENDS (Coffee-chicory) 76 % @ +4%

(Just add water)

1% @ +50%

NESCAF CLASSIC 100%

NESCAF SUNRISE 43%

BRU 57%

Caf style coffee

Mixes Segment
Coffee Mixes

Hot 73%

Cold 27%

NESCAF Cappuccino 77%

BRU Cappuccino 23%

BRU Ice Cappuccino 100%

M. Shares (By Volume)

Coffee in India Consumer Landscape

SOUTH
WHO Initiation at young age (high school) WHO

NORTH-EAST-WEST
Initiation at young age (high school) 100% Pure soluble coffee preferred Coffee used as a milk modifier with lighter strength

WHAT

Youth prefers Instant coffee to R&G Prefer a strong coffee cup with great aroma

WHAT

WHEN

All day, but key time of day is Morning Majority at home but out of home also is significant Coffee excitement through cafs, new types of coffee beverages being introduced Aroma, Stimulation Instant coffee for convenience

WHEN

Coffee consumption skewed towards cold season Key time of day: Breakfast & Evening
Majority at home but out of home also is significant Caf culture spreading fast (top cities) Alertness, Stimulation, Conversations, Social Impress Barriers (aided): Heat perception, expensive

WHERE

WHERE

WHY

WHY & WHY NOT

Coffee in India Category Landscape

SOUTH INDIA NORTH-EAST-WEST INDIA

Coffee growing region, developed coffee culture

Tea-Coffee ratio = 4:1 No seasonality Coffee loyal consumers Understand a good cup of coffee (aroma, flavour)

Coffee is still an under-developed category

Tea-Coffee ratio = 60:1 Highly seasonal Mostly light/infrequent users Coffee used as a milk-modifier

PENETRATION SNAPSHOT SOUTH

Urban (SEC A-E): 62% of population drinks coffee Rural (R1-R5) 27.5% of population drinks coffee (< Half of Urban)

PENETRATION SNAPSHOT NORTH+EAST+WEST

Urban (SEC A-E) 29% of population drinks coffee Rural (R1-R5) 1.2% of population drinks coffee

NESCAF: Brands-Geographical Distribution

NESCAF Classic

SUNRISE Premium

SUNRISE Special (Andhra Pradesh Only)

Region
North-East-West

Household Penetration (North-East-West)

Coffee Penet.% (Urban)

28.5% 27.1% 29.5% 29.3% 28.2%

Coffee Penet.% (Urban)

2007
15.9% 16.8% 18.0% 9.3% 8.8% 9.6%

2008

2009
15.4% 16.7%
15.7%

9.2% 9.3% 9.5%

2005

2006

2007

2008

2009

Q1

Q2

Q3

Q4

Source :HHP 2007-2009, IMRB

N-E-W: Coffee preparation & purchase

Who prepares coffee ?
Students Self Spouse Parents Know how to prepare 22% 63% 74% YWA* 19% 64% 75% CWE* 7% 84% 4% 64% HW* 87% 1% 99%

How is coffee prepared ?

Milk+Water Only Milk

78 22

Consumer Method of Preparation

0.8g coffee 9g sugar 105 ml milk 15 ml water 46% whip for froth

HW primarily prepares coffee at home Who purchases coffee ?

Students Self Spouse Parents 47% 77%

Where is coffee purchased?

HW*
89% 16% Grocery/General Store/Local Kirana Supermarket/Hype rmarket Wholesale store 82% 14%

How frequently?
10%

YWA*
47% 77%

CWE*
59% 75% 8%

36%

54%

2%

HW primary purchasers, shared by the CWE

* Glossary YWA Young Working Adults CWE Chief Wage Earner HW House Wife

Monthly grocery Emergency

Stock over

Category User-ship: North-East-West

100%

Majority of Consumers are infrequent users of coffee in North-East-West Regions.

% HHLD Distribution

80%

45

LIGHT MEDIUM HEAVY

60%

40%

53
20%

2
0%

Light: up to 2 cups per HouseHold per month Medium: 2 to 48 cups per HouseHold per month Heavy: 48+ cups per HouseHold per month

Region
South

Household Penetration (South)

Coffee Penet.% (Urban)
79.3% 78.5% 79.9% 78.6% 79.5%
63.2%
62.8% 62.7% 60.9% 61.0% 60.3%

Household Penetration (South)

Coffee Penet.% (Urban)

2007 2008
63.9%
63.5% 62.8%

2009
64.5% 63.6% 62.3%

2005

2006

2007

2008

2009

Q1

Q2

Q3

Q4

Source :HHP 2007-2009, IMRB

South: Coffee preparation & purchase

Who prepares coffee ?
Students Self Spouse Parents Know how to prepare 11% 80%
< 13 years

How is coffee prepared ?

HW* 96% 1%
School 99% students

YWA* 21% 74% 47%

CWE* 15% 76% 6% 38%

15
Black Milk+Water Only Milk

Consumer Method of Preparation

1.3g coffee 9g sugar 120 ml milk 40 ml water Tumble for froth

54%

83

Cant say

House wife primarily prepares coffee at home Who purchases coffee ?

Students
Self Spouse Parents 19% 77% YWA* 36% 59% CWE* 35% 59% 9% HW* 65% 34% 3%

Coffee is mostly prepared with a mix of milk and water Where is coffee purchased?
Grocery/General Store/Local Kirana Supermarket/Hype rmarket Wholesale store 84% 15%
37% 54%

How frequently?
9%

5%

House wife is the primary purchaser

* Glossary YWA Young Working Adults CWE Chief Wage Earner HW House Wife

Monthly grocery Emergency

Stock over

Caf Culture

The Opportunity
50% of Indias population is below 30 years of age, making India the country with youngest population in the world Young are earning high income at earlier stages of their career than compared to previous generations High disposable income, a desire to spend on better things, and a desire for change Increased relevance of Caf culture
Opened to different formats of coffee that can be consumed apart from the regular hot and cold Different variants, earlier not known at all are becoming familiar; such as Lattes, Cappuccinos, Espressos Cafs becoming synonymous as meeting/hangout places where one can share great moments over a cup of coffee

Out of Home
CCD, Barista, Mocha & Costa Coffee are the key players in the OOH segment
2000 outlets across the country Huge expansion plans over the next 3-5 years; mainly in tier-II cities Also forayed into retailing of packaged coffees

New Entrant
Starbucks expected to open cafs in the Indian market soon

Nestls presence in OOH segment

- Caf NESCAFs - NESCAF Caf Corners - Vending points across educational institutions & corporate/commercial establishments

Coffee mixes (In-Home): A Brief History

First launched as a basic 3-in-1 coffee by NESCAF in 1998, targeted at youth
Met with limited success, withdrawn next year

BRU launched the first foaming 3-in-1 coffee in 2005, targeted primarily at aspiring, trendy, upwardly mobile youth BRU strategy : Focus in driving Image
Leverage Cappuccino imagery of Trendy, Youthful, Modern Beverage Growth in Volumes but base still low Significant investments behind Cappuccino (both ATL & BTL)- Sip Lick mmm campaign

NESCAF launched NESCAF Cappuccino in 2008, with the proposition of Bring home the caf experience
This was followed with launch of the variants: NESCAF Choco Mocha & NESCAF Vanilla Latte

DELIVERABLES
(STAGE 1)
Does Caf style coffee (in-home) have a role to play in developing the coffee category?
If Yes How? If No Then what do you see as the way to grow Coffee Category? You may use graphs & charts to support the same Limit: 1 slide

Give a Brand Positioning Framework for a Product (within the current portfolio or outside) that you will look to support/launch. Only one product may be selected. (Use the Brand Positioning Frame work given in the next two slides strictly to provide your inputs)
Limit: 1 slide

Brand Positioning Framework format

FOR . . . WHO . . . IS . . . AND OFFERS THAT MAKES ME FEEL BY

TARGET CONSUMER
BRAND BRAND PERSONALITY CORE ESSENCE EMOTIONAL BENEFITS FUNCTIONAL BENEFIT

I BELIEVE THAT DOES THIS BY PROVIDING UNLIKE WHO IS NOT OFFERING

BRAND REASON TO BELIEVE MAIN COMPETITOR COMPETITIVE DIFFERENTIATION

E.g. Coca-Cola Zero

FOR . . . WHO . . . active, individual young men Coca-Cola Zero fit, tough, original and masculine deep down refreshment for the body, mind and spirit like a man not having to compromise on my self-image or taste for the sake of diet TARGET CONSUMER BRAND BRAND PERSONALITY CORE ESSENCE EMOTIONAL BENEFITS FUNCTIONAL BENEFIT

IS . . .
AND OFFERS THAT MAKES ME FEEL BY

I BELIEVE THAT DOES THIS BY PROVIDING UNLIKE WHO IS NOT OFFERING

Coca-Cola Zero the real taste of Coca-Cola with zero calories in packaging more suited to me

BRAND REASON TO BELIEVE MAIN COMPETITOR COMPETITIVE DIFFERENTIATION

Pepsi MAX the real taste of Coca-Cola.

DELIVERABLES (Stage II)

Instructions
Complete Marketing Plan:
Slide 1: 4Ps in detail Slide 2: Broad-level Sales & Distribution Strategy Slide 3: A Five-year development plan for the brand
Targeted annual Volume Growth figures. Rationale (may be supported with statistical data). Marketing Inputs to be given, year-wise. Estimated spends. Assume a Marginal Contribution in the range of 30-35%. How long will the brand/portfolio take to break even?

Slide 4: Articulation of insight (from positioning framework) Slide 5: Give the tagline for the Product. Any creative designed will be given brownie points!

Additional Data

Out of Home: Caf Coffee Day

Background

Caf Coffee Day is a division of Indias largest coffee conglomerate, the Amalgamated Bean Coffee Trading Company Limited (ABCTCL). Popularly known as Coffee Day, its a Rs. 750 crore, ISO 9002 certified company. With Asias second-largest network of coffee estates (10,500 acres) and 11,000 small growers, Coffee Day has a rich and abundant source of coffee. This coffee goes all over the world to clients across the USA, Europe and Japan, making it one of the top coffee exporters in the world. ABCTCLs retail division Caf Coffee Day (CCD) pioneered the caf concept in India in 1996 by opening its first caf at Brigade Road in Bangalore. Caf Coffee Day is now the largest organized retail caf chain in India with cafes across top ninety cities in the country. It also has cafes in Vienna, Austria and Karachi

Operation in India

ABCTCL at present has 970 CCD outlets. The company plans to spend Rs 130-150 crore on expanding its store network and changing the look and feel of existing stores in this financial year. The Route To Market for Cafs is mainly through company owned, company operated Cafes. The chain is also trying to capture a slice of spends on in home consumption of coffee by retailing its own coffee and related products through food and grocery chains.

Out of Home: Costa Coffee

British coffee chain Costa Coffee has reworked its India strategy to turn profitable and expand its footprint. The new strategy involves closing unprofitable locations, segmenting strategy for different locations, changing the look and feel of outlets and customising the menu to better suit the Indian palate. The chain, which has a master franchisee agreement with Devyani International, a subsidiary of Ravi Jaipuria owned RJ Corporation, is looking to expand only at metros. According to Santhosh Unni, the company went through its share of mistakes before setting the model right. As part of the restructuring, Costa will have four key formats situated at airports, malls, high streets and IT parks. They have also introduced something called the off premise business where they are setting up kiosks in marriages, and seminars meetings.

Outlets market share of major players

38, 2% 120, 5%

No of outlets
CCD
Costa Coffee 803, 35% 1270, 56% NESCAFE Touchpoint Barista Lavazza

Lipton Caf

42, 2%

Beverages dispensing system market share of major players

14000, 12%

No of machines
42000, 36% 49000, 42%
Nestle CCD HUL Others

11667, 10%

NESCAF Cappuccino
Targeting youth (between 18-30) by offering a great alternative to expensive cappuccinos available at Cafs NESCAF brand name lends credibility

Objectives
To become an image driver amongst the youth by establishing the versatility of NESCAF as a brand To provide an affordable caf experience to those who aspire for it
Single Serve Pack 15g Sachet Multi Pack (5X15g sachet)

NESCAF Cappuccino: New Variants

New variants were launched in October 2009:
NESCAF Choco Mocha NESCAF Vanilla Latte

Launched in select cities

Limited exclusive consumer communication done since launch.
Only In-Store communication through Point of Sales