Essay: Café Coffee Day

Introduction
At Café Coffee Day, we take pride in our 130 year old coffee growing heritage that began in the verdant soil of Chickmaglur where over 10,000 acres of our coffee plantations lie. From the states to the trendy cafes that CCD is synonymous with, our dedicated team strives collectively towards providing all our customers with a world class coffee experience at affordable prices. It has indeed been an eventful journey led by Mr. V.G Siddhartha, Chairman CCD when he initiated his business interests in coffee by incorporating ABCTCL in the year 1994. From Exports to commodity trading and building a brand, Coffee Day entered with ‘Fresh n Ground’ and subsequently went up the value chain thereby revolutionizing the metropolis with Cafes under the brand Café Coffee Day Café Coffee Day is a division of India’s largest coffee conglomerate, Amalgamated Bean Coffee Trading Company Ltd. (ABCTCL), popularly known as Coffee Day, a Rs. 300 crore ISO 9002 certified company. Coffee Day sources coffee from 5000 acres of coffee estates, the 2nd largest in Asia, that is owned by a sister concern and from 11,000 small growers. It is one of India’s leading coffee exporters with clients across USA, Europe & Japan.
With its roots in the golden soil of Chickmaglur, the home of some of the best Indian Coffees and with the vision of a true entrepreneur nurturing it, Coffee Day has its business spanning the entire value chain of coffee consumption in India. Its different divisions include: Coffee Day Fresh n Ground (which owns 354 Coffee bean and powder retail outlets), Coffee Day Xpress (which owns 341 Coffee Day Kiosk), Coffee Day Take away (which owns 7000 Vending Machines), Coffee Day Exports and Coffee Day Perfect (FMCG Packaged Coffee) division.
Café Coffee Day (CCD) pioneered the Café concept in India in 1996 by opening its first Café at Brigade Road in Bangalore. Till about the late 1990’s coffee drinking in India was restricted to the intellectual, the South Indian traditionalist and the five star coffee shop visitor. As the pure (as opposed to instant coffee) coffee Café culture in neighboring international markets grew, the need for a relaxed and fun ‘hangout’ for the emerging urban youth in the country was clearly seen.
Recognizing the potential that lay ahead on the horizon, Café Coffee Day embarked on a dynamic journey to become a large organized retail Café chain with a distinct brand identity of its own. From a handful of Cafés in six cites in the first 5 years, CCD has become India’s largest and premier retail chain of cafes with 2000 cafes in 318 cities around the country.
Early History and Evolution of Brand
Early History
Café Coffee Day is a division of the largest coffee conglomerate, Amalgamated Bean Coffee Trading Company Ltd. (ABCTCL) which was founded by V. G. Siddhartha, in the year 1993. During those days coffee drinking was mostly restricted to the southern part of the country. During the initial part of the 90s Coffee trading was a government monopoly. However, Siddhartha’s strong intuitive optimism motivated him to buy coffee plantations in the hope of liberalization to come by. This pre-emptive strategy paid off when the country underwent Liberalization, Privatization and Globalization in 1991 and the Government eased FDI regulations. In 1993 the Amalgamated Bean Coffee Trading Company Ltd. was formed which focused solely on coffee exports. In 1995, within just two years of inception, ABCTCL became the second largest coffee exporter from India.
In 1996, realizing the limited growth opportunities in the B2B exports business, ABCTCL decided to enter the business-to-consumer (B2C) market in two major ways. It opened Fresh ‘n Ground ‘ the first ‘neighborhood coffee store’ ‘ in 1996 with the promise of selling freshly ground coffee. In 1996, ABCTCL launched the first Cafe Coffee Day (CCD) in Brigade Road, Bangalore, Bundling coffee with internet surfing proved to be a runaway success and gave CCD the first mover advantage into a segment that promised endless growth.
Evolution of Brand
In the initial phase Café Coffee witnessed rather slow growth rate as compared to the competitors like Barista as CCD mainly catered towards the consumers that are more than 30 years of age. But, in the year 2002 the company went through a massive brand repositioning exercise which helped CCD to gain competitive advantage over the other competitors. Today Café Coffee Day has become the largest coffee retail chain in the country with 1496 number of outlets across 28 states in India. Since then Cafe Coffee day has won several awards and recognitions. It was named “most popular hangout joint amongst youth” at the 3rd Global Youth Marketing Forum in 2011. The Indian Hospitality Excellence Awards also named it “India’s most popular coffee joint” in 2011.
Some Key Facts about the brand
Backward Integration
Café Coffee also follows unique backward integration strategy. This gives it a high sense of quality assurance and guaranteed supply across its outlets as the same raw material is used in all outlets. CCD used to follow forward integration also, but things have changed since 2003. However, it is worth mentioning that CCD till today does not go for franchising and hence the CCD outlets are still managed, operated and marketed by the company itself.
Store Location and characteristics
The CCD stores are placed in strategic locations which include places like High Street/ Family Entertainment Centers, gas stations, near Colleges etc. Café Coffee Day usually goes for high or high-medium footfall area. The store size usually varies from 1000 to 1500 sq ft ground floor space. However, there are certain variations also. As per Mr. Subhajyoti, the store manager of the CCD outlet located near Asutosh College Kolkata, the CCD outlet is 500-700 sq ft. the store gets majority of the traffic on weekdays as it is near a college. It was added that the probable store peak times are 10 A.M to 2 P.M. and 5 P.M. to 7 P.M.
International Presence
Cafe Coffee Day has also started its outlets in international cities like Karachi, Vienna, Dubai and Prague. Café Coffee day, in June 2010, acquired Café Emporio, a Café chain from the Czech Republic. Cafe Emporio has 11 Cafés in Czech Republic. While 7 of them are in Prague, 1 is in Brno and Olomouc and 2 are at Freeport-Hate. Café Emporio runs on 2 formats similar to CCD’s regular Cafés and Lounge & Square set ups.
Revenue Generated
As on March 2013, revenue generated by the Café Coffee Day happened to be US$450 million. Here it is worth mentioning that as per Mr. Subhajyoti, the store manager of the CCD outlet located near Asutosh College Kolkata, the CCD outlet generates a sale of Rs. 7000 per day.
Employee Strength
As on March 2013, the number of employees was 5000.
Product Mix ‘ A Snapshot
Here it needs to added that as per Mr. Subhajyoti, the store manager of the CCD outlet located near Asutosh College Kolkata, the CCD outlet; among food the sandwiches seems to be the favorite of the incoming consumers; in case of beverages the consumer seem to prefer cold coffee. The price range of Cold Coffee varies from 100 to 150; whereas the prices of the sandwiches vary from 100 to 110.
Café Coffee Day Initial Positioning and Repositioning strategy
As it has been discussed before Café Coffee Day is the largest Indian coffee retail chain. It started its journey in 1996 and since then it has come a long way. However, during this phase positioning has been one of the most important aspects of CCD, which has enabled the company the retailers to gain competitive advantage over some of the major competitors like Barista. CCD has also had to undertake substantial amount of repositioning exercise in order to gain such competitive advantage. In this section the initial positioning and the reposition strategy of CCD would be discussed.
Executing the repositioning exercise
Identifying the Target Segment
The real game changer for CCD was the identifying the appropriate target market segment. Unlike the initial phase, where CCD targeted the people belonging to the 30 plus age bracket, in this phase the CCD targeted the people belonging to the 16-35 age group.
Association with Landor Associates
Having zeroed in on the target market segment it was time for CCD to reposition itself as a youth oriented brand. However one of the major challenge was the serious competition from the coffee-rooted brands like Barista and youth-focused brands like Javagreen, and anticipating the arrival of foreign entrants such as Gloria Jean’s and Starbucks. Hence, with an objective to refresh the brand image, Café Coffee Day went to Landor Associates, a major brand consulting firm.
Landor very quickly realized that Youth in India are increasingly influenced by Western culture thanks to cable television and more travel outside the country. As a result, coffee drinking has become a social statement for young upwardly mobile Indians. Landor’s big idea was for Café Coffee Day to become a social hub for young people’a modern day adda
Cafes would be a place for the young, and young at heart, to come together, stylish spaces where the fun and humorous ambiance was as important as the coffee. Coffee would be presented as more than a beverage or product, but a catalyst for long chats, philosophical discussions, political debate, making connections, and developing new ideas. Landor created the look and feel for Café Coffee Day, mapped the customer journey, and developed product, service, and marketing concepts rooted in the new big idea. Menu cards, wall graphics, waiters’ aprons, crockery, and cutlery all provided opportunities to engage in dialogue with customers. Another major part of the brand refreshment was the brand voice which spoke the hip and speaks language of the language of the young upwardly mobile target customers; Catch Phrases such as ‘coffee smoother than words,’ ‘my coffee inside exhibited witty sense of humor and also free debate and fun conversation. It was critical to strike a delicate balance between being humorous and being intelligent and cool.
Change of Logo
The initial Café Coffee Day logo was the first Café Coffee Day logo was a bright red cube with a green stroke above ‘e’ in ‘Café Coffee Day’. The word ‘Café was made to appear dominant to indicate Café Coffee Day’s introduction of ‘Coffee culture’ in India.
The logo of CCD has been changed recently, in line with the increased competition and also to convey a clear communication to its customers. The famous Café Coffee Day squared logo has got a fresh new avatar in the form of a dialogue box with the words Café Coffee Day written in a distinct, specially created font. The new logo reflects the essence of what a Café Coffee Day Café is really all about ‘ a perfect place to ‘relax and dialogue.
Outcomes of Repositioning
Café Coffee Day’s new positioning and clever voice is starting to show results for the company. It won ‘India’s Most Preferred Brand’ in the retail/cafe category in the 2010 CNBC Awaaz Consumer Awards. Café Coffee Day has been able to make a single-minded commitment to the young in India. Café Coffee Day has been able to position itself like a brick and mortar social community network where people can express themselves in a friendly, clean, non-inhibitive and non-intimidating environment that offers an excellent range of products at affordable prices.
Analysis of product and generic competition to the brand
Initial Positioning
During 90’s the coffee drinking in India was limited to south Indian traditionalists, the intellectuals and the five-star coffee shop visitors. On the other hand the neighboring South Asian markets had a popular culture of the consumers visiting the cafes experiential purpose in addition to consuming a glass of beer. These Cafés were also promoting cyber-culture and offering Internet access. Such trend was really inspired V.G. Siddhartha, the founder of CCD. Hence, in the initial part Café Coffee Day was positioned more as an Internet Café. This was the very early days of the Internet in India, and customers trooped in to Coffee Day to experience the Internet. Coffee was just an extra. Siddhartha also experimented with new formats, such as lounge Cafés serving plated meals in addition to the sandwiches, pastries and croissants offered in the Cafés. The idea is to see whether this format can attract and retain customers who typically go elsewhere during mealtimes. Unlike the Cafés, that caters primarily to the 15 to 30 age group, these format targets consumers that are more than 30 years of age. However, Siddhartha had quickly realized that the present positioning strategy has been far from successful. Due to the lack of clear positioning CCD had lost lots of ground to Barista. By 2002, Barista had some close to hundred cafes around the country, while CCD had just thirty five. Executing the repositioning exercise
Identifying the Target Segment
The real game changer for CCD was the identifying the appropriate target market segment. Unlike the initial phase, where CCD targeted the people belonging to the 30 plus age bracket, in this phase the CCD targeted the people belonging to the 16-35 age group.
Association with Landor Associates
Having zeroed in on the target market segment it was time for CCD to reposition itself as a youth oriented brand. However one of the major challenge was the serious competition from the coffee-rooted brands like Barista and youth-focused brands like Javagreen, and anticipating the arrival of foreign entrants such as Gloria Jean’s and Starbucks. Hence, with an objective to refresh the brand image, Café Coffee Day went to Landor Associates, a major brand consulting firm.
Landor very quickly realized that Youth in India are increasingly influenced by Western culture thanks to cable television and more travel outside the country. As a result, coffee drinking has become a social statement for young upwardly mobile Indians. Landor’s big idea was for Café Coffee Day to become a social hub for young people’a modern day adda
Cafes would be a place for the young, and young at heart, to come together, stylish spaces where the fun and humorous ambiance was as important as the coffee. Coffee would be presented as more than a beverage or product, but a catalyst for long chats, philosophical discussions, political debate, making connections, and developing new ideas. Landor created the look and feel for Café Coffee Day, mapped the customer journey, and developed product, service, and marketing concepts rooted in the new big idea. Menu cards, wall graphics, waiters’ aprons, crockery, and cutlery all provided opportunities to engage in dialogue with customers. Another major part of the brand refreshment was the brand voice which spoke the hip and speaks language of the language of the young upwardly mobile target customers; Catch Phrases such as ‘coffee smoother than words,’ ‘my coffee inside exhibited witty sense of humor and also free debate and fun conversation. It was critical to strike a delicate balance between being humorous and being intelligent and cool.
Product Analysis
CCD offers an array for products. However, for the ease of analysis all the products offered by CCD are being classified under two broad heads, such as the beverages and the food items. Among the beverages the coffee related terms are the real cash cow. However, the company is also looking to focus on the noon coffee segments, especially the food segment to increase the variety of offerings. Hence applying the concept of product life cycle, it can be said that the Coffee related products of CCD have successfully, reached the maturity stage, where as the food segment of the company is in the growth stage and is looking to make its way to the maturity stage
Competition to the brand
Indian Café Market- A snap shot
Changing lifestyles, improving disposable incomes, increasing influence of western countries, easy accessibility and younger population are fueling the demand for coffee shops in every corner of the country. The humble cup of coffee that cheers up mood, initiates conversation and relaxes you from a tiring day is brewing up a storm in India. The Indian ready-to-drink (RTD) tea and coffee market has picked up a great business in the last 5 years. According to recently published report ‘India Coffee Shops / Café Market Forecast & Opportunities, 2017; the market is expected to grow to a whopping Rs 2,250 crore by 2017- thanks to the cafe culture among urban youth. The domestic market, which currently stands at an estimated Rs 1,100 crore, is dominated by outlets like Cafe Coffee Day, Barista and Costa Coffee. The competition in the market is likely to heat up with the entry Starbucks, the largest coffee retail chain in the world.
Café Coffee Day- Direct Competition
Barista Lavazza
Barista Coffee Co. Ltd, India’s second largest organized cafe chain. A 34.3% equity stake was sold to Tata Coffee in 2001 and the remaining 65% stake was bought by Sterling Group owned C Sivasankaran in 2004. Later, he also bought the remaining Tata’s stake. In 2007 Sterling group sold Barista to Lavazza. Lavazza is an Italian manufacturer of coffee products. Barista Lavazza has estimated annual revenue of Rs 200 crore. As on 2012, Barista had 225 outlets and was planning to launch 40-45 outlets a year in the next two-three years. Lavazza enjoys a market share of 15 per cent in the country as compared to CCD, which has a market share of 60%.
Costa Coffee
Costa is a British multinational company and is a wholly-owned subsidiary of Whitbread PLC. It is the second largest coffeehouse chain in the world behind Starbucks. Costa Coffee entered India in September 2005 through an exclusive franchisee tie-up with Devyani International Ltd. As on 2013 Costa had 100 stores in the country and had plans to open 300 more stores in the country.
Starbucks
The latest entry in India`s coffee chain industry is Starbucks. Starbucks came to India in 2012 in partnership with Tata Global Beverages. The Seattle-based company, which has operations in 61 countries, was planning to open its store in India for the last 5 years. Finally, the first outlet was open in Mumbai in October 2012. Beginning with stores in Delhi and Mumbai in calendar 2012, the retail stores will be developed in cities across the country.
A part from this there are other competitors also such as Beyond Coffee, Gloria Jeans, Minerva Coffee Shop, Café Mocha, etc.
Indirect Competition
‘ McDonald’s
‘ KFC
”Pizza Hut
‘ Local Coffee shops
Marketing, Communications and Segmentation Strategy
Marketing and Communications
Advertising
In store Advertising
Café Coffee Day has always been known to for its unconventional marketing techniques. Café Coffee Day has been in the business for the last 17 years and the yet it has been seen in the television advertisements for very few times. CCD invests 2 per cent of its top line on marketing, with a marketing budget of Rs 8-10 crore. Of this, so far, nearly 90 per cent was spent on in-store marketing. In an interview to Campaign India, Ramakrishnan, president ‘ marketing- CCD has said as far as communications is concerned the company treats all the 1496 stores as 1496 billboards and hence in store advertising is very much an above the line advertising for the company.
The visit to the CCD outlet near Asutosh College, Kolkata was a reflection of the in store advertising strategy of the company. The store had posters with catchy and funny statements positioned at key strategic positions in the store which reflected the overall youth oriented brand image. This was supplemented by well planned store ambience. Here it needs to be added that CCD has started to focus a lot more on the food segment and the in store marketing at the store actually reflected such strategy, as most off the in store posters had the foods offered by CCD.
Television Commercial
Last year, Café Coffee Day debuted in the debuted its first television commercial (TVC). The campaign follows a recent burst of print media advertisements in nine key cities. The brand that created and established the Café culture in the country, is making inroads into several newer and unconventional markets and aims to reinforce itself into new segments through the TVC.
The ‘Sit Down’ TVC, conceptualized by Creativeland Asia, CCD’s communication partner, is part of a 360-degree campaign. It gives the CCD customer a purpose for hanging out at the Café. It’s built on the premise that ‘standing up’ often doesn’t really yield results, but a lot of things can happen when you ‘sit down’. The CCD TVC is meant to reflect the light-hearted fun one finds at CCD outlets. It mirrors the youth’s habit of sitting down over a cup of coffee for wholesome conversations, from making plans with friends to sharing excitement over a celebration or discussing current affairs and resolving issues.
Print Advertisement
Cafe Coffee Day released its first print ad on Friday, 28 September, as a false cover in The Times of India. With the headline, “You’ll never run out of reasons to hang out”, the ad showcases the combo deals introduced by the coffee shop chain on the front page, and some fun takeaways from when Cafe Coffee Day first began on the flip side. The ad appeared in The Times of India editions in Mumbai, Delhi, Bangalore, Kolkata, Chennai, Hyderabad and Pune, the same cities the offers have been introduced in.
Creativeland Asia is the creative agency for Cafe Coffee Day, and Madison handles the media duties. Cafe Coffee Day had introduced a new menu and combos two months ago, and has been advertising on outdoor and radio for that. The print ad is just to increase the scale of exposure.
Sales Promotion
Banded Packs
In an effort to promote food segment Café Coffee Day has started the banded packs through combo deals. In this case the two or more unit of two different products is sold at two different prices. The combined price is less than the actual regular prices of the products.
Customer Loyalty Programs
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. This not only helps the company to inflict repurchase of product but also acts as an effective customer retention strategy.
Public relations
Cafe coffee day has been able to popularize the coffee culture amidst the youth through the use of the digital media; social media to be more specific. Their entire social media strategy is focused towards youngsters. Be it their Facebook updates or tweets, they are very focused on whom to communicate to. A huge majority of their social media communication is revolving around their ‘Sit Down’ culture.
Content-wise they are focused on promoting Cafe Coffee Day as a place to have conversations. Ably supported by some good photography, they are heavy on image updates to resonate with the vibrancies on youngsters. With 2 updates every day, they seem to getting quite a good traction from their community. For a brand with more than 3 million people in its community, they boast a healthy 9% fan engagement for a month.
CCD has also used YouTube effectively to create a buzz, especially through the ‘Sit down’ advertisement. CCD, like most brands, is using YouTube as a place to host their commercials. Although their Facebook strategy is nothing short of brilliant, there is a lot of room for improvement in the You Tube strategy of CCD.
Be it user base or engagement, CCD is way ahead of all its competitors, including the closest one Barista.
The overall social media strategy has resulted in generating quite a buzz, especially on Facebook. And with an overwhelming majority of people liking, their perception is positive as well.
Segmentation Strategy
Demographic Segmentation
Age: 16-35. It was reflected as the store manager of the CCD outlet located near Asutosh College Kolkata added that, Seventy percent of the customers belong to the age group of 18-24 as the college is near a college.
Income: Middle to High Income Group (Middle income group in India: Rs 3.4 lakh to Rs 17 lakh, ET.)
Psychological segmentation
Personality- Extrovert
Attitude- Positive Attitude
Psychographic Segmentation
Lifestyle- Status seekers, Outdoor enthusiasts
Strategies adopted over time by the brand to tackle competition
Strong Brand Positioning
Café Coffee Day is positioned as a youth oriented brand. Café Coffee Day has been able to make a single-minded commitment to the young in India. Café Coffee Day has been able to position itself like a brick and mortar social community network where people can express themselves in a friendly, clean, non-inhibitive and non-intimidating environment that offers an excellent range of products at affordable prices. This has actually been a part of the major brand
refreshment or repositioning strategy undertaken by Café Coffee Day. Since, the rebranding CCD has been recognized as one of the most popular brands in the country. The strong association of the brand with the youth of the country has lead to the competitive advantage of the advantage of top-of-mind recall.
Strong distribution Channel
The channel and distribution strategy followed by CCD is probably unlike any other of its competitors. CCD has 1497 number of stores in the country. Cafe Coffee Day selects key strategic locations like High Street/ Family Entertainment Centers, gas stations, near Colleges etc. This has provided CCD to capitalize on two key factors that affect the consumer buying behavior, such as convenience and visibility. The stores usually have minimum frontage of 25 running feet, and sufficient parking space.
Effective Backward Integration
Café Coffee Day is famous for its integration strategy. The company has shifted from the forward integration strategy, but it still follows the backward integration strategy. On the contrary, one of the major competitors of Café Coffee Day, Barista uses imported coffee beans and beans from the Tata Coffee. In this way, the backward integration strategy followed by CCD not only provides better control over the supply chain through guaranteed supply but also high sense of quality assurance.
Association with Local Suppliers
Although, Coffee is the main product provided by the CCD, but CCD is seriously looking to consider the food items as an important part of the product of the overall product mix. The food items available in Café Coffee Day are obtained from local suppliers whereas Barista’s food is catered by the Taj caterers. Café Coffee Day would hence, have a lower-cost advantage.
To summarize, it can be said that through the above mentioned strategies CCD has been able to achieve operational efficiency and cost minimization, i.e. the cost leadership.
Café Coffee Day Market Expansion Strategy
Café Coffee Day already has a strong presence in the Indian market with 1497 outlets and it looks to take total number of outlets to 2,000 by 2015. This means that CCD has footprints in 200 cities as of now and by 2015 it will spread to about 400 cities. Here, it needs to be added that the outlets are going to be in a combination of Café, lounge and square formats. Such expansion strategies followed by CCD makes sense as the Reports say that the market is expected to grow to a whopping Rs 2,250 crore by 2017- thanks to the cafe culture among urban youth. Café Coffee Day is also looking to bet big on the food segment planning to add more menus to the food category.
Café Coffee day is also looking to make its presence felt in the global market. Cafe Coffee Day has also started its outlets in international cities like Karachi, Vienna, Dubai and Prague. Café Coffee day, in June 2010, acquired Café Emporio, a Café chain from the Czech Republic. Cafe Emporio has 11 Cafés in Czech Republic, while 7 of them are in Prague. Emporio runs on 2 formats similar to CCD’s regular Cafés and Lounge & Square set ups. The regular cafes are pure play Cafés serving hot and cold beverages and ready to eat snacks while the lounges and squares come with a broader menu and elegant layouts.
Distribution Strategy
Café Coffee Day distribution strategy success story- A Snap Shot
Distribution or place is one of the most important aspects of the overall marketing mix. Marketing Channel Strategy is growing in Importance for the search for sustainable competitive advantage, growing power of retailers in marketing channels, the need to reduce distribution costs, the increased role and power of technology and the new stress on growth. From the point of view of retailing, the decisions related to distribution become critically important. Distribution strategy has been instrumental in the success of Café Coffee Day (CCD). The first Café Coffee day outlet was set up in the month of July of 1996 in Bangalore. Since then the company has come leaps and bounds as far the channel and distribution is concerned. As on July, 2013 CCD has been able to successfully open 1496 outlets across 28 of the country. As a matter of fact the company has also went taken a step forward towards becoming a global brand by making the presence felt in countries international cities like Karachi, Vienna, Dubai and Prague. One of the key strategic decisions towards globalization has been the acquisition of Café Emporio, a Café chain from the Czech Republic which has eleven Cafes in Czech Republic, among which seven are situated in Prague.
Café Coffee Day distribution strategy- A Paradigm of shift
There has been significant change in the distribution strategy of the company. Café Coffee Day has always been famous for being a vertically integrated company; both forward and backward. Here it needs to be mentioned that incase of back ward integration the firm integrates with the suppliers. In forward integration the firms integrate towards the channels of distribution i.e. with the channel partners or intermediaries. CCD has continued the backward integration strategy to reduce costs which includes owning the plantations, growing the coffee, making the coffee machines to making the furniture for the outlets. However, there has been a lot of change in the forward integration strategy.
In the year 2003, , then head of marketing of CCD Sudipta Sen Gupta, told Financial Express that CCD is looking to outsource the regional distribution and warehousing operation to a private party.
The Cafe Coffee Day retail outlets are serviced by regional warehouses store. The regional warehouses were in turn serviced by a main warehousing and distribution centre situated at Bangalore.
After the tie-up, the where-with-all of warehousing like manpower, land and space are being provided by the private party while Cafe Coffee Day provides the online support needed for inventory management, which has been developed in-house. Here it needs to be mentioned that, one of the main reasons for such a revamping in the distribution strategy was not only to save cost, but also to make the presence stronger in the country. At that point of time the company had 130 outlets only, now it has increased to 1481; the number itself reflects the success of the newly adopted distribution strategy.
However, it is worth mentioning that CCD till today does not go for franchising and hence the CCD outlets are still managed, operated and marketed by the company itself. But it must be added that Coffee Day Express, a division and subsidiary of Café Coffee Day operates through franchisee. In an interview, K. Ramakrishnan, President Marketing, Cafe Coffee Day mentioned that CDX has quickly reached more than 900 outlets across the country, of which 226 are franchise outlets.
Apart from the change in forward integration, another major change in the distribution strategy of CCD has been the use of internet. CCD has been using the digital space quite effectively to reach out to the customer directly. CCD offers coffee makers, cakes, coffee powders, apparel, vending machines and other accessories through the digital space.
Role of store Location in the success
One of the key aspects of the distribution in case of retailing happens to be location. While a good retail location does not ensure success, a bad retail location does ensure problems. Café Coffee is one of the prime examples of how good store location can play a major role in the success of the retail outlets. It is quite evident that Café Coffee is mainly a youth centric brand that targets the population belonging to the 16-35 brackets mainly and hence it would be quite imperative for them to be present in key strategic locations which include places like High Street/ Family Entertainment Centers, gas stations, near Colleges etc. This has provided CCD to capitalize on two key factors that affect the consumer buying behavior, such as convenience and visibility. Café Coffee Day usually goes for high or high-medium footfall area. The store size usually varies from 1000 to 1500 sq ft ground floor space. The stores usually have minimum frontage of 25 running feet, and sufficient parking space. If we consider Kolkata itself CCD has Role of store Location in the success
One of the key aspects of the distribution in case of retailing happens to be location. While a good retail location does not ensure success, a bad retail location does ensure problems. Café Coffee is one of the prime examples of how good store location can play a major role in the success of the retail outlets. It is quite evident that Café Coffee is mainly a youth centric brand that targets the population belonging to the 16-35 brackets mainly and hence it would be quite imperative for them to be present in key strategic locations which include places like High Street/ Family Entertainment Centers, gas stations, near Colleges etc. This has provided CCD to capitalize on two key factors that affect the consumer buying behavior, such as convenience and visibility. Café Coffee Day usually goes for high or high-medium footfall area. The store size usually varies from 1000 to 1500 sq ft ground floor space. The stores usually have minimum frontage of 25 running feet, and sufficient parking space. If we consider Kolkata itself CCD has established its presence in key strategic location in places like Park Street, Camac Street, Salt-lake Sector-V, ruby, etc. Most of these outlets are o high streets or near schools, colleges, offices, petrol pumps, etc. This has helped the company to gain strategic leverage in the city over some its competitors.
Summary regarding the future directions for the brand
Although the consumption of the coffee in India is considerably lower as compared to some of the other countries like Brazil, USA, etc. it is worth mentioning that over the next few years the coffee consumption rate is likely to grow. This is more likely to make the Indian coffee retailing business a lot more attractive and competitive. One of the key signs of such a trend is clearly visible as the largest Coffee retail chain has entered India. Hence, it is important for CCD to follow strategic direction to ensure competitive advantage.
Store Expansion
Coffee consumption has seen a robust growth during the past decade. Coffee is being increasingly consumed in cafes and other commercial establishments apart from South India where coffee is readily consumed by households. The key drivers of this growth can be attributed to increase in income along with growing middle class and urbanization. This also led to the trend of emerging Café culture in the country. CARE Research estimates domestic coffee consumption to grow at a CAGR of 6% in the period CY12-15.
Keeping the above stats in mind it can be said that the plan of CCD to reach the 2000 milestone by 2015 is of great significance. CCD operates under three formats (CCD cafe, lounges and squares) and six verticals — high street, educational institutes, corporate, transportation hub, highways and tourist hubs. CCD may look for new verticals along with scouting for new locations for expansion. This is of great importance keeping in mind that Starbucks may not be expanding at that pace to start with. CCD is expecting to have around 50-100 cafes in the next 12 months. CCD indeed does have the first mover advantage and has cornered most of the high street locations in India and with real estate costs the major hindrance for retailers, Starbucks will have a task on their hands as they seek to expand.
Focus on non-coffee segments
There is very little doubt over the fact that the coffee related beverages are the cash cow for Café Coffee Day. However, the brand has come under certain degree of criticism for being over dependent on the coffee related segments. This can be achieved through focusing on merchandising and the food segment.
Merchandising
Merchandising as a culture is fast picking up. It would help the keep the brand young and vibrant. The company currently sells its own products such as coffee powder, juices, cookies, mugs and coffee brewing machines. Apart from this CCD has also tied up with IPL teams such as Kolkata Knight Riders and Chennai Super Kings for selling their merchandise. Although it was a good experience, presently Merchandising currently accounts for less than 10 per cent of our total business.
Foods
CCD is largely seen as a beverages and hangout chain. However, to encourage consumers to have food at the joints lounge formats were launched. Close to 30 per cent of our consumers is below 20 years of age, while another 30 per cent of our consumers are in the age group of 20-35 years and hence CCD wishes to continue with the present brand image of a hangout spot. But, the company is also looking to add more menus to their existing food category. They are planning to offer Sandwiches, Biryani and Pastas. The company expects to churn 30 % revenue from this segment.
Commercial Vending Machines
CCD has parallely built in a sturdy revenue pipeline from marketing income and the vending machine business.
The vending machine business in various corporate offices and other locations is another killer offering which is bringing in healthy revenues. On an average, CCD vending machines pour out 1.2 million cups a day and the target is to take this to 2 million cups a day.
Hyper Local marketing
Hyper local marketing is a concept that says that Local is the new global. It is a new way to engage the consumers with brands in their vicinity. This strategy is worth while trying as the one of the major strengths of CCD is the strong presence leading to high degree of visibility and convenience. Such a strategy is tailor made for the overall business model of CCD. As a matter of fact CCD has partnered with hopper, location based mobile app developer. The partnership that was formed in the end of 2012 for its 1319 outlets was implemented so that users could discover CCD outlets in their vicinity and win rewards for check in.
Entering international markets
One of the major visions of Siddhartha is to see to become a truly top global coffee retail brand. CCD has already started its outlets in international cities like Karachi, Vienna, Dubai and Prague. In June 2010, CCD acquired Café Emporio, a Café chain from the Czech Republic. CCD had been eyeing an entry into Philippines, Malaysia, Vietnam and neighboring countries. CCD was eyeing a presence in the foreign market on the back of joint venture agreements as it felt that local expertise would help the coffee retail chain to gain a stronger foothold. However, the buzz in the industry is that with global coffee chain major Starbucks entering India, the home grown company is looking to focus more on the domestic business, which is its domain.