Barista Coffee Company Ltd. 1. What is Barista positioned in the market? 2. Should Barista adopt the franchising strategy?

3. Should Barista go for price reduction of its product line or should it continue with its premium pricing strategy? 4. Should company adopt differential pricing strategy or retain the same across all towns? 5. Should Barista contribute with the current product mix strategy or should it offer wider assortment of food/snack items alomg with its core offerings of coffee? 6. Recommend a growth strategy and formulate 2006-2007 marketing plan for Barista Coffee Company Ltd.

Key words - Coffee Retailing, Experience Marketing, Pricing, Franchising Barista has emerged as a leading coffee chain in India. It was the first to sense the latent need of Indian consumers wanting not just a product but a complete coffee experience. The case describes the key factors contributing to the growth of Barista. It discusses the dilemma faced by the company on adopting the franchise model to further expand its chains of caf in the country. Its top management has to take important decisions related to the pricing and product mix.

Its plan to expand the network of coffee chains had suffered owing to several factors such as changes in ownership structure and high attrition rate at the top level

1. What is Barista positioned in the market? Barista positioned itself as a fine cafe. It projected itself as an experiential coffee. Moreover it positions itself as a brand for anyone who loves coffee. Their products, services and outlets are more like the traditional European cafs, where people would meet for the love of coffee. Barista decided to use caf ambience as a differentiator between itself and competitors. So, Barista outlets started to position the ambience provided. Ambience inside Barista was relaxing, fun and casual which is similar to that of Italian cafes. 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. Baristas bar tenders call out the names of customers loudly when their order was ready which made the customers feel warm and gave them a sense of importance and familiarity. It also made clear to the customers that they could hang around for as long as they wished without feeling embarrassed and thus positioned itself as a relationship building caf.

2. Should Barista adopt the franchising strategy? Barista wants its coffee retailing business to grow aggressively. The dilemma faced by the company is whether to adopt the franchise model to further expand its chains of caf in the country or should go for the company owned outlets. We would recommend Barista to go for franchising strategy. The advantages of going for a franchising strategy are: - Interested parties will invest in the setting up new outlets - The real estate case will also be handled by the interested parties - The current real estate cost of Barista is about 20percent of the total sales, so will lead in reduction of the cost of operation - No rental fees for the extra outlets opened - Barista has incurred losses of 1.46, 4.57,15 crore in successive 3 years, so it needs to reduce the expenses first. - Franchising is a relative easier way of expanding the business and this strategy is followed by most of its competitors. So it should go for franchising strategy.

3. Should Barista go for price reduction of its product line or should it continue with its premium pricing strategy?

The competitors of Barista offer products at lower prices than Barista. Taking the case of CCD, affordable prices had been an important element of its overall strategy. But lowering the price in case of Barista wont do any good. It could erode the brand exclusivity. It would also lead to lower margins which might not be tenable owing to high rentals of its outlets. Moreover Barista has been incurring losses for the last 3 years as per Exhibit 12. A further lower margin will lead to more losses. If it continues with its premium pricing strategy, then a larger segment of market that is the middle class families is neglected. CCD (100 cr) mainly targets the middle class segment and has a revenue more than that of Barista (80 cr). Barista should not neglect the TIER 2 cities.

4. Should company adopt differential pricing strategy or retain the same across all towns? The possible option could be the differentiation in which Barista could offer its products at lower rates in tier 2 cities like Combaitore, Mysore, Jalandhar etc in comparison with the tier 1 cities like Mumbai and Delhi. Premium pricing in the tier 1 cities like Delhi and Mumbai Differential pricing in different cities will also help in targeting the middle class families which constitute the major portion of the target population This would also enable it to offer its products at prices based on the actual cost of operations. Consumers are price sensitive in Tier 2 cities. Lower rates would make the product more affordable in the Tier 2 cities. This would result in penetrating the tier 2 cities faster which will ultimately help in revenue generation Increase in the market share.

5. Should Barista contribute with the current product mix strategy or should it offer wider assortment of food/snack items along with its core offerings of coffee? As per the current scenario, the revenue mix of coffee and foods is 70:30. Barista has an objective of offering a much wider range of food and beverages. But our recommendation is not to increase the range very wide. Increasing the range of products will result in - Dilution of the experiential coffee image - Gradual reduction of the focus on coffee - The concept of experience marketing wont hold good for Barista - Focus on food could erode the difference between outlets of food chains like McDonalds and the coffee bars

But Barista is a family oriented brand. In a family, children would not like to have coffee and can go for the other food items. So, we suggest that Barista should not totally focus on coffees but it should have certain snacks which are more of demand by the children like the all time favorite sandwiches. It has also been mentioned that only 20% items account for 80% sales, so Barista should cut down the products that do not make much impact with the consumers.

6. Recommend a growth strategy and formulate 2006-2007 marketing plan for Barista Coffee Company Ltd.