Coffee Wars in India: Café Coffee Day takes on Global

Brands
Submitted by - Matthew Joe I Sathish Hariharan I Rini Rafi
The evolution of the Café Coffee Day
Café Coffee day was founded by Mr. VG Siddharta. VG Sidharta started out as a
management trainee at JM Financial services where he learnt the first lessons of
investment. Later he started an equity trading business and started acquiring coffee
plantations. During this time, the coffee market was regulated by the government. Later,
the government started deregulating the market. By then, Siddharta had acquired 3000
acres of coffee plantations and believed that he had to brand his coffee to compete with
global players.
Siddharta started by selling freshly ground high quality beans in Blore and Chennai. Slowly
he moved up the value chain by launching a café at a fashionable street called Brigade road
in Blore. The question that siddharta had to answer was why a customer would pay so high
for a cup of coffee. The answer to this was the branding and the bundling. The Café Coffee
Day was launched with internet, IBM computers, air conditioning and high-end furniture.
This turned out to be a success.
By April 2013, CCD had nearly 1500 cafes, 1000 Xprs kiosks, 450 Fresh and Ground retail
outlets and 22000 vending machines. The vision of CCD was to become No. 2 in the world.
CCD was positioned as a “hang out place” and targeted the upper middle-class youngsters.
CCD sold instant coffee Indian snacks, sandwiches, pastries etc and merchandise. CCD
ensured reasonable pricing. CCD focussed less on mass media advertisements and more on
promotional activities.
The four Ps of marketing:
1. Product: Coffee, snacks, merchandise
2. Place: Fashionable streets, IT campuses
3. Promotion: Contests around popular television shows
4. Price: Reasonable/affordable
CCD did not buy coffee from the market. They made their own coffee, so they could control
their quality. In 2002, CCD launched “Coffee Day Xprss” counters and by 2013, had nearly
1000 such outlets. In 2010 CCD launched the CCD lounge which was targeted at young
professionals and not teenagers.
Segmentation, targeting and positioning:
1. Segmentation: The market of coffee lovers is divided based on their age –
teenagers, young professionals, middle/senior coffee drinkers. The market has a
segment for coffee connoisseurs.
2. Targeting: CCD had a product for each segment.
 a. For the teenagers, CCD had the cafes as a hangout place. CCD also targeted
the merchandise for teenagers
b. For middle aged or senior customers who preferred coffee at home, CCD
sold freshly ground coffee
c. For the young professionals, CCD had the lounges.
d. For the coffee connoisseurs, CCD had the CCD square
3. Positioning: CCD was positioned as a lifestyle brand for coffee lovers
Starbucks as a Competitor for CCD
There are several factors that make Starbucks an entrant that CCD must watch out for –
1. Tie up with Tatas – This offers Starbucks access to premium real estate, easy access
to local coffee and the network to set up a café in a shorter time compared to the
other foreign players.
2. Increasing median age of Indian population – The median age of Indian population is
27. Though affordability might be less now, it is bound to increase in the changing
economic climate. CCD’s focus is on youngsters below 25. If CCD does not focus on
the 27-35 segment, Starbucks may become a very strong competitor in this segment.
3. Brand conscious India – India is brand conscious country and there is a good chance
that certain segments of customers may switch to an international brand, especially
if it provides better customer service and value.
However, given its premium pricing, Starbucks will find it difficult to make inroads into the
Tier II markets and its locations will be limited to metros. Given its various options, CCD
could choose to capitalise on its core strengths – long industry presence, large network of
stores in Tier 2 & strong brand presence. It should try not to enter direct competition with
Starbucks in its major markets. It could try to differentiate itself on its two main USPs –
youth & affordability.
Roadmap Ahead for CCD:
We recommend CCD to only plan for a slight alignment to confront Starbucks. The focus
area for CCD should be as below.

 On the value creation frontier CCD is placed in the cost leadership with
efficiency and reliable quality. Continue focus on the quality and efficiency
(vertical integration, high number of stores, brand equity among youth
customer segment).
 Improve service level through personalised customer service. Improve employee
training program to provide state of the art service.
 Adding healthier option in the menu to attract health conscious customers.
 Look at merchandising options for CCD
CCD to use the containment strategies as its too early to access the threat of starbucks.
Focus on locking in the customers with improved quality and service.