Crimson Cup Bangladesh: Expanding the Coffee Market

to the Youth of Bangladesh

Case

Author: Mahmud Habib Zaman, Sohana Z. Sharif, Mashkur Zaman & Sabrina Rowshan
Online Pub Date: January 15, 2020 | Original Pub. Date: 2020
Subject: Advertising & Promotion, Consumer Behavior, Globalization & Business
Level: | Type: Direct case | Length: 1729
Copyright: © Mahmud Habib Zaman, Sohana Z. Sharif, Mashkur Zaman, and Sabrina Rowshan 2020
Organization: Crimson Cup Bangladesh | Organization size: Small
Region: Southern Asia | State:
Industry: Food and beverage service activities
Originally Published in:
Publisher: SAGE Publications: SAGE Business Cases Originals
DOI: https://dx.doi.org/10.4135/9781529704150 | Online ISBN: 9781529704150
SAGE SAGE Business Cases
© Mahmud Habib Zaman, Sohana Z. Sharif, Mashkur Zaman, and Sabrina
Rowshan 2020

© Mahmud Habib Zaman, Sohana Z. Sharif, Mashkur Zaman, and Sabrina Rowshan 2020

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Abstract
By examining the expansion and operations of Crimson Cup, a U.S.-based coffee shop in
Bangladesh, the case highlights challenges faced by a company in the hot beverage industry in
a developing nation. These challenges include competitors, employee retention, supply, and the
coffee culture of the country. The case also considers the company’s philosophy in operating its
coffee house, its strategy and accomplishments, and the changing behaviors of consumers.

Case

Learning Outcomes

By completing this case study students will be able to:

• study the culture and growth of the hot beverage market in a developing nation;
• evaluate the trade-off between standardization vs. customization; and
• assess the challenges faced by the hot beverage industry, including various competitors.

Introduction

Unlike in the United States, where early morning weekdays are peak hours for coffee shops and account for
significant daily business, the early morning beverage market in Bangladesh is practically non-existent. The
highest sales happen late afternoons and evenings on Thursdays and Fridays. Mohaimin Mostafa, Rehanur
Rahman, Mirza Abdul Khaled, and Tarek Rafi Bhuiyan recognized a gap in the hot beverage industry of
Bangladesh. Rehanur Rahman also realized the intense traffic in Bangladesh could be a detrimental factor in
establishing an early-morning market.

On May 22, 2015, the partners opened the Chicago-based coffee company Crimson Cup in Dhaka, with their
flagship store located in Banani (Road 11). This location was specifically picked as international franchises
such as KFC, Pizza Hut, Nando’s, and Krispy Kreme already had stores present, resulting in existing high
foot traffic. The majority of consumers consisted of university students and executives of nearby offices.
Targeting the youth generation was a priority as they exhibit similar attitudes towards brand consumption as
their western counterparts (Jabbar & Zaman, 2014).

With the success of the Banani store, the partners decided to expand to Dhanmondi (Road 27) on January
22, 2016, an area within Dhaka with a high number of schools and colleges and a few universities. The
Dhanmondi store sold more than 500 drinks on the day of its grand opening. Another store was opened on
May 25, 2017 in Uttara, a residential area in the rapidly developing residential community near the outskirts
of Dhaka, featuring a “quiet room”; the idea was to have a place where customers can unwind and catch up
on reading or have meetings.

Coffee Culture in Bangladesh

With the eighth largest population in the world, Bangladesh (World Bank, 2017) is an attractive market for
many foreign businesses. The consistent rise in economic growth over the past decade has led to higher
disposable income and increased consumer spending, with a solid consumer base of 160 million.

Yet, while U.S. customers order multiple cups of coffee and Europeans have entered the fourth wave with
high-end coffee—the science of coffee (CBI, 2018)—Bangladesh is predominantly a tea market. A slight
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increase in coffee consumption among youth aged 18–32 (LightCastle Partners, 2014), however, is likely due
to the increase in coffee shops offering a cozy environment and free Wi-Fi.

Based on market research conducted by LightCastle Partners (2014), Bangladesh has about 50 premium
coffee houses, with four international chains including Gloria Jean’s, North End Coffee Roasters, Coffee
World, and Beans & Aroma (see Figure 1). These leading coffee houses offer companion products such
as cookies, fruit smoothies, and specialty teas. However, as points of difference are limited amongst coffee
shops, some are serving a greater range of food products including salads, pasta, and even lunch platters.
Crimson Coffee has limited its products to bakery items and sandwiches; the partners believe the core identity
of the shop would be diluted by including other product lines like platters.

To provide an authentic coffee experience, Crimson Coffee imports supplies from the United States, including
the exact same 12-ounce cups used in U.S. stores. To minimize costs, Mr. Rahman orders a full container
worth of supplies with a lead time of three months. Unexpected delays from the supplier’s end or the shipping
company could result in the catastrophic consequence of having to refuse service to customers, affecting the
quality of the service itself. Such an incident occurred only once, which created an expense for Crimson Cup.
The company had to offer medium cups instead of small ones, causing consumers to wonder about the free
top-up. This additional cost was bound to be borne by the company in order to maintain its standards and
prevent switching behavior. Due to this learning curve, the company started to maintain a strict stock and
inventory system, with orders for stock replenishment placed in advance by anticipating projections such as
traffic and inventory write-offs for all three stores.

The Crimson Cup Brand

Although there are a number of coffee shops with both local and international brands in Bangladesh (see
Figure 1), consumers would prefer to see widely popular international chain coffee shops such as Starbucks,
Costa Coffee, and Caffè Nero (LightCastle Partners, 2017).

Figure 1: Timeline of Major Coffee Stores in Bangladesh

Source: Author.

To expand its brand, Crimson Cup turned to the youth segment, positioning the coffee shop as an ideal
hangout with an authentic “coffee house experience.” The company engaged in one-day campaigns on
university campuses, offering promotions such as a 50% discount on cookies with purchase of a medium
drink. Additional campaigns in the form of free coffee were initiated with a Quick Response (QR) code that
redirected the user to Crimson Cup’s Facebook page on the mobile kiosks. Facebook had 2.8 million users

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in Bangladesh in 2018 (Asia Internet Usage Stats, n.d.); thus, it is an important vehicle for organizations.
Through its social media campaigns, Crimson Cup Bangladesh was able to achieve over 48,000 likes and
followers; the company earns recommendations from over 1,000 individuals and multiple reviews.

Most Crimson Cup employees are part-time university students, which creates a challenge for employee
retention. The employee turnover ratio is high within the industry and at Crimson Cup, though the company
pays competitive wages. This challenge extends to managers as well. The partners have invested in a
training program for employees, as an approach to standardizing the service quality of their cafés. To maintain
strict standards, the partners undertook the “Seven Steps to Success” coffee franchise program by Greg
Ubert. Baristas receive a copy of the Ubert book during training and are monitored by mystery shoppers and
auditing. Additionally, through mentorship and on-the-job training, baristas are responsible for training another
individual as well as internal collaboration.

The current level of performance of the existing three stores has led the Crimson Cup partners to believe
that Crimson Cup can become a much bigger player in Bangladesh. The future of the company now relies on
whether to target a niche market or a mass one, with the partners expressing interest in opening additional
stores in Sylhet, Chittagong, and other major cities in the country.

Aside from being the capital city, Dhaka is robust, has diversity, and is flexible to change; the partners are
aware that a “one-size-fits-all” approach will not be appropriate in the other districts, as identical demographic
segments have different motivations outside the capital. Often, coffee shops in districts outside the major
cities consist of “mom and pop” coffee shops rather than barista services. Before taking the leap, the partners
are seeking consumer insights from various districts through the use of research firms and advertising
agencies. The partners want to avoid the “cultural relativism” practice at all cost and are focusing on multilevel
research to gain insights. Moreover, they are also planning to arrange soft launches (i.e., one-day kiosks) in
other districts to get the vibe of potential customers. As the plans for expansion materialize, the partners grow
more concerned with the issue of standardizing or customizing their products in the future stores.

Discussion Questions

1. Evaluate the alternatives for Crimson if it follows its competitors in offering meals or if it maintains a
“standardized coffee experience.”
2. Assess the effectiveness of Crimson Cup’s strategy to increase brand awareness using only word-
of-mouth (i.e., Facebook) over the long run. Suggest alternative strategies that the company can
employ to minimize switching behavior.
3. Describe the pros and cons of expanding Crimson Cup’s operations to other districts. The partners
have decided to conduct studies on the buying behavior amongst consumers in a few districts. What
step(s) should they follow while conducting the research?

Further Reading

Bodenstab, J. (2014, September). The innovator’s solution [Web log post]. Retrieved from
https://www.blog.toolsgroup.com/en/a-supply-chain-innovation-case-study-demand-data-powering-growth
Canadian Second Cup Coffee sets foot in Dhaka. (2016, January). Dhaka Tribune. Retrieved from
https://www.dhakatribune.com/uncategorized/2016/01/26/canadian-second-cup-coffee-sets-foot-in-dhaka
Cavusgil, S. T. , Kiyak, T. , & Yeniyurt, S. (2004). Complementary approaches to preliminary foreign market
opportunity assessment: Country clustering and country ranking. Industrial Marketing Management, 33(7),
607–617.
Klein, K. J. , & Kozlowski, S. W. (2000). From micro to meso: Critical steps in conceptualizing and conducting
multilevel research. Organizational Research Methods, 3(3), 211–236.
Miller Magazine. (2016, October). Grain and flour market in Bangladesh. Retrieved from
http://www.millermagazine.com/english/grain-and-flour-market-in-bangladesh/
Rahman, S. S. , & Mujeri, M. K. (2018). Development partnerships in middle income countries (MICs)
in transition: A case study of Bangladesh. Canadian Journal of Development Studies/Revue canadienne

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d’études du développement, 39(2), 289–309.

Roaster Magazine. (2017, November). Roaster of the year competition. Retrieved from
https://www.roastmagazine.com/about/roasteroftheyear/
Schau, H. J. , Dellande, S. , & Gilly, M. C. (2007). The impact of code switching on service encounters. Journal
of Retailing, 83(1), 65–78.
Zaman, M. & Rahman, M. (2018). Surviving a corporate telecom merger: Case study on Robi Axiata and
Airtel Bangladesh. SAGE Business Cases.

References

Asia Internet Usage Stats 2018 Facebook and Population Statistics. (n.d.). Retrieved from
https://www.internetworldstats.com/stats3.htm
CBI Ministry of Foreign Affairs. (2018, January). Which trends offer opportunities on the European coffee
market? Retrieved from https://www.cbi.eu/market-information/coffee/trends/
Jabbar, M. , & Zaman, M. (2014). Branding: The socio-psychological impacts on low income adolescents of
Pakistan. International Journal of Business & Management (Toronto), 1(2), 52–72.
LightCastle Partners. (2017). Café Industry in Bangladesh. Retrieved from https://studylib.net/doc/8302785/
café-industry-in-bangladesh
World Bank. (2017, November). Data: Bangladesh. Retrieved from https://data.worldbank.org/country/
bangladesh
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