Business Strategies adopted by Cafe Coffee Day
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Café Coffee Day aims to be the best café chain by providing a world-class coffee experience at affordable prices, with a significant market presence in India and expansion plans. The café market is projected to grow from $70 billion to $151 billion by 2020, with Café Coffee Day as the largest chain in India operating over 1,500 outlets. Despite facing competition from global brands and local chains, the company leverages its lowest price strategy and vertical integration to connect with a growing young demographic.
Business Strategies adopted by Cafe Coffee Day
- 2. Mission “To be the best café chain by offering a world class coffee experience at affordable prices.”
- 3. Country Analysis • Median Age – 27 years • 65% of the population is below the age of 35 years • The proportion of working population (25-59) is expected to increase from 40% in 2000 to 46% in 2020 • By 2020, 35% of the total population will be residing in Urban cities • By 2020, there will be 109 miilion people in India earning between 3 lacs to 6lacs per annum and 100 million people earning between 6 lacs to 30 lacs • Spending on discretionary products will increase to about 64% of total spending by 2020
- 4. Industry Analysis • Current size of the café market in $70 billion and is expected to grow to $151 billion by 2020
- 5. Competitor Analysis Biggest competitors are: • Starbucks • Costa Coffee • Barista • Gloria’s • Coffee Bean & Tea Leaf • Many stand-alone coffee shops are coming up. • McDonalds and Dunkin Donuts have started selling coffee. • Many substitutes in the form of Slush, Iced Tea, Flavored Juices, Fruit Punch etc are available. • Revenues are rising but losses are also on the rise.
- 6. About Café Coffee Day • Café Coffee Day, owned by Coffee Day Global is the largest coffee chain in India. • It was founded by Mr. V.G Siddhartha. • With 1538 outlets across India, it is 3 times bigger than its major competitors such as Starbucks, Barista and Costa Coffee. • It also has a presence in Austria, Czech Republic, Dubai, Malaysia and Egypt. • It is also the largest producer of “Arabica” beans in Asia exporting to various countries including USA, Europe and Japan.
- 7. in India, we operate a highly optimized and vertically integrated coffee business which ranges from procuring, processing and roasting of coffee beans to retailing of coffee products across various formats. We set out below a description of the formats of coffee businesses we operated as of December 31, 2014: Format Branding Offerings Target segment Footprint C a f é N e t w o r k1 Café Coffee Day outlet Café Coffee Day a mix of coffees, teas and other beverages and food options value-conscious youth segment 1,423 outlets across 209 cities in India and 16 international outlets across Austria, Czech Republic and Malaysia Café Coffee Day The Lounge outlet The Lounge a mix of exotic coffees, teas, cocktails and international cuisines options trendy and affluent customers with a higher disposable income 42 outlets across seven cities in India Café Coffee Day The Square outlet The Square specialty coffees and teas and fine dining options coffee connoisseurs who seek the theatre of coffee seven outlets across four cities in India I n H o m e Vending business Coffee Day Beverages a variety of coffees and teas; coffee is freshly brewed corporate and institutional clients 28,777 vending machines across India Fresh & Ground outlet Coffee Day Fresh & Ground 22 exclusive varieties of freshly brewed coffee powder residential households consumption and a large number of restaurants and eateries across South India 424 outlets across seven states in India O u t o f H o m e Coffee Day Xpress kiosks Coffee Day Xpress basic offerings of coffees and teas and light snack options caters to ‘Coffee on- the-go’ consumers 590 kiosks across 12 cities in India Production, Processing & Exports Coffee Day Exports green coffee beans large roaster and coffee traders one of the largest exporters of Indian coffee beans, primarily to Europe, Japan and the Middle East Café Coffee Day as on December 31, 2014
- 9. Strengths 1. Highest number of stores 2. High brand equity among the youth 3. Low prices 4. Vertical Integration Weaknesses 1. Not seen as a premium brand 2. Ordinary ambience and décor 3. Complaints about customer service Opportunities 1. Growing coffee culture in India 2. Rising income of people 3. High potential in Tier-II and Tier-III cities 4. Enter foreign markets 5. Introduce new varieties of snacks and beverages Threats 1. Growing competition from global and local coffee chains 2. Rising attrition rate SWOT
- 10. Porter’s Five Forces Industry rivalry (HIGH) Threat of new entrants (HIGH) Supplier’s bargaining power (LOW) Threat of substitutes (HIGH) Buyer’s bargaining power (LOW)
- 11. Abell’s Framework Customer Group (18-30 years) Distinctive Competencies Low cost, Larger reach, Better connect with the people Customer Need Informal place to relax and have fun
- 12. Determinants of Shareholder Value To increase shareholder value, managers must pursue strategies that increase the profitability of the company and grow the profits CCD has used certain strategies, like going for IPO - Rs 1,150-crore for its growth and expansion purpose, ultimately helping the shareholders to make profit
- 13. Coffee Day has ties up with Swiggy and will start the service in Bengaluru where it has mapped 50 cafés to deliver orders within a 3-4km radius. Rs 1,150-crore IPO in October 2015 . Cafe Coffee Day to invest Rs 450 crore to add 400 stores in 3 years. • Current Information on CCD
- 14. Industry Life Cycle Organized Café chain Industry currently is in the Growth Phase
- 15. Strategic Groups Café Coffee Day Independent Café chains Barista Costa Coffee Starbucks Coffee Bean & Tea Leaf
- 16. Quality Map Costa Coffee Barista Coffee Bean & Tea Leaf CCD Starbucks
- 17. Functional Level Strategies Efficiency 1. Highest number of stores 2. High brand equity among the youth 3. Low prices 4. Vertical Integration Customer Responsiveness 1. Not seen as a premium brand 2. Ordinary ambience and décor 3. Complaints about customer service Innovation 1. Growing coffee culture in India 2. Rising income of people 3. High potential in Tier-II and Tier-III cities 4. Enter foreign markets 5. Introduce new varieties of snacks and Quality 1. Growing competition from global and local coffee chains 2. Rising attrition rate Competitive Advantage LOW COST
- 18. Customer Groups and Market Segment Café Chain Market CCD stores and Kiosks Middle Income College Students CCD Lounge and CCD Square Premium Corporates
- 19. Value Creation Frontier Costa Coffee Barista Coffee Bean & Tea Leaf CCD Starbucks
- 20. Business Level Strategy Business Level Strategy used by Café Coffee Day
- 21. Crossing “The Chasm” Gloria Jean’s Coffee had to shut shop in India as it couldn’t pass the Chasm CCD successfully crossed the Chasm as it understood the needs of majority of Indian consumers
- 23. Coffee Plantations Conversion in to coffee beans Selling coffee through retail chains Vertical Integration of Café Coffee Day
- 24. Existing PRODUCTS New MARKET DEVELOPMENT Opening of Café chains in internationally DIVERSIFICATION Vending machines MARKET PENETRATION Café Chains PRODUCT DEVELOPMENT 1. Coffee exports 2. Premium cafes such as Lounge and Square 3. Home Delivery Service ExistingMARKETNew