Biswa SME Presentation Cafe Coffee Day

7/30/2019 Biswa SME Presentation Cafe Coffee Day

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Strategic Management & Ethics

April 12th ,2010

Biswajeet (Biswa) Jitendriya Pattnaik Section: B, Cohort 5, MBA 2010, Asian Institute of Management, Manila

[email protected]

Cafe Coffee Day

Cafe Coffee Day



Outline of the Strategy Analysis and Planning

By the analysis of Internal and External environment of the Industry, strategic planning is done.



Coffee Industry in India

• India is the 5th largest coffee producers

• Contributes to 3% of the global coffee consumption.

• Exports 80% of the total produce.

• 6% compounded annual growth rate.

• Niche coffee retail format growing at 10-12% annually.

• Organized coffee retail business: Rs. 25 bn.

• Coffee consumption has increased from 50,000 tons to 94,400 tons in last 5 years.

• Second most preferred drink after tea, in India. Wide acceptability in spite of

heterogeneous demographics

• Cafe bars like Cafe Coffee Day (CCD), Barista, Mocha, Qwirky‟s have flocked.

Increasing Middle class serves as a potential untapped customer for the Indian Coffee Industry.

Source: Coffee Board of India

Industry Background



Cafe Coffee Day

• Was started in 1996, as a division of India‟s largest coffee conglomerate, the

Amalgamated Bean Coffee Trading Company Limited (ABCTCL). Popularly known

as Coffee Day, it‟s a Rs. 7.50 bn ISO 9002 certified company. With Asia‟s second-

largest network of coffee estates (10,500 acres) and 11,000 small growers, Coffee

Day has a rich and abundant source of coffee.

• Café Coffee Day (CCD) pioneered the café concept in India in 1996 by opening its

first café at Brigade Road in Bangalore.

• Today, more than a decade later, Café Coffee Day is the largest organized retail

café chain in India with cafes functioning in every nook and corner of the country.

• Café Coffee Day today has cafes in Vienna, Austria and Karachi. New cafes are

planned across Middle East, Eastern Europe, Eurasia, Egypt and South East Asia

in the near future.

• In FY06-07, Cafe Coffee Day's turnover was Rs. 4 bn, in FY08-09, its turnover

increased to Rs. 7.5 bn.

• Meeting place for 15-29 year olds.

Due to increase in consumption of Coffee in India, CCD’s target market is youth.

Company Background

Source: www.cafecoffeeday.com

Who am I ?



Red Square

Leadership & passion

White Swirl

Purity of purpose,

invigorating properties of coffee

Green Stroke

125 years of coffee

growing heritage of thisvertically integrated Group

The font used for “Café” is

called SLURRY. The font looksas though the letters have

congealed(coagulated) out of a

liquid

Source: http://cafecoffeedayblog.com/

Company Background

Mission: To be the best Cafe chain by offering a world class coffee experience at affordable prices.

Company Logo giving a clear alignment to the Company’s mission, values and Leadership.

Who am I ?

http://cafecoffeedayblog.com/

http://cafecoffeedayblog.com/



Target Market

• Research shows that 37% of the customers are between 20 and 24years.

• 27% of the customers are between the age group of 25-29 years.

• 60% of the customers who visit the café are male and 40% are female.

•52% of customers who visit the cafes are students.

• 18% of the customers visit the cafes daily while another 44% visit weekly.

• Each café, depending upon its size attracts between 500 and 800 customers daily,

mainly between 4pm and 7 pm.

• Customers describe Café Coffee Day as the place they frequent most after “home

and workplace/college”. It is a place where they meet friends and colleagues, ingroups of 3 or more.

Whom do I serve ? Customer Profile

Market Research shows that age group of 20 – 29 years are CCD’s primary target market.

Source: Industry data, Barista Vs Café Coffee Day – A Comparative Study, IIPM



Macro & Micro Market Analysis

The Market Analysis shows that CCD & Barista own roughly 80% of the Café outlets in India.

Competition & Strategic Group data

Tea (52%)

Filter and

Instant

Coffee (14%)

Plain Milk

(14%)

Butter Milk &

Lassi (3%)

CSD &

Beverages

(3%)

Share of the Thirst1 Market Share of Coffee2

Branded Coffee

Unbranded Coffee

Cafe

Market Share of Cafe3

Cafe Coffee Day

Barista

Others:Mocha (20%),

Qwiky's (4%),

Georgia (2%)

Source: 1Report on Coffee Consumption in India, 2 & 3Cafe Coffee Day website

Where am I ?



PEST factors that affect Industry/ Strategic group

Key deciding external factors are Taxation, Trade policies, Health consciousness, Age distribn and Pricing.

External Environment Analysis

Political Economic Social Technology

• Taxation policy: High

taxation imposed on

farmers will usually mean

a higher price for thecoffee .

• Deregulation of Intl

trade policy: Depending

on export policies, the

pricing of the domestic

coffee prices are set.• Government stability:

Changes in governmentcan lead to changes in

taxation and legislation.

• International stability

• Employment law

•Interest rates: Increase

means halting investment

and expansion plans, falling

sales for CCD and their suppliers, lesser disposable

income to spend on luxury

products such as coffee.

• Inflation rates: An

increase will decrease the

profitability which will force

to increase prices.

• Competitors pricing - Aprice war for CCD that can

drive down profits.

• Globalization , FOREX

risks

•Population demographics:

Youth brand, majority of its

customers falling in the 15-29

year age bracket.

•Income distribn: Should be

targeted and marketed to

those people with the most

amount of disposable income.

• Location: Easy access for

staff and customers.

• Working conditions/safety

Superior ambience, healthand safety issues are fully

addressed, quick service.

• Age distribution

• Health consciousness

• IT development: Use of

IT infrastructure in Market

Research to exploreopportunities.

• R & D activity

• Rate of technological

change - Much of the

technological change is

down to the Internet and

the speed with which

information can be

communicated around theglobe. CCD will need to

invest heavily just to stand

still in the ever expanding

and developing market.

Source: Starbucks – A Strategy report, James Heavey

How am I affected ?



Porter‟s forces for Coffee Retail Industry attractiveness

Porter’s framework suggests that the Coffee Retail Industry is very unattractive due to heavy threats from all forces.

Internal Environment Analysis

Source: Home grown Coffee Chains - Prakhar Singh, IMI New Delhi

How am I affected ?

Bargaining Power of the Suppliers• The market is dominated by few large suppliers

rather than numerous fragmented sources.

• Establishment of independent chains by the

Suppliers.

Bargaining Power of the Buyers

• Unsustainable Customer Loyalty• Preference merely on factors like easier

accessibility and price

• Switching cost is low

Threat of the New Entrants

• Economies of scale, high cost of entry• Uneasiness of access to distribution channels

• Cost advantages related to the size of the

company,

Threat of the Substitutes

• Most Indians‟ preference for tea over coffeegives them a natural advantage

• Heavy influence of Western culture, could lead to

more Alcohol consumption.

• More emphasis on Quick Service Restaurants

like Pizza Hut, KFC, McDonalds.

Internal rivalry of the

CompetitorsThe major players in coffee

retail are Barista, Mocha,

Java Green. Qwiky's & Java

city.

High High

High High

High



CCD attracts more market share due to its better market penetration by offering it at convenient locations at reasonable price.

Strategic Maps

Source: Industry data, Barista Vs Café Coffee Day – A Comparative Study, IIPM

Where am I?

Low High

Low

Low

Low

Low

Low

Low

Low

High

HighHigh

HighHigh

High

HighNo. of retail outlets

Vertical Integration

C u s t o m

e r S e r v i c e

Price

Mocha (12 outlets)

A m b i e n c

e & D e c o r

Cafe Coffee

Day

Barista

Qwiky's (11 outlets)

Cafe Coffee

Day (430

outlets)

Barista

(160

outlets)

Mocha

Qwiky„s

Accessible & Convenient Location

N o .

o f r e t a i l o u t l e t s

Cafe Coffee

Day

Barista

Mocha

Qwiky„s

BaristaCafe Coffee

Day

Mocha

Qwiky„s

T a s t e



List of KSFs and Threshold factors

In a hyper-competitive Coffee retail Industry , lower pricing by vertical integration and higher availability at accessible

& convenient locations will enable them to be leaders

Strategic Maps Analysis & Interpretation

Threshold CompetenciesKey Success Factors

• Accessible & Convenient Location

• Number of Retail outlets

• Price

• Vertical Integration

• Ambience & Décor

• Customer Service

• Product Mix

• Taste

• Advertising & Promotion

Picture, graph, … Picture, graph, …



As long as CCD could maintain the taste at comparable reasonable prices by vertically integrating and intensely

penetrate in existing markets, it will continue to be the Leader in Coffee retail .

Future Competitive Matrix

Source: Industry estimates, Cafe Coffee Day website

Key Success Factors Weights CCD Barista Mocha Qwiky's Others

Price 30% 10 8 7 3 2

Vertical Integration 30% 10 7 7 7 7

No. of Outlets 20% 10 9 4 0.1 0.05

Location 10% 9 9 6 0.1 0.05

Weighted average 16.045 5.9 5.1 3.5 0.93 0.615

Percentage share 100% 37% 32% 22% 6% 4%

Market Share (Actual) 100% 40% 34% 20% 4% 2%



Since Coffee drinking will become fad, number of outlets and Location convenience will be the future key success factors.

Projected Matrix

Key Success Factors Weights CCD Barista Mocha Qwiky's Others

Price 25% 10 8 7 3 2

Vertical Integration 25% 10 7 7 7 7

No. of Outlets 25% 10 9 4 0.1 0.05

Location 25% 9.5 9 6 0.1 0.05

Weighted average 19.45 7.375 6.5 4.25 0.8 0.525

Percentage share 100% 38% 33% 22% 4% 3%

Market Share (Actual) 100% 40% 34% 20% 4% 2%



The Ladder Model clearly shows that low pricing and Market penetration strategy will give CCD a

sustainable competitive advantage

Company Competencies

What we are?

Competitive Advantage


• Accessible & Convenient

Location



• Product Mix

• Taste



Location

• Number of Retail outlets• Price


• Distribution System

• Functional Organization

• Distribution Network

Resources• Ambience & Décor


• Product Mix

• Taste

•Advertising & Promotion


Location


• Price




•Distribution Network

• Capital Requirement

Competencies

StrategicCompetencies

DistinctiveCompetencies

Sustainable Competitive Advantage

Threshold Competencies



• Distribution Network


• Price


Location


• Price


Incompetencies

Capital requirements

Peripheral Competencies



• Product Mix

• Taste




• Product Mix

• Taste



Location

• Number of Retail outlets• Price


Ladder

Model

L bj i

h d b ?



Extensive penetration by maintaining quality and by customer delightment will lead to achieve the Long term objectives

Long term objectives

Increase in

• Sales

• Market Share

• Market Value

Financial

Objectives

20202010 ACTION PLAN

Rs. 18 bn

40%

Rs. 20 bnxxx

xxx

Strategic

Objectives

• Increased ability to compete in Global

markets

•Increased visibility in Tier 2 & 3 cities.

• Total Customer delightment

FROM TO

• India‟s Leader in Coffee Retail

• Strong reputation with Customers

•Total Customer satisfaction

Where do I want to be?

Reverse and Dream

Rs. 7.5 bn

40%

Rs. 7.5 bn

T i l M d l

h ill b ?



Future Value Proposition

Reasonably priced high quality coffee and other related products, any time anywhere with

superior Customer service and youthful ambience

Triangular Model

Accessible & Convenient Location

Price Vertical Integration

Number of Retail outlets

Key Success Factors

Ambience & Décor

Customer Service

Product Mix

Taste Advertising & Promotion

Strategic Competencies

What we will be tomorrow?



The SWOT analysis gives the Strategic Options which arise due to External and Internal factors.

SWOT Analysis

Growing western cultureinfluence (O1)

Increasing spending patternsof Youth (O2)

Tie-ups with other companiesfor promotion (O3)

Opportunities

Wider coverage in cities (S1O1)

Reasonably priced near Colleges,

Schools, Coaching Centers, SportsComplex (S2S3O2)

For wider brand awareness, tie upwith Youth centric brands (S1O2O3)

Strengths - Opportunities

More Youth centric menu (W1O2)

Include more premium products

(W2O2)

More brand awareness in 2nd and 3rd tier cities, tie-ups with youth centricbands (W1W2O2O3)

Weakness - Opportunities

Wider coverage (S1)

Reasonably priced (S2)

Accessible & Convenient location(S3)

Strengths

Intense Industry rivalry (W1)

Low profit margins (W2)

Heavy CAPEX due to expansion(W3)

Weakness

Introduce High quality exotic Coffeeflavors at low prices (S3T1)

Vertical Integration of Dairy Products(S2T6)

More smaller stores to avoidcannibalization (S1T5)

Strengths - Threats

Target new Market segments suchas Baby Boomers, and Mid-agepeople (W2T3)

Merger & Acquisitions / Joint

venture with Dairy Industry (W1W2T6)

Introduce franchise (W2W3T1)

Weakness - Threats

Entry of Foreign players: Starbucks(T1)

Large unorganized market (T3)

Substitutes for coffee (T4)

Cannibalization (T5)

Rising cost of coffee and dairyproducts (T6)

Threat

O ti Filt



By using Weighed average of options against key factors, options are filtered according to urgency and growth

Options Filter

Short term and Long term recommendations Wh t ill d t ?



Short term and Long-term recommendations What we will do tomorrow?

Execution of Short term and Long term recommendations will help CCD to sustain itself as Market Leader in India.

Target new Market segments suchas Baby Boomers, and Mid-agepeople (W2T3) 1W2T6)

Introduce franchise (W2W3T1)

Merger & Acquisitions / Joint venturewith Dairy Industry (W1W2T6)

More Youth centric menu (W1O2)

Short term recommendations Long term recommendations

Wider coverage in cities (S1O1)

Reasonably priced near Colleges,Schools, Coaching Centres, SportsComplex (S2S3O2)

More smaller stores to avoidcannibalization (S1T5)

Business Model canvas



Business Model canvas

Source: Business Model Generation: Alexander Osterwalder & Yves Pigneur

Key partners Customer

segmentsCustomer

relationships

Value Proposition

Key Resources

Revenue StreamsCost Structure

Key activities

Channels

• Small Fragmented

11,000 farmers

• Dairy products

Providers

• Merchandise

providers

• Youth brand like

Levi, Himalaya

Natural Drugs &

Book stores

• IT companies like

Wipro, Infosys,

Accenture, etc.

• Selling coffee

through Retail

cafe.

• Expansion

• 10,500 acres of

Coffee Plantation

• Vertically integrated,

efficient supply chain

management

• 80% of the revenue is Coffee beans

products.

• 10% of the revenue is generated by

selling merchandises.

• 10% revenue is due to sale of eatables.

• 8 – 10% Profit Margin in Coffee products with

higher margin in merchandises & eatables.

• High costs due to Leasing / renting and initial

investments.

• Customer Loyalty

Programme

• Smart Card promotion

• Movie & Programs

advertisements

37% of the customers

are between 20 and

24years. 27% of thecustomers are between

the age group of 25-29

years. 60% of the

customers who visit the

café are male and 40%

are female. 52% of

customers who visit the

cafes are students

• Superior

Customer service

Reasonably priced

high quality coffee

and other related

products, any time

anywhere with

superior Customer service and

youthful ambience

Documents

Biswa SME Presentation Cafe Coffee Day