As international coffee chains like Starbucks join the list of global players foraying into the coffee business in India, ‘a cup of coffee’ is changing its meaning. Eyeing the increasing amount of disposable income in the wallets of today’s youth, marketers are offering them an ‘experience’ through the cup of coffee.
A move up the value chain
Cafe Coffee Day (CCD), for example, has introduced a new store format to “help customers move up the value chain”. The chain recently, launched a ‘Lounge’ format in its stores in different cities. According to CCD, the format will offer different methods of brewing coffee and the customers will get a chance to explore the process happening right in front of them.
“It is kind of going through the adventure of coffee brewing and exploring ways to enhance your mood,” says Ramchander Raman, Senior General Manager, Food & Beverage, Cafe Coffee Day. A new menu in the lounge format also enables the customer to choose the particular kind of bread and the other elements that he wants inside the bread. “The new lounge format is all about its ambience, the smell, the touch and the overall feeling,” adds Raman.
CCD, which has added around 250 stores in the last year, has major expansion plans for the next few years. According to company officials, CCD is looking at opening 1,000 new outlets by 2014 to take its store count to over 2,000 from its current size of 1,050 cafes in 175 cities across India.
As experience drives the business of almost all the coffee chains, CCD says that there is no specific TG for it. “There is no TG and it is all about offering customers to enhance their mood. So, people of all age groups are our potential customers. We help them explore the experience of having coffee in a better way,” says Raman.
As new players enter the Indian market, CCD has started seriously looking into non-metro cities and expanding its menu for selected stores. For example, the stores on the highways offer meal options as well. “Now, besides opening more stores in metro and Tier I cities, we are expanding into Tier II and Tier III cities. We are also reaching out to travellers and tourists through our stores on highways, where we have also added meals in the menu,” says Raman.
According to a recent survey by the Coffee Board of India, coffee consumption in India has grown manifold over the last two decades. While domestic consumption grew by mere 2 per cent during 1990-2000, it went up to 6 per cent during 2001-08. A recent industry estimate puts the growth rate at 8 per cent for 2008-09. Domestic coffee consumption stood at 94,000 tonnes in the year 2008.
Industry experts suggest that the even better growth prospects in future has attracted international players to start operations in the country. As a matter of fact, out of more than 3,000 cities in India, coffee retailers are present in only 175 cities, which indicates the growth potential of the industry, they suggest.
Looking at the potential, different international players are also riding on their unique value proposition of ‘experience’ that they have created over the years, to tap the market. After entering into an agreement with Tata Coffee, Starbucks, the world’s largest coffee retailer, is expected to open retail outlets in the country soon. “We bring the unique Starbucks Experience to life for every customer through every cup,” says the Starbucks’ website.
Quite similar is the claim of UK-based Costa Coffee’s website, which notes, “First of all, there’s the warm and welcoming atmosphere in our stores and then the great range of authentic coffee drinks. It’s this unique combination that makes us stand out from the others, and we’re incredibly proud of it.”
Costa Coffee, one of the major players in the estimated Rs 1,000-crore organised coffee business in India, is also ready to expand its business to consolidate its market position. The UK-based coffee retailer, which entered India in 2005 and operates 70 outlets, has plans to invest Rs 30-35 crore for setting up 50-60 Costa cafes pan-India by the end of calendar year 2011.
Terming its customers as guests, Barista Lavazza drives its business somewhat on the same line as it claims “We do all we can to make every guest feel comfortable and welcome. And provide a cheerful, interactive ambience that makes guests wish their coffee breaks lasted just a little bit longer.”
Italy’s leading coffee roaster, Lavazza, entered India in 2007 through its acquisition of Barista - the chain of coffee shops in the country, with around 200 points of sale. Now, the international player has plans to spend about Rs 130 crore in developing a coffee plant in India.
What makes India an attractive market for international coffee chains? Harish Bijoor, Brand Expert and CEO, Harish Bijoor Consults, says that the changing consumer behaviour is the key reason. “India is a large market. And customers are on a modernisation spree. Also, the presence of coffee stores is very less and this business area so far remains under-explored in India,” Bijoor points out.
Agreeing with this, Dr Sharad Sarin, Professor of Marketing at XLRI, Jamshedpur, says, “It is the growing and critical size of the Indian economy that is driving the international coffee chains to Indian markets.”
The players though aren’t scared of competition. The more the merrier seems to be the mantra.
“We are a billion-plus people country and marketers are yet to reach people who are willing to spend on having a coffee experience. If you compare the number of coffee shops with other counties, it is much-much lower here. So, there are lots of opportunities and more and more players will only help develop the ‘coffee culture’ in the country,” says Raman of CCD.
Dr Sharad Sarin feels that competition will grow in the coming years, but different brands will have to focus on their USP to sustain. “India is a huge market, but still the competition will grow as more players come into business. But the winners will be those who would be able to create brand loyalty and provide better experience to customers,” says Dr Sarin.
While Bijoor feels, “The winning strategy lies in being present at the right time to the right customers and above all, at the right place. Also, it is very important for different chains to show unique differentiation ability, both in terms of product and experience.”
So, when are you going out to experience your coffee?