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A Study of Coffee Retail Cafes in India
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A Study of Coffee Retail Cafes in India

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Term Paper presentation as part of the Retailing Management course in IIM Bangalore.

Term Paper presentation as part of the Retailing Management course in IIM Bangalore.

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A Study of Coffee Retail Cafes in India A Study of Coffee Retail Cafes in India Presentation Transcript

  • Term Paper Retail Management Group No. 9 Monika Tanwar (1211116) Prachi Patil (1211203) Tonmoyee Saikia (1211153) Anusha S. (1211011) Vishrut Shukla (1211314)
  • > Agenda Coffee Retail Industry in India • Current and Future Trends • Porter’s 5 Forces Analysis of Industry Secondary Research : Competitive Landscape • Study of different players in Coffee Retail Industry • Study of Consumer Behaviour • Major players in Coffee Retail Industry Primary Research: Detailed Analysis of Cafés of Select Brands • Café Coffee Day ( Regular) • Barista Lavazza Espresso Bar • Costa Coffee Primary Research: • Factor Analysis • Discriminant Analysis • Results Quantitative Analysis
  • > Coffee Retail Industry in India TRENDS Size of Market in 2012 $230 million Number of Specialty Coffee Shops in India : 2100 PORTER’S FIVE FORCES ANALYSIS Number will double to 4000 by 2015 CHALLENGES • High Operational Costs • High Rental Charges • Brands competing for limited real estate • Attrition of store workforce MODERATE MODERATE HIGH MODERATE HIGH View slide
  • > Competitive Landscape in India First movers New entrants Other players View slide
  • > Competitive Landscape in India Café Coffee Day • Division of Amalgamated Bean Cofee Trading Company , Karnataka • ~40% Market Share • 1,534 stores Multiple Formats • Lounge 47 stores • The Square 3 stores • Café 1, 484 stores Barista Lavazza • Owned by Chennai-based Sterling Infotech under Brand Barista • Acquired by Italian coffee maker Lavazza Group in 2007 • Second Largest Coffee Chain • 230 stores in 2011 • Plans to open 500 by 2014 Costa Coffee • UK-based coffee retailer • 100 cafes • Presence in Tier-I cities, plans to grow in Tier-II cities in long term • Plans to expand to 1000 by 2015-16
  • > Consumer Behavior Change in Needs from Functional to Experiential Traditional Consumers : Frequent Independent Coffee Houses like India Coffee House which account for 96% of total value sales in 2011 Consumer Motivations : • Past Experience • Convenience of Location • Choice of Café by Friends & Family 95% consumers in India drink their coffee on-site (in café) Young consumers : Spend long time in cafes , hanging out and socializing Consumers want Value – for Money Services
  • > Detailed Analysis of Café Brands Café Coffee Day (Lounge) Customer Demography • Teens to middle-aged, upwardly mobile Loyalty Program • Café Moments Card that gives cashback Offers • Discounts given to cardholders at times, communicated through digital marketing Product Mix Merchandise Menu • Hot and cold coffee of different flavours and origins, shakes, tea, sandwiches, mini eats, desserts – available in 2 sizes • Very detailed Menu – different menu for food and beverages Method of preparation: Freshly prepared, customization allowed Order - Staff comes to take order and deliver (15-20 minutes for delivery) Merchandise • Coffee mugs, sippers, cookies, coffee beans, coffee percolator, special festive/new merchandise. • Items on display have quantities and prices clearly marked on placards, display on wall fixture and over counter
  • > Detailed Analysis of Café Brands • • • • • • • • • Ownership - Company owned Store front - Prototype store - Typical red brand signage along with distinct color for Lounge to differentiate it from regular CCD, Display window induces customers to enter flaunts the interiors of the store with bright light giving a premium look Brightly lit walkway, extended glass gallery Store locality - Store located on a busy main road in Koramangla, in a semi-residential area close to some offices Store layout - Indoor seating, sofas, chairs and tables arranged along the walls and some in the centre Furniture - Tiled and laminated flooring with wood panels, sofas and cushions that match the color scheme Lighting - Bright white and yellow light, lamps in all the corners to make the area look bigger, spotlights above tables Comfort / Feel – Upscale, formal, ideal for business meets Entertainment - Soft music playing, brand promos on TV
  • > Exhaustive Set of Retail Parameters • Choice and availability of beverages & snacks • Availability of full meals Well lit ambience Colors, wall art Quiet, calm mood Can sit comfortably for long hours • Facilities like restroom, smoking area etc. • • • • • Contemporary, comfortable seating • Space for small meetings • Meeting like-minded people for socializing • Loyalty programs • Discounts, coupons, offers • Branded merchandise • Mood/Feel in the café • Attachment/belonging • Location and ease of access • Availability of parking • • • • Newness of the menu Flexibility of offering Simplicity of menu Price /value for money • Books, newspapers, magazines Music playing in the café • Video entertainment • Internet access • Quick, prompt service • Warmth and hospitality by staff • Convenient timings
  • > Reduced Set After Factor Analysis Purpose - Fun, conversations, meeting friends, hanging out, passing time • • • • • • • Convenience of locations Fresh, flexible, contemporary menu for food & beverages Availability of full meals in the menu Internet Access, Books, Magazines etc. in the café Branded merchandise (eg: coffee mugs, t-shirts, sippers) Music + Video entertainment in café Ambience (Wall arts, graphics, youthful colors) of café Statistics: KMO: 0.606 and Bartlett’s Test of Sphericity: Significant for Chi-Square at given dof Purpose - Family visits, serious talks, personal visits & business meetings • • • • • • Quality of service and amenities in the café Fresh, flexible, contemporary menu for food & beverages Opportunity of networking with peers, community atmosphere Loyalty programme, discounts, coupons and rewards Music + Video entertainment in café Convenient pricing and value-for-money offerings in café Statistics: KMO: 0.606 and Bartlett’s Test of Sphericity: Significant for Chi-Square at given dof
  • > Discriminant Analysis Objective • Build a statistical model to understand which factors contribute significantly to superior café experience for 4 brands • Predict how a new store of a particular café brand will fare on customer satisfaction based on ratings of retail factors. Methodology • Each café brand rated on identified reduced set of factors (Independent Variables) for each purpose of visit • Discriminant Analysis run for each (Café Brand, Purpose of Visit) combination (Results below) • Summary Analysis of the customer satisfaction data (1 to 5) done to obtain basic Customer Experience Score for brands Purpose Café Brand Determinant Equation for EXPERIENCE_RATING : ‘Exp’ (1=Good, 2=Bad) CCD Regular Exp = (.469*LC)+(.125*M)+(.058*FM)+(.379*IBM)+(.491*BM)-(.080*MVE)+(.306*AW) Barista Exp = (.509*LC)+(.250*M)+(.003*FM)+(.077*IBM)+(.280*BM)-(.538*MVE)+(.404*AW) Exp = (.735*LC)+(.254*M)-(.055*FM)+(.359*IBM)+(.076*BM)-(.161*MVE)+(.290*AW) CCD Regular Family visit, serious talks, own time, bmeetings CCD Lounge Costa Coffee Fun talks, meet friends, hang out pass time Exp = (.034*LC)+(.672*M)+(.170*FM)-(.323*IBM)+(.418*BM)+(.131*MVE)+(.521*AW) Exp = (.665*QOS)-(.206*M)-(.481*NWC)+(.240*LDC)+(.246*MVE)+(.789*PVM) CCD Lounge Exp = (.340*QOS)+(.763*M)+(.310*NWC)+(.166*LDC)-(.489*MVE)+(.552*PVM) Barista Exp = (.428*QOS)+(.125*M)+(.367*NWC)+(.318*LDC)-(.786*MVE)+(.619*PVM) Costa Coffee Wilk’s Lambda is too high and chi-square value is not significant due to fewer responses.
  • > Customer Experience Scores
  • That’s it folks! Thank You!
  • APPENDIX Detailed Analysis of Café Brands Café Coffee Day (Regular) Barista Lavazza Espresso Costa Coffee
  • Detailed Analysis of café brands – Café Coffee Day (Regular) Demographics Teenagers, young mobile Loyalty programs Café Moments Card that gives cashback of Rs.500 for every Rs. 5000 spent Promotional offers Customer Special Birthday/ Anniversary SMS & emails and discounts to loyalty card holders Menu Product Mix Coffees, Smoothies, sundaes, cakes, Finger Foods, Pastas, Momos, Pizzas, Sandwiches, Desserts etc., Combo deals (beverage + snacks) Freshly Prepared, customization is allowed Merchandise Price Method of preparation Coffee Mugs , Variety of Coffee Beans , Coffee Powders, Coffee Machines, Apparel, Gift Items Pricing Pricing is same for all the CCDs - Rs. 450 for two people (approx.) VAT extra
  • Detailed Analysis of café brands – Café Coffee Day (Regular) Delivery Order Staff comes to take order and deliver (15-20 minutes for delivery) Raw material sourcing Delivery frequency Once in 3 days, CCD’s own logistics service, cold storage Quality check Operations Sourced from vendor, Furniture etc. made by CCD itself Weekly checks from ISI, dedicated executive for hygiene maintenance Appearance & 3-4 members with proper clean uniforms, helpful and have attitude knowledge about products Staff attributes Service and behavior Courteous staff , take/deliver order with a smile, enthusiastic and prompt, 10th/12th-pass staff trained at CCD’s own training institute
  • Detailed Analysis of café brands – Café Coffee Day (Regular) Ownership Company owned Preparation area Visible, however, platform is comparatively high so as to not keep it too visible Store front Prototype store; Typical red brand signage with tagline on purple board to identify the store; Display window induces customers to enter flaunts the interiors of the store with red and yellow light – not so premium but casual look Locality Store attributes Located on main roads, near malls, corner etc Layout Indoor + outdoor seating area, - wooden chairs and table – not so premium; Open assortment of snacks besides counter, Menu displayed above eye level Furniture Entertainme nt Lighting Store timings CCD makes its own furniture - Laminate Flooring, Leather Couches, Plastic Chairs, Granite Tables Music Adequate yellow lighting in the store, spotlights on furniture, wall arts 8AM-1AM
  • Detailed Analysis of café brands – Barista Lavazza Espresso Demographics Teenagers, young mobile Loyalty programs Newly launched in NCR Customer Menu Italian based menu: Appetizers, Sandwiches , Quaker oats, muffins, puffs & rolls, pasta, lasagne, Teas & Coffees , Soups & Salads , Pastries & Bakery , Desserts, Mocktails (Juice, shake, refreshers), combo meals (for 1, for 2) Price Method of preparation Only beverages are freshly Prepared - General customization is possible in drinks. (Only customization is adding more/less sugar, sugar free etc.). Merchandise Product Mix Coffee Mugs , Variety of Coffee Beans , Coffee Powder – comparatively less merchandize; Also, merchandise is not displayed properly Pricing Prices are also different across outlets. Some outlets are inside corporate offices. The prices are generally cheaper there (because of absence of rent and negotiation by the corporate for lower prices) - Rs. 300 for two people (approx.) VAT extra
  • Detailed Analysis of café brands – Barista Lavazza Espresso Delivery Order Raw material sourcing Operations Delivery frequency Self service Sourced from national vendor Once every day – since readymade sandwiches etc are also sourced; (Food items generally have life of one day. If it is not sold, then it is disposed-off and entered as ‘damaged goods’ in the system. Other ingredients generally last for 6-12 months) Quality check Monthly surprise checks from internal audit agency & immediate suspension if found guilty Appearance & attitude Proper uniforms – clean Light colored orange Staff attributes Service and behavior Courteous staff , take/deliver order with a smile, enthusiastic and prompt
  • Detailed Analysis of café brands – Barista Lavazza Espresso Ownership Company owned Preparation area Visible, to customers Store front Prototype store; Typical orange brand signage with distinct name Lavazza; Display window induces customers to enter flaunts the interiors of the store with red and yellow light – not so premium but casual look Locality Store attributes Layout Furniture Entertainme nt Lighting Store timings Located on main roads, near malls, corner etc Indoor + outdoor seating area, - Metal Tables & chairs, orange lights– not so premium; Open assortment of snacks besides counter; Menu displayed above eye level Laminate Flooring, Metal tables and chairs Couches, Music Orange Yellow light – not so premium 8AM-11PM
  • Detailed Analysis of café brands – Costa Coffee Demographics Customer Loyalty programs Promotions Menu Product Mix Youth and high income group None Collaborates with online deal sites such www.crazydeal.in to offer Buy 1 Get 1 free offers. 15% off on a minimum billing of Rs 300 on CitiBank Cards Coffee (Hot+ Cold), Ice Tea, Croissant, sandwiches, cakes and pastry, wraps (beverage + snacks) There is no menu for food. Everything is on display. The beverage menu is simple to understand. Only beverages are freshly Prepared - General customization is possible in drinks. (Only customization is adding more/less sugar, sugar free etc.). Merchandise Price Method of preparation Costa Coffee Mugs Pricing Prices are same across all outlets. (approx Rs.450 for two)
  • Detailed Analysis of café brands – Costa Coffee Delivery Order Raw material sourcing Operations Delivery frequency Quality check Appearance & attitude Customers need to place the order, but is served by the staff Sourced from vendor Delivery is done every morning Food authority and internal inspection Area Manager carries regular inventory management and orders are placed carefully to ensure that there is no leftover waste. Proper uniforms – clean Staff attributes Service and behavior Courteous staff , take/deliver order with a smile, enthusiastic and prompt
  • Detailed Analysis of café brands – Costa Coffee Ownership Preparation area Store front Locality Store attributes Layout Furniture Entertainme nt Lighting Store timings Company owned There is open area where all items are prepared. Preparation is visible to customers. But the platform is comparatively high so as to not make it too visible Prototype store Typical maroon and white combination brand signage with distinct font Costa Coffee Display window induces customers to enter flaunts the premium looking interiors of the store Located on main roads, near malls, corner etc Indoor + outdoor seating area, - couch, cushions – premium look •Open assortment of snacks and beverages besides counter with huge quantity Laminate Flooring, Leather Couches, Jute Chairs, Granite Tables Music Red and white light – premium look 8AM-1AM