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CASE STUDY
Baristalooks for alliances to grow here
SUBMITTED TO : SUBMITTED BY:
Dr. N. P. Prabhakar Debasish Baj (01)
Jadgish Singh (09)
Ketan Kashyap (12)
Prerna Chauhan (18)
Mridul Chandra (39)
4. Background of Barista
Barista Lavazza is a chain of espresso bars in India. Established in February 2000 under the
name Barista, it was taken over by Lavazza in 2007, a world-famous enterprise that continues
as Italyâs top-ranking coffee company. Headquartered in Okhla, Barista currently has espresso
bars across India, Sri Lanka, Bangladesh and the Middle East. It was established in February
2000 by the Barista Coffee Company Limited. A 34.3% equity stake was sold to Tata Coffee in
2001. C Sivasankaran bought the remaining 65 per cent in Barista from the Amit Judge-
controlled Turner Morrison in 2004, and his Sterling Group also bought out Tata Coffee's stake
later. In 2007, the Sterling Group sold Barista to Lavazza. Barista Lavazza is currently owned by
Lavazza. The coffee is supplied by the Indian roaster Fresh and Honest, headquartered
in Chennai, which is also owned by Lavazza. As of 2009, the chain has 200 stores in India, with
an estimated annual revenue of 200 crores.
Barista was the fastest brand to make it on the list of super brands and is ranked among the top
50 phenomena that changed India.
INDIA AS A GROWTH OPTION
India is still by and large a country of tea- swilling limeys but the trend towards reaching out for
that morning cup of Java is fast catching fire. So, even as North India tightly holds on to its tea
bags, the South loves to measure its daily drone with coffee spoons. Statistics reveal that the tea
to coffee consumption in India is still 7:1 but Java drinkers are fast making up for the lost
opportunity. Still, India is not a major coffee consumption market even though it is the worldâs
sixth largest producer and fifth largest exporter of coffee, exporting roughly 5% or close to 6
million bags in 2010-11 fiscal. Indiaâs annual coffee output is over 3, 00,000 tones, only a third
of which is consumed domestically. Over 90% of the coffee production takes place in the
developing countries while consumption happens mainly in the industrialized economies.
But of late, India seems to be turning the corner in terms of coffee consumption. âOver the past
few years coffee has transitioned from being a traditional beverage consumed mainly in South
India to a beverage with a national presence, consumed in several forms and retail formats,â says
Jawaid Akhtar, Chairman, Coffee Board of India. According to the figures given out by the
6. plans to whip up a smorgasbord of cuisine for Indian palates. The company is aiming for cafes at
Tata hotels, and retail outlets in New Delhi and Mumbai with an initial investment of roughly
$80 million. In the course of time Starbucks will move its cafes to malls, railway stations,
airports and offices.
Starbucks
Starbucks Corporation is an international coffee company and coffeehouse chain based
in Seattle, Washington. Starbucks is the largest coffeehouse company in the world, with 19,763
stores in 59 countries, including 12,848 in the United States, 1,264 in Canada, 973 in Japan, 778
in Great Britain, 621 in China, 441 in South Korea, 350 in Mexico and 269 in Philippines.
Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, coffee
beans, salads, hot and cold sandwiches and panini, sweet pastries, snacks, and items such as
mugs and tumblers. Through the Starbucks Entertainment division and Hear Music brand, the
company also markets books, music, and film. Many of the company's products are seasonal or
specific to the locality of the store. Starbucks-brand ice creamand coffee are also offered
at grocery stores.
From Starbucks' founding in later forms in Seattle as a local coffee bean roaster and retailer, the
company has expanded rapidly. In the 1990s, Starbucks was opening a new store every workday,
a pace that continued into the 2000s. The first store outside the United States or Canada opened
in the mid-1990s, and overseas stores now constitute almost one third of Starbucks' stores. The
company planned to open a net of 900 new stores outside of the United States in 2009, but has
announced 300 store closures in the United States since 2008.
In January 2011, Starbucks and Tata Coffee, Asia's largest coffee plantation company,
announced plans for a strategic alliance to bring Starbucks to India and also to source and roast
coffee beans at Tata Coffee's Kodagu facility. Despite a false start in 2007, in January 2012
Starbucks finally announced a 50/50 joint venture with Tata Global Beverages Limited which
will own and operate as Starbucks Coffee "A Tata Alliance. Starbucks had previously attempted
to enter the Indian market, in 2007, with a joint venture involving its Indonesian franchise and
Kishore Biyani of the Future Group. However, the joint venture withdrew its foreign investment
9. Costa Coffee was founded in London in 1971 by the Italian brothers Sergio and Bruno Costa, as
a wholesale operation supplying roasted coffee to caterers and specialist Italian coffee shops. It
was acquired by Whitbread in 1995, since when it has grown to over 1,700 stores across 28
countries. The business has 1,375 UK shops, 920 Costa Express vending machines and a further
800 shops overseas.
MISSION: âTo serve the best coffee in the true Italian style.â
Costa Coffee has products that boast of a very powerful retail. This includes a reputation for
value of money, convenience and a wide variety of products. It has grown significantly over the
years, and has experienced global expansion. Its main competence lies on the use of information
technology (IT) to fully support its international logistics system. Therefore, Costa Coffee can
see how their individual products perform within the United Kingdom, or even at stores at a
glance. IT also supports the companyâs efficient procurement. It is even able to deliver
good customer care, as the limited amount of work would mean plenty of time to devote to
customers. Its lead consultants have established a strong reputation within the market. It can also
afford to change direction quickly if its management finds that the companyâs marketing strategy
is not effective. It has little deficits and overheads. Therefore the company can offer good value
to customers on a consistent basis.
Despite the powerful strengths, the company is not able to cope up well with its weaknesses. It is
one of UK's largest company in coffee brewing and but has a weak control of its empire, despite
its IT advantages. This could lead to a decrease in productivity in some areas where they have
the least control of. Since Costa Coffee sells products across many sectors, the company may
lack the flexibility that some of its more focused competitors possess. It operates globally, but its
presence is located in only relatively few countries worldwide. Some of the companyâs weaker
branches lack market presence or reputation. Some of the companyâs personnel still lack the
essential skills base in many areas. The company is still vulnerable to the temporary losses of its
vital staff (e.g. being sick, leaving). The companyâs cash flow is unreliable especially in the early
stages of a new product development.
14. itcontinues to sustain the beverage experience through promotions, offerings to include non-
coffee lovers through ice tea, tea, smoothieâs etc.
GROWTH OPTIONS IN INDIA
Baristaâs alliance with Lavazza to grow here may help them to reap certain benefits but at the
same time might even cost them.
Advantages of Strategic Alliances
ï· Gain competitive advantage through access to a partner's resources, including markets,
technology, capital and personnel.
ï· Provide growth at the fraction of the cost of going it alone. Costs are shared among all
members of the alliance, thereby reducing the cost to each.
ï· Make each entity appear to be larger than it is, in the eyes of the public and the
competition, and provide added credibility
ï· Add complimentary resources and capabilities, enabling participants to grow and expand
more quickly and efficiently
ï· Reduce marketing and advertising costs, since these will be shared among the members
of the alliance, leading to greater brand awareness
ï· Expand potential markets, selling to a larger target audience. If your business operates
locally, a strategic alliance can help it expand statewide; if statewide, it can expand
regionally or nationally; if national, it can expand internationally.
ï· Provide opportunities to take advantage of economies of scale through bulk buying,
placing the alliance in the same league as much larger entities in terms of purchasing
power.
ï· Increase market penetration and market share.
ï· Maximize ability to raise capital, as potential funding groups see these alliances as safer
bets for future profits than each of the individual entities alone.
15. Disadvantages of Strategic Alliances
ï· The process of forming the alliance may engender tension, frustration and suspicion.
ï· The relationship may not be win-win; one member of the alliance may benefit
substantially more than the other(s).
ï· A member of the alliance may "steal" your customers, especially if the company is a
direct competitor.
ï· A member of the alliance who operates in an unprofessional or unscrupulous manner may
result in a loss of your customers. A damaged reputation may take years to repair.
ï· There may be conflicts over how the partnership works.
ï· There is the potential to reduce future opportunities by being unable to work with one of
your partner's competitors.
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