“Running cafe is a hospitality business and one needs to create the right ambiance
and experience and back it up with strong logistics”
Over second and third cups flow matters of high finance, high
state, common gossip and low comedy. It is a social binder, a
warmer of tongues, a soberer of minds, a stimulant of wit, a
foiler of sleep if you want it so. From roadside mugs to the
classic demi-tasse, it is the perfect democrat.
Introduction & Rationale
• Booming coffee market in India
• Democratization of coffee culture
• Global coffee chains landing in India
• Imperative to study the consumer
motives, perceptions and wants
Objectives of Study
• Analyzing the Market Potential and Market Players
– International Market
– National Market
• Understanding Market Strategies adopted by top competitors
• Emerging New Players:
– Potential for New Formats like Garden Café, Fashion Café
• Countering future competition
• Our Understanding & Recommendation
• Coffee consumption:120 million (60kgs) bags in 2007-08
• The second most traded commodity in the world
• Market growth rate:World coffee exports totalled 8.01 million
bags in June 2007, an increase of 3.6%
• Top three Players:
•Gloria Jean’s Coffee
• 1971: Opened in Seattle’s Markets
• Aim of providing coffee to a number of restaurants.
• 1982: Adapted Italian principles to resemble strong bar
• 1995: Established its name with the opening of the
676th store as well as increasing the products in store
and in-house music
• More than 14,396 stores spread across 40 countries
• Revenue: $2.01 billion.
• Accounts for 73% market share of U.S. coffeehouse
• Reach customers where they work, travel, shop, and
• Use less of traditional advertising; relying on image
advertising, movie and television placement
• Quality and experience, rather than price.
• Plenty of comfortable seating.
• Environmental Friendly
• India has yet to get the taste of Starbucks coffee
• The reason - Their proposal to enter India was rejected earlier
by the Foreign Investment Promotion Board on the ground that
the equity structure was ambiguous.
• Starbucks bullish on India has decided to file a new proposal
• Bruno & Sergio Costa set up the first Costa espresso
Italian coffee shops, slow-roasted coffee the Italian
way, in London (1978)
• Costa coffee has over 300 stores in the UK, Germany
and the Middle East.
• Revenue: £1.1 billion with a market share of 16%in
• Loyalty Scheme by introducing the Costa Card
• Affiliate marketing: Strong retail presence, Less advertising
currently looking to expand into affiliate marketing
• New contact strategy: Encouraging the customers to register
their details or opt for e-mail marketing
• Costa book awards
• Social Marketing through Costa Foundation
• Brought to Indian by the RKJ Group through a master
franchisee tie-up with Devyani International, in
• Plans to open 300 outlets in the next three to four
• Looking at an investment of over Rs 150 crore.
• In 1995, a businessman and an MD of an advertising agency
visited the United States to experience first hand the Gloria
Jean's Coffees brand.
• Together they established Jireh International Pty Ltd, the
company that holds the right to franchise Gloria Jean's
Coffees in Australia
• Purchased the rights to the Gloria Jean's Coffees brand for
all international countries
• 345 stores around Australia - all locally owned and
operated by more than 100 franchisees
• Revenue: $479,700
• Market share of 37% in Australia
• Gloria Jean's expanded mainly through franchising.
• Prior to a store opening, franchisees receive comprehensive
training through their Coffee University Training Program.
• constantly introducing new and innovative quality products
that are supported by national marketing campaigns, public
relations and local marketing.
• Gloria Jean’s Coffee’s opened its first outlet in July 2006.
• Planning a total of 750 outlets over the next 5-7 years with 150
within the next two years.
• 4 formats:
3. Regular cafes
4. Coffee carts
Indian Domestic Market
• Organized coffee retail business - Rs.8 billion ($17 million)
• Potential for coffee retail outlets are nearly 3,000
• Coffee consumption is 75,000 tonnes – 1/10th the consumption of tea,
• Growth from 2002 and 2005— about 20,000-25,000 tonnes because of
aggressive coffee retail chains
• Organised coffee retail segment growing at 25%-30%
• Non-carbonated beverages (tea and coffee, that is) market pegged at around
Rs 8,000-Rs 10,000 crore
Essentials of a coffee business
• Investment in a coffee outlet
– Rs 18 and Rs 22 lakh for an espresso bar (such as Barista)
– Rs 75 lakh for a high-end, full-service cafe (such as Mocha)
• Location factor: “There are coffee chains paying rentals as high as Rs
250-Rs 300 per square foot,”
• Fluctuation in revenues per outlet: Rs 9,000-Rs 10,000 per day to Rs
35,000-Rs 50,000 per day.
References: www.indiacoffee.org, www.icmr.icfai.org
• Food retail accounts for a sizeable portion of outlet’s sales: 50% to
• Uniqueness of style, menu and concept results in walk-ins of about
– 700-800 per day for mocha
– Cafe Coffee Day’s 500
– Barista’s 300-700
• An average cheque per person of Rs 96 at Mocha. Barista, Cafe
Coffee Day and Qwiky’s.
Top Indian Players….
• Was started in 1996
• Has over 430 café in India.
• Has presence in Austria and Pakistan.
• In FY06-07, Cafe Coffee Day's turnover was Rs 400
• Meeting place for 15-29 year olds
• Want their customers to grow with them
• Marketing associations with youth-oriented brands like
Levis, TVS, Airtel, AOL
• Well lit and respectable, yet informal
• Regular food items like biryani, pulao on experimental
• Launch 25 café a month – Never be more than 5
minutes away from a CCD
• Started in 1999
• Tata’s buy a stake of Barista
• Sterling Infotech take over in 2004
• Lavazza take over in 2007
• Over 160 outlets
• Revenue: Rs 45 crore
• Recreate the ambience and experience of a
typical Italian espresso bar.
• Had newspapers, magazines, guitars, board games.
• Priced at a premium.
• In 2002, Barista had 85 outlets compared to CCD’s 35.
• Reduced its prices to be more accessible.
• Diluted its upmarket sheen.
• Discouraged customers to hang around.
• Tried to be everything to everybody and ended being nothing
Sociability Different themes
‘Doing coffee’ Different Price Points
Coffee & Conversations
Relaxing & Take Away
Taking ‘lifestyle’ out
‘Coffee’ Most Important Convenient
Followed by Price
Lifestyle & Cafes
• Focus on Coffee and Non-coffee Beverages
• Customer Satisfaction and Convenience important
• Take Away
• Pricing policy critical
• Increase average/spending & frequency of visits
• Different Café Concepts
• Exploit Wellness trends among the young
• Target middle class
Strategies for New Entrants
• Differentiate themselves from the rest.
• Tie up with existing established brands
• Use word of mouth and advertisements on radio.
• Run in-store promotions.
• Use of opinion-leading cities.
• In-film advertising (e.g. Café Coffee Day)