Barista, owned by Italian company Lavazza, is looking to form strategic partnerships or franchise agreements to help grow its cafe business in India. It is considering appointing master franchisees to help expand, as competition in the Indian coffee market is increasing with the entry of global brands like Starbucks and Costa Coffee. Barista has struggled to be profitable in India and has closed some underperforming locations. It is exploring options like franchising to improve efficiency and control while continuing to grow in the Indian market.

1. ITM Warangal
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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)

2. BARISTA LOOKS FOR ALLIANCES TO GROW HERE
Italy’s largest coffee company Lavazza is considering strategic partnerships to grow its café
chain Barista in India, a top company official said, without divulging details of such partnerships
(Exhibit 1).
Another person aware of barista’s plans said the company has decided against expanding on its
own and is keen to appoint master franchisees, just as Yum! Restaurants International has done
by appointing RJ foods arm Devyani International as India franchisee for Pizza Hut and Costa
Coffee. A top team from Barista will be in India next week to start negotiations with prospective
franchisees, he added.
Giampaolo Arpe, Chief Commercial Officer of the Lavazza Group, said: “We are open to
exploring strategic partnerships to go ahead with our growth in the Indian market.”
“Lavazza is primarily focused on its coffee vending business in India. Operating cafes is tough,
which is why it has been exploring the option to sell this business and has also considered
franchising it to a third-party completely,” an executive at a rival chain said, seeking anonymity.
The over century-old Lavazza entered India by snapping up Barista Coffee Company along with
its mainstay, coffee-vending business Fresh & Honest from the Sterling Group in 2007. Barista
was earlier partly owned by the Tata Group.
The chain’s troubles became visible over the past year as it shut several prime properties
adjacent to regal cinema in Mumbai’s Colaba area at Barton Center in Bangalore. Barista shut
12-15 outlets in the past two months.
“The company has been unable to make profits and seems to have frozen expansions in the past
six months,” another rival retailer said. Several senior management executives of Lavazza’s café
business, headquartered in New Delhi, also quit the company in recent months. Arpe said the
worldwide economic crisis prompted Lavazza to review its foreign strategies, India included, to
achieve more efficiency and flexibility “and a chain of control appropriate for our times. This
does not mean that we wish to look at our business.” Arpe also pointed out that the strategy is to

3. open cafes offering profitable opportunities and closing those where it is becoming near
impossible to make them viable.
Lavazza had opened over seven new Barista cafes in the past year. Although the € 1.2 billion
Lavazza operates India’s second largest coffee chain, market leader Café Coffee Day (CCD) has
1,320 outlets against roughly 160 Baristas.
Lavazza is largely into the business of coffee roasting and vending globally although, insiders
say, India is the single-largest market for its café business, accounting for less than 3-4 % of
global revenue.
Industry players say that since cafes are not the flagship activity, Barista has stayed on the back
foot when it comes to food offerings and its positioning in India.
Also, the Lavazza formats are not quit mass-market. Arpe says Barista has discerning consumers
who appreciate Italian coffee, which makes the product delivered premium and special in nature,
yet accessible.
But that accessibility may not be quite enough. “The brand was never able to get hold of the
target group,” one of its rivals said.
While CCD has been positioned as an Indian brand in the value segment, global brands such as
Costa Coffee, Gloria Jean’s Coffees and Coffee Bean &Tea Leaf (CBTL) have pushed their
international pedigree through a premium positioning.
TOO Many Owners Spoil the Broth
2000: Barista set up by Turner Morrison.
2001: Sold 34.3% stake to Tata Coffee.
2004: C Sivasankaran’s Sterling Group bought remaining 65% stake from Turner Morrison also
bought out Tata Coffee.
2007: Italian company Lavazza buys barista from Sterling Group.

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 Italy’s 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 world’s
sixth largest producer and fifth largest exporter of coffee, exporting roughly 5% or close to 6
million bags in 2010-11 fiscal. India’s 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. “Over 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,” says
Jawaid Akhtar, Chairman, Coffee Board of India. According to the figures given out by the

5. Coffee Board, coffee consumption has grown in the non-south regions at 42% annually while it
has grown at 3.5% per annum in the southern states between 2003 and 2008.
With the emergence of an aspirational and young middle class who are more cued into
international tastes, coffee café culture is slowly but steadily picking up in the country. Today,
cafes are opening up across all urban centres and coffees joints are fast becoming modern, more
suave renditions of speakeasies where the urban educated youth loves to hang and schmooze
around and spill the beans on current happenings and events.
ALARMING COMPETITION
Currently, India has roughly 1,800 cafes across major cities, with Café Coffee Day - which
opened its branded coffee outlet in Bangalore way back in 1997 – leading the race with over
1,200 cafes. But with the entry of Lavazza in 2007, Costa Coffee in 2005, and now the
impending arrival of Starbucks (in partnership with Tata Coffee) – the gold standard of café
culture worldwide with 50 cafes planned for launch by the end of 2012 – the Indian coffee
landscape is bracing up for greater competition where consumers will have a more liberating
choice when ordering their invigorating shot of espresso. Even fringe players like Australia’s
Gloria Jeans and Dunkin’ Donuts have entered the market and a few more are expected to dip
their toes in the swelling tide of the café boom spreading across India.
The bloom in cafes has resulted in the branded café market reaching an inflection point. Coffee-
shops have now touched $180 million, out of the country’s annual coffee sales of about $667
million. Though still small, the branded café market is growing at 25% and analysts predict it has
the potential to reach $800 million, and to 5000 cafes by 2015. As per capita coffee consumption
in India is just over 60 grams, compared with 4.5 kilograms in France and Japan, and 6 kg in
Italy and the U.S., coffee retailers understandably see a huge growth potential and revenue
upside in the days ahead.(Exhibit 2)
T. Radhakrishnan, Vice President of Tata Coffee, says, “Being the largest Indian coffee
producer, we will fulfill Starbuck’s sourcing needs, and help them with insights on the
market…going by Starbucks reputation, they will be a big force to reckon with in India, and
revolutionize the café market here with their global standards and product offerings.” Starbucks
is looking to create different entry-points for different demographics and apart from coffee it

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

7. proposal with the Indian government. Starbucks did not cite any reason for the
withdrawal. Starbucks is expected to open its first store in India in Mumbai in October 2012.
Many bookstores have Starbucks licensed stores within them, including Barnes & Noble in the
United States, Chapters-Indigo in Canada (company operated), Jarir Bookstores in Saudi Arabia,
Livraria, Saraiva, Fnac in Brazil and B2S in Thailand.
Starbucks' mission to "inspire the human spirit," is something that can't be served in a cup
with whipped cream.
Starbucks Corporation is a very profitable organization, earning in excess of $600 million in
2004.The company generated revenue of more than $5000 million in the same year (Exhibit 4).
It is a global coffee brand built upon a reputation for fine products and services. It has almost
9000 cafes in almost 40 countries. Starbucks was one of the Fortune Top 100 Companies to
Work For in 2005. The company is a respected employer that values its workforce. The
organization has strong ethical values and an ethical mission statement as follows, 'Starbucks is
committed to a role of environmental leadership in all facets of our business.’
Starbucks has a reputation for new product development and creativity. However, they remain
vulnerable to the possibility that their innovation may falter over time. The organization has a
strong presence in the United States of America with more than three quarters of their cafes
located in the home market. It is often argued that they need to look for a portfolio of countries,
in order to spread business risk. The organization is dependent on a main competitive advantage,
the retail of coffee. This could make them slow to diversify into other sectors should the need
arise.
Starbucks’ operations in India is bound to raise the coffee temperature in the Indian market and
could nibble away the business of another premium player in the market, Costa Coffee which
currently runs 95 cafes spread over Delhi–NCR, Jaipur, Agra, Mumbai, Bangalore and Pune. To
maintain its premium product differentiation, Costa Coffee offers a range of café food (localized
to suit Indian tastes) along with its trademark handcrafted Mocha-Italia coffee blend.

8. Sensing the effervescence in the coffee market, two of the biggest and most- entrenched players
– Café Coffee Day and Lavazza India – have started expanding besides going for a more focused
targeting of young consumers, even as they take their branded café experience to the next level.
The idea is to become complete coffee solutions company with both organized café and coffee
retailing arms. The strategy revolves around catering to the complete ecosystem of the coffee
market and reaching out to both in-home and out-of-home (like office vending machines)
consumption needs.
In line with this thinking, Barista Lavazza, India’s second –largest coffee chain, and part of
Italy’s Lavazza Group, has embarked on a plan to open a new line of coffee outlets to reach to
the coffee connoisseurs. Lavazza Espression is a premium café chain that was launched
internationally in 2007 and is now making its way to India. The company plans to open 10-15
Espression stores in the next 2-3 years. At the same time Lavazza is also ramping up the number
of its barista outlets, from roughly around 250 currently to 500 by 2014 (Exhibit 3). In a re-
jigged strategy, Espression will find a place on premium high streets while a majority of the new
Baristas will be located on highways to tap into various consumer profiles.
On its part, CCD is aiming to be the price warrior as global premium brands duke it out for
market share in India. Though CCD does fear losing out some of its customers to the likes of
Starbucks and Costa Coffee, it’s making up by aggressively targeting Tier-II cities. Its strong
social media marketing strategy, as evidenced by its 1.1 million fan base on Facebook, is a great
advantage in wooing the youth and becoming on top of youth’s mindscape. The chain is aiming
for 1,000 more cafes in the next three years, and experimenting with new formats like
neighborhood CCD stores, Coffee Day Squares, and the premium Coffee Day Lounges. The
menu, too, has been revamped, with outlets along national highways serving Indian food like
paranthas, idlis, dosas. At CCD Lounges customers can cook up their own treats with a do-it-
yourself menu.
Costa Coffee
CostaCoffee is a British multinational coffeehouse company headquartered in Dunstable, United
Kingdom and a wholly owned subsidiary of Whitbread PLC. It is the second-largest coffeehouse
chain in the world (behind Starbucks) and the largest in the United Kingdom.

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: “To serve the best coffee in the true Italian style.”
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 company’s 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 company’s 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 company’s weaker
branches lack market presence or reputation. Some of the company’s 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 company’s cash flow is unreliable especially in the early
stages of a new product development.

10. CCD (Café Coffee Day)
Café Coffee Day is a division of India's largest coffee conglomerate, Amalgamated Bean Coffee
Trading Company Ltd. (ABCTCL). ABCTCL grows coffee in its own estates of 10,000 acres
(4047 ha). The land value of the plantations is US$250–300 million. It is the largest producer
of Arabica beans in Asia. Apart from this, the group also sources coffee from 11,000 small
growers. ABCTCL is one of India’s leading coffee exporters with clients across USA, Europe
and Japan.
Founded in 1996 headquartered in Bangalore, Karnataka, It has over 1300 outlets serving coffee
, with 3,00,000 visitors per day, where more than 5000 people are employed generating revenues
more than US$ 45 million.
With excellent brand name and brand visibility, the company has managed to provide world
class ambience and service. It has targeted the right customers- the young crowd, providing
products that are of extremely good quality and taste. This enables the company to leverage on
the huge potential since 40% population is below 20 years. The USP of the brand is its
affordability since the coffee that is served is actually produced/ grown by the company hence
reducing the cost manifolds.
However, the weak brand image hinders in maintaining brand loyalty. The poor ambience and
décor along with wrong site selection has burdened the company with losses.
INDIRECT COMPETITION
A large number of substitutes to coffee exist in the Indian market, ranging from tea, cold drinks
to home-made drinks like lassi, shikanji etc. Cold drinks manufactured by PepsiCo and Coca
Cola are posing a continuous threat to the coffee brewing companies. Even the cold coffees
available at Mc Donald are not far in the race. The company like Nestle and Hindustan Unilever
are providing instant coffee mixes which are gaining much popularity in India. Apart from all
above, a large section of the society still relies on local vendors of tea and coffee serving them at
lowest price and excellent taste – If lucky enough you may even get couple of biscuits for free!!!

11. BARISTAS PLAN OF ACTION
The core product offered by Barista is coffee. Their menu also consists of traditional favorites
like cappuccino, espresso, iced mocha and other varieties of coffee and
tea, juices and other beverages, sandwiches etc andvariety of desserts, breads like paninis,
ciabattas and French baguettes. It is surrounded by warmth, good taste,
good aroma and the ambience of place. It serves not only coffee but also an experience. Now
Barista even offers branded merchandise like caps, T-shirts, coffee mugs and other coffee
paraphernalia. It gives the customers a very interactive social environment by providing
newspapers, magazines, a guitar, games and television on, music playing as well as message
boards to pen down your thoughts. Some stores also have an outlet of Corner Bookstore (they
joined hands in November 2003) which sells all varieties of books. This year, Barista has
launched Swiss Hot chocolate, sundaes in two flavors, frozen Swiss chocolate, pastas and rolls,
chilly cheese toasts, a new range of sandwiches with wafers besides a health range of sandwiches
slimmers’s choice with brown bread and low fat option. In another change, Barista is diversifyin
g its hot beverages menu and introducing several specialty teas. It has introduced Wi-Fi services
where executives and students can access the internet from any of the numerous access points. It
plans to introduce music downloads
next.Brotin Banerjee, marketing head Barista coffee company says” delighting the customer is
our USP” (unique selling proposition)
The pricing of Barista beverages is quite high as unique brands often command higher prices. It
is much highly priced than its competitors, with the starting price of coffee at Rs.35 going on till
Rs.100, whereas, Café Coffee Day’s price ranging between Rs.28 to Rs.60. Now it has started
revising its prices. Recently, Barista cut prices of nearly all items in its menu card by 25 per cent.
Now, a cup of standard cappuccino coffee cup at Barista is available for Rs 30, down from Rs 40
earlier, while cold coffee Frappies available for Rs 40 per cup against Rs 55 earlier. Also Classic
cold coffee is now cheaper by Rs 12 at Rs 33 a cup. Apart from this, Barista has also introduced
new low-priced beverages.
Barista is opening its outlets in various offices, i.e. HSBC, GE. Barista has also tied up with
BPCL- Bharat Petroleum Corporation limited to open coffee kiosks in its retailing outlets.
Barista bar chain, has tied up with Taj group of Hotels for setting up exclusive Barista espresso
bars at the Taj hotels in metro cities recently. The company also plans to have a new concept bar

12. called “pavement bar” at the Taj poolside which would be a 24 hrs coffee shop. It is also opening
outlets at Planet-M and PVR Cinema. Barista is seeking to expand through the franchisee route
model and plans to enter B-class towns in the country and middle-class localities in the metros
such as North and East Delhi. In the past year Barista has expanded through tie-ups with major
retail chains and setting up outlets in their premises. With ABN Amro, Barista has introduced a
concept called Ban café - a café in the bank premises.
Barista is also positioning itself through its marketing partners. Lacoste, which also aims at
younger, wealthier consumer base in urbanized areas. Barista’s collection
of coffee shade cosmetics, now marketed by Elle18 targets the younger women. Barista has
come up with its new coffee product named ‘Exclusive Original Coffee of the Month’, June’
Mexico Altura Organic Month’ is one such example. The most recent promotions techniques it
has adopted are musical performances at Bangalore Barista outlets on some days. Then it is
offering scratch cards across all Barista outlets where everybody wins. Moreover, it is launching
Barista coffee cards soon. The company also has frequent promotional associations with CNBC,
Singapore airlines and Evian.
Barista follows the psychographic lifestyle segmentation strategy which considers lifestyle, age
group and the income. It has positioned itself as a lifestyle brand, with
concentrated positioning aiming at young students, professionals and workingcouples. The target
age is about 15-25 years. The premium segment is the domain of the Barista chain. Now Barista
is changing its positioning from a premium retail outlet to that of a hangout or a meeting place
frequented by young people. Company officials say this is because the nature of Barista's
clientele ranges from young college-goers to young professionals Barista is not only satisfying
the coffee need of the customers but what came across during our study was a major reason
why people go to Barista, apart from other reasons, was lifestyle.
Barista opted for the differentiation strategy to gain a competitive advantage over its competitors.
The most important attribute of Barista is ambience. This is the actual uniqueness in a broad
market consisting of various coffee players. Barista did realize that the consumers were not just
looking for a place to have a cup of coffee but were looking for a place to hang around and relax.
Thus, they decided to create a place where the consumers would feel at home. The
ambience inside is comforting and casual which is one of the major reason of its success. They
created a coffee bar with a typical Italian environment

13. where people could get together over a cup of coffee and enjoy themselves in acomfortable and
relaxing environment. It offers customers a very interactive social environment by providing
newspapers, magazines, a guitar, games and television on, music playing as well as message
boards to pen down your thoughts. Some stores also have an outlet of Corner Bookstore (they
joined hands in November 2003) which sells all varieties of books. Moreover, most of the people
feel that its ambience and aroma of coffee which is a major driving force. It has games like
scrabble, Pictionary etc. and books available to keep one engaged. People can also play guitar
which is kept against the corner wall. It also has magazines and newspaper which can be read
while sitting there and a take away newspaper which is quite popular.
This has been very successful in attracting customers, especially their target market of teenagers,
youngsters, professionals and families. They have promoted themselves as a fine café and not as
a coffee pub that Café Coffee Day did. Thus, the experience of having a coffee at a Barista is
definitely different than having it at any other coffee parlor.
Barista goes beyond providing coffee at the bars, offering a more complete experience by
combining the coffee drinking experience with books, magazines and merchandise. On offer
besides a large variety of premium coffee, is a selective range of sandwiches and desserts. The
product offerings of Barista include a diverse range food and beverages with coffee remaining
the main focus. To begin with, there's the Barista House Blend – Barista’s signature blend of
coffee and select international coffees from some of the most noted coffee growing regions of
the world. Followed by an extensive list of steaming hot espressos, cappuccinos and lattes made
from the finest Arabica beans, they also offer a host of fruit smoothies and chilled granites in
tropical flavors
During the first four years Barista focused on two categories of foods: sandwiches and desserts.
Today the list includes more items. In addition to this, Barista has been evolving its menu,
keeping pace with the changing consumer needs. Barista also launched one of the most
affordable cold coffees across India, Iced Latte. Barista maintains that the rationale behind
introducing more food items in its menu is that while providing the ‘coffee experience’ remains
its motto, to improve the experience of food is also an on-going affair. The special focus on
Indian food is because, typically, a consumer who walks into a Barista spends 30 to 45 minutes
and often the consumer would like to have something along with her coffee. Simultaneously,

14. itcontinues to sustain the beverage experience through promotions, offerings to include non-
coffee lovers through ice tea, tea, smoothie’s etc.
GROWTH OPTIONS IN INDIA
Barista’s 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
 Gain competitive advantage through access to a partner's resources, including markets,
technology, capital and personnel.
 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.
 Make each entity appear to be larger than it is, in the eyes of the public and the
competition, and provide added credibility
 Add complimentary resources and capabilities, enabling participants to grow and expand
more quickly and efficiently
 Reduce marketing and advertising costs, since these will be shared among the members
of the alliance, leading to greater brand awareness
 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.
 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.
 Increase market penetration and market share.
 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
 The process of forming the alliance may engender tension, frustration and suspicion.
 The relationship may not be win-win; one member of the alliance may benefit
substantially more than the other(s).
 A member of the alliance may "steal" your customers, especially if the company is a
direct competitor.
 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.
 There may be conflicts over how the partnership works.
 There is the potential to reduce future opportunities by being unable to work with one of
your partner's competitors.

16. Interview of Nilanjan Bhattacharya,
COO, India and SAARC of Barista Lavazza
 Coffee consumption is increasing annually and is trending at 5% year-on-year. The
growing acceptance of coffee coupled with ‘third home’ café culture among the middle-
class audience in India is spearheading the out-of home consumption of this beverage in
this traditionally tea-drinking country.
Q. What are the prime reasons behind the increasing café culture in India?
A. The rise in café culture is attributed to lifestyle changes. Consumer acceptance and the
urge to experiment with new products have driven growth in the consumption of coffee
market and café culture in India. Today, the role of a café depends on the customer index.
It can act as a hangout place, a meeting spot, a reunion joint. For some, it is their third
place with which they begin and end their day.
 How has the growth of café retail business in India been? How do you foresee its
growth in the coming couple of years?
 Coffee consumption is increasing annually and is trending at 5% year-on-year. The
growing acceptance of coffee coupled with ‘third home’ café culture among the middle-
class audience in India is spearheading the out-of home consumption of this beverage in
this traditionally tea-drinking country. This consumer acceptance is actually driving
growth in consumption as well as the café culture marking almost 1600 stores in the last
10-12 years.
 Do you think that Indian café retail has global potential? What is the market
potential in the country?
 India is primarily a tea drinking nation where the coffee to tea ratio is about 1:7 and
coffee consumption is still 80 grams per capita as against six kg per capita in Italy. In
spite of this skewed ratio, coffee consumption is increasing annually and is trending at
5% year-on-year.
 Definitely, Indian café retail has global potential. Indian coffee retail market is set to
grow at 40% per annum. There has been a significant change in the attitude of consumers
over the years and this is mainly leading to the growth of cafes in India.

17.  Who are your frequent customers?
 True connoisseurs of coffee; consumers who can distinguish between a coffee and an
Italian coffee.
 Do you offer any other services like book reading, music, etc. to make your café
more attractive?
 Barista Lavazza believes in giving a holistic ‘experience’ to its customer. We constantly
keep on exploring customer engagement programme on regular intervals with activities
like Friendship Jam, Scrabble, Guitars, etc. This engagement is further extended though a
range of various in-store promotions with the objective of bringing something new and
fresh to our guests experience.
 Are you using recycled paper cups or earthen mugs to replace plastics containers? If
yes, how do customers accept such environment friendly initiative?
 Yes, we use recyclable paper for Barista Lavazza carry bags, napkins, paper cups, take
way glasses, etc.

18. EXHIBITS
EXHIBIT 1: Growth of Barista so-far

19. EXHIBIT 2: Global Coffee Consumption Trends
EXHIBIT 3: Café market in India

20. EXHIBIT 4: Price and Revenue Chart of Starbucks
EXHIBIT 5
Cash flows

21. Balance sheet

22. Income Statement

23. REFERENCES
http://articles.economictimes.indiatimes.com/2012-07-05/news/32551794_1_coffee-vending-
business-barista-lavazza-group
http://www.4psbusinessandmarketing.com/23022012/storyd.asp?sid=5165&pageno=1
http://node_charts_production.s3.amazonaws.com/e01ea1f6b5156619edd7bc52d0c811c5.png
http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=BCCI&datase
t=incomeStatement&period=A&currency=native
http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=BCCI&datase
t=balanceSheet&period=A&currency=native
https://www.otciq.com/otciq/ajax/showFinancialReportById.pdf?id=41293
http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=BCCI&datase
t=cashFlow&period=A&currency=native
http://en.wikipedia.org/wiki/Barista_Lavazza
http://businesstoday.intoday.in/story/cafe-coffee-day-in-promising-companies-list/1/18661.html
http://www.scribd.com/doc/24990295/Overview-of-The-Indian-Coffee-Industry
http://sedatedworld.com/?p=1167
http://www.businesseconomics.in/?p=4367
http://www.business-standard.com/india/news/finally-tata-coffee-to-bring-starbucks-to-
india/462351/
http://books.google.co.in/books?id=G4eQybE28qwC&pg=PA445&lpg=PA445&dq=economic+t
imes+article+on+barista+looks+for+alliance+in+india&source=bl&ots=RO7FP01Eiw&sig=Vg
BFzT4KNCjcBSAIxS6BdT1wN9g&hl=en#v=onepage&q=economic%20times%20article%20o
n%20barista%20looks%20for%20alliance%20in%20india&f=false

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