This document analyzes McCafé, a brand extension of McDonald's that offers specialty coffee. McCafé targets a more diverse segment seeking convenience and affordable prices. It is housed within McDonald's outlets but has a separate café environment. McCafé analyzes the organized café market in India, which is growing at 8% annually. It segments the market demographically, behaviorally, and psychographically. McCafé's marketing mix includes specialty coffee and food products at prices 15-20% lower than competitors. It promotes through TV ads and challenges. The brand aims to achieve stronger awareness and customer relationships to build resonance over time.

1. STUDY OF BRAND

2. PARENT BRAND

3. Good Neighbor
• Keeps families together
through Ronald
McDonald House
Charities
• Uses less energy
• Recycles more
Good Food
• Promotes choices
• Real ingredients
• Great taste
• Transparency
Good People
• Creates opportunity
• Encourages diversity
• Facilitates teamwork
• Rewards achievement
McDonald’s
Core Values

4. McDonald's
Breakfast Dessert
Burgers and wraps
Munchies

6. BRAND
EXTENSION
• Internationally, McCafés are housed within
McDonald’s outlets but have a separate look and
feel. These stores are more bold and sophisticated
as compared to the McDonald’s outlets
• The same format is being followed in India, where
a McCafé store typically occupies 500 sq. ft. of a
4,000 sq. ft. McDonald’s outlet
• Presently McCafé has 27 outlets in India in major
cities like Mumbai, Pune, Nasik and Ahmedabad
• It plans to expand aggressively and open close to
250 stores in the next 3-5 years
• McCafé is able to tap the advantage of McDonald’s
excellent store network and supply chain
HIGH QUALITY, INEXPENSIVE COFEE
TARGET SEGMENT: more diverse segment of the population that favors
convenience, speed and lower prices.

7. INDUSTRY OVERVEW

8. Organized Café Market in India

9. Café Food Café Beverages
GROWTH OF ORGANIZED CAF´E MARKET IN INDIA
• The café market (organized sector) grew at a CAGR of 8.24% in the last 5 years
• Within this market, the food segment, experienced a growth of 8.06% while the beverages
segment grew at a rate of 8.71%
• However, the proportion of food in relation to beverages has declined over the years

10. Café Coffee Day
(1.3%)
Coffee Day Xpress
(0.2%)
Costa Coffee (0.1%)
Barista Coffee Co
(0.1%)
Others (98.3%)
Café Coffee Day (1.3%)
Coffee Day Xpress
(0.2%)
Costa Coffee (0.1%)
Barista Coffee Co
(0.1%)
Others (98.3%)
2013: Market size INR 17.6 Bn 2014: Market size INR 19.2 Bn
Key observations:
• Stand alone cafés and the unorganized sector constitutes majority of the market for
cafés and bars in India ~98%
• In the organized sector, Café Coffee Day, Barista and Costa Coffee together comprise
1.6%
• Starbucks and McCafé are relatively new to the Indian market and occupy a very small
part of the market. With their rapid expansion, however, they are slowly capturing the
market with their USP – “Affordable luxury”
Market share

11. MARKET
SEGMENTATION
MARKET
SEGMENTATION

12. McCafé has chosen to
target urban cities in
well-established
countries such as
Australia, the US,
Japan, China, Spain,
India etc.
Geographic
segmentation

13. • Demographically, McCafé considers young adults with relatively high disposable
income (annual income above 5,00,000) and adults in the working population.
• These consumers look for a laid-back environment with comfortable
surroundings, exquisite furnishings, and an artistic ambiance in a coffee house.
• The TG is aged 25-39. Many within this group have young families. McCafé are
designed to offer them a place to meet friends and enjoy a quality coffee experience
as well as keep the children fed and entertained
Demographic
segmentation

14. Behavioural
Psychographic
Occasions Regular
Benefits Speed & Quality
User Rate Light to medium
Loyalty
status
Low to Medium
Lifestyle People with a hectic
schedule, looking for
convenient options
Personality People who are not very
brand conscious

15. PRODUCT
McCafé offers a wide range of café
products – Coffee, frappé, iced drinks,
pastries and sweets, cookies, cakes etc.
Their offering range is at par with other
cafés in the consideration set (Starbucks,
Costa, Barista etc.). The product is high
on quality and taste.
4 Ps of Marketing - McCafé
The following range of products is
offered at a McCafé outlet
• Classic coffee
• Frappé
• Iced coffee
• Iced Tea
• Smoothies

16. PLACE
McCafé, internationally and in India
are housed within a McDonald’s
outlet, where a separate area is
demarcated for the Café. Because of
this, it is able to make use of
McDonald’s established network.
However, even within the traditional
McDonalds store, McCafé offers a café
style environment. The company aims to
open at least 1 McCafé outlet within a
radius of 2 kms.
4 Ps of Marketing - McCafé
Map of Mumbai

17. 4 Ps of Marketing - McCafé
PRICE
McCafé offers ‘value for money’ coffee without compromising on the
quality front. It is priced 15-20% below its competitors.
4 Ps of Marketing - McCafé
Category McCafé (INR) Starbucks (INR)
Classic coffee 135 185
Frappé 145 185
Ice coffee 115 150
Ice tea 105 170
Smoothies 180 250
PRODUCT OFFERING COMPARISON

18. 4 Ps of Marketing - McCafé4 Ps of Marketing - McCafé
PROMOTION
McCafé is yet to promote itself more in
India. Globally it promotes the brand
through coupons, premiums,
advertisements on billboards and
television
Example-
‘McCafé Social Hour – Buy 1 Get
1 Coffee Free between 3-5 pm’

19. McCafé Television Commercial
The ad emphasizes on how McCafé has strived to provide the best
coffee for it’s customers. It reinforces its concern for its customers
and the quality of its offerings. (play the ad by clicking on the arrow)

20. McCafé: Morning Person Challenge
McCafé in order to promote it’s coffee, created this challenge where it invited a few
people who hated getting up early in the morning. It made these people stay together in a
hotel. Next morning, they were woken up at 6 a.m. and were taken to a McCafé outlet
where they were served with coffee. While they kept cribbing on the way to McCafé, they
noticed a sudden change in their moods after consuming breakfast with McCafé coffee.

21. BRAND POSITIONING

22. Value Proposition
Intimate
connections
Comfortable environment No pretense
Daily chit-chats
Informal set-up
Cup of coffee with a book
“VALUE FOR MONEY COFFEE”

23. BFFs
Writers & Artists
Father, mother, children
Professionals
Older couples
Study groups
Siblings
Value Proposition

24. “THE INTER-WOVEN EXPERIENCE”
Conversations linger on after a McDonald’s meal at McCafé
Value Proposition

25. Competitive Frame of Reference
Hot Beverages
Tea Coffee

26. POP POD
Self - service
Family friendly – Thesame restaurant has
food (McDonalds) and
coffee (McCafé)
Modest environment
Value for money coffee
High quality trained
staff
Menu: Freshly brewedcoffee, smoothies, cakes
etc
Café style environment
Points of Parity & Points of Difference

27. Perceptual Map
Premium
(Status symbol)
Mass
(Convenience &
functionality)
Established (Many outlets)
Emerging (Few outlets)

28. Starbucks vs McCafé
Target Group
• Almost half of Starbucks' total business comes from its
primary market target if men and women ages 25-40.
• These professionals tend to be professional urbanites
with high incomes who are interested in socially
responsible and environmentally friendly policies
• They consider Starbucks logo as status symbol and
want to be associated with it
McCafé's target group appears to overlap with
Starbucks' to some extent: those interested in the
specialty coffee market, but at a more affordable price -
so perhaps not as high quality.
Advantage Starbucks has over McCafé
• First mover’s advantage: Since McCafe entered
the market after Starbucks, will will need to
offer something compelling to attract
Starbuck’s loyal customer base
• People who prefer super premium coffee and
see Starbucks as a status symbol are not a part
of McCafe’s TG
Advantage McCafé has over Starbucks
• The well established McDonald’s brand:
When the brand is well known, the
possibility of a brand extension being
successful is high
• Affordable premium coffee
• Food options at McDonald’s

29. BRANDBUILDINGThe Brand Resonance Model

30. The model
Resonance
Judgment
Performance
Imagery
Salience
Feelings
4. Relationship: What about you and me?
3. Response: What about you?
2. Meaning: What are you?
1. Identity: Who are you?

31. #1
The target group is well aware of
the parent brand ‘McDonald’s
which fares high on Top-of-Mind
Awareness (TOMA). McCafé on
the other hand is yet to gain
awareness because of existence of
outlets in very few cities, shorter
brand history and lack of
promotions and advertising (in the
Indian context)
SALIENCE

32. #2
McCafé fares very well on this parameter. The range
of products offered is at par with other coffee houses.
The product is basic coffee (with variants), that is
high on quality and taste. McCafé offers quick and
effective self-service. The offerings are more
economical and are around 20% lesser than peers
PERFORMANCE
#3 IMAGERY
McCafé is perceived as a “convenient, reliable, ready-
to-go” brand. It performs well when the experience of
having a coffee is not as important as the functional
benefit

33. #4 JUDGEMENT
#5 FEELINGS
McCafé arouses the following feelings among the TG:
• No warmth (weak and distant customer
relationship)
• Security (trust in quality of offerings)
Being a relatively new player, McCafé lacks the
perception of authenticity in the market. It has a lot
of equity building to do to.

34. #6 RESONANCE
McCafé is far from this stage of brand loyalty. It can
build resonance through loyalty programmes and
community engagement. It will have to pass through
the previous 5 stages of the Brand Resonance Model
to reach this stage where people can completely
identify with the brand

35. SUMMARY
Parent brand –
McDonald’s
Brand extension -
McCafé
Offering: specialty coffee
market, but at a more
affordable price
Target Group: More diverse
segment of the population that
favors convenience, speed and
lower prices. (for full market
segmentation, refer to slides
12-14)
Product: Specialty coffee
Price: semi-premium
Place: Housed within a
McDonald’s
Promotion: TV ads,
challenges, schemes
Industry
scenario:
Organized café
growing at
8.24% CAGR,
beverages
growing faster
than food
Brand Resonance: The brand
needs to achieve Salience
(awareness and
Value proposition:
No pretense, bonding
over a cup of coffee.
The McDonald’s
experience lingers on
to McCafé.
POP: Menu offerings,
quality service, trained
staff
POD: Value for money
coffee, modest
environment, family
friendly

36. References
• Euromonitor: GMID database
• McDonald’s annual reports
http://www.aboutmcdonalds.com/mcd/investors/annual_reports.html
• Business Standard -
http://www.business-standard.com/article/companies/mcdonalds-to-open-100-
outlets-of-mccafe-in-india-115042000958_1.html
• The Times of India
http://timesofindia.indiatimes.com/business/india-business/Beverage-boost-
McDonalds-to-roll-out-McCafs-in-India/articleshow/23850835.cms
• First Post
http://www.firstpost.com/business/starbucks-watch-out-mccafe-is-coming-for-
you-with-cheaper-coffee-1163753.html
• VCC Circle
http://www.vccircle.com/news/food-agri/2013/10/09/mcdonald’s-forays-
coffee-shop-market-india-through-mccafe
• http://businesscasestudies.co.uk/mcdonalds-restaurants/staying-ahead-in-a-
competitive-environment/the-mccaf-concept.html#axzz3fT6WMS8T
• http://www.huffingtonpost.com/ladan-rafii/the-starbucks-or-mccafe-
c_b_4262104.html?ir=India&adsSiteOverride=in

37. The project is a part of Brand Management course.
It has been completed under the guidance of
Prof. Sameer Mathur
Indian Institute of Management Lucknow: Marketing Professor 2013-
McGill: Marketing Professor (2009-13)
Carnegie Mellon: Ph.D. and M.S. (Marketing) 2003-09

38. Thank You