PRAXIS BUSINESS SCHOOL Business Plan – ‘Private Sip’Submitted To: Prof. Srinivas Govindrajan Prof. K. DasaratharamanPresented By: Ankita Singh Arunachalam Ramanathan Kushal Roy Zeeshan Mohammad
INDIAN RETAIL SCENARIOThe retail scenario is one of the fastest growing industries in India over the last couple of years. India retailsector comprises of organized retail and unorganized retail sector. Traditionally the retail market in India waslargely unorganized; however with changing consumer preferences, organized retail is gradually becomingpopular.Unorganized retailing consists of small and medium grocery store, medicine stores, subzi mandi, kirana stores,paan shops etc. More than 90% of retailing in India fall into the unorganized sector, the organized sector islargely concentrated in big cities. Organized retail in India is expected to grow 25-30 per cent yearly.Facts on Indian Retail sector Indian Retail sector is the fifth largest global retail destination. India retail market is dominated by the unorganized sector. The top five companies in retail hold a combined market share of less than 2%. The Indian retail market has been ranked by AT Kearneys eighth annual Global Retail DevelopmentIndex (GRDI), in 2009 as the most attractive emerging market for investment in the retail sector. Currently the share of retail trade in Indias GDP is around 12 per cent, and is estimated to reach 30percent by 2013.According to Government of India estimate the retail sector is likely to grow to a value of ` 2,00,000 crore(US$45 billion) and could yield 10 to 15 million retail jobs in the coming five years; currently this industryemploys 8% of the working population.India continues to be among the most attractive countries for global retailers. More than 80% of the retailsector in the country is concentrated in the large cities. A study reveals that among the more than 20 locations,for organized retail in India, Mumbai was found to be the most preferred location followed closely byBengaluru in the second position.Indian Organized RetailRetailing in India is gradually inching its way toward becoming the next boom industry. The whole concept ofshopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping inIndia. Modern retail has entered India as seen in increasing shopping centres, multi-storied malls and hugecomplexes offer shopping, entertainment and food all under one roof. The Indian retailing sector is at a pointwhere the growth of organized retailing and growth in the consumption by the Indian population is going totake a higher growth trajectory. The Indian population is witnessing a significant change in its demographics.
A large young working population with median age of 24 years, nuclear families in urban areas, along withincreasing working-women population and emerging opportunities in the services sector are going to be thekey growth drivers of the organized retail sector in India.It was argued that the best period for Retail in India will be between 2009-13, when the Retail industry willexpand and consolidation would set in with most of the top global retailers having a presence in India. Alsoargued that the Indian market is unlike the US where the market is already saturated. Hence, if Retailers playtheir cards right, they can get customers, make profits and all concerned in the entire value chain can grow byleaps and bounds. Industry experts also highlighted that organized retail in India is booming and is set to growat 42% to touch US $70bn by 2011, which means that organized retail would be twice as big as the size of theMobile Telecom industry in India. Currently, India is the fourth largest economy and is all set to become thethird largest by 2013, leaving Japan behind. It is estimated that there would be around 300 million middle classconsumers in India by 2013, and organized retail market share would reach 10%, which would reach 24% by2025. Name of the format Description Players Hypermarket Mother of all retail formats and offers everything from Future group‟s Big Bazaar, Typically, a hypermarket spans more than Spencer‟s Hypermarket 1, 00,000 sq. ft. of space and can be located and Trent‟s Star India outside the city center. Bazaar. Supermarket It offers variety of foods, grocery and household Food world, Food Bazaar items and is located in residential areas. Departmental stores Carries various „departments‟ such as apparels, house Shoppers‟ stop, Westside, ware, furniture, jewellery and appliances, but is Lifestyle, Pantaloon etc. much smaller than a hypermarket in terms of space and SKU‟s Convenience store It offers accessibility; Hence it is located in Nilgiris in South crowded places Exclusive outlet Stocks a single brand and could be either company – Raymond, owned or franchised Madura Garments, LG, etc. Discount store Offers no frills such as spacious, well-lit and A.C retail Subhiksha space, but makes up by marking down MRP. Cash-n-Carry It is a B2B format, where the retailer sells to shopping Metro establishments and large institutional customers.
The Indian retail sector can be broadly classified into:FOOD RETAILERSThere are large number and variety of retailers in the food-retailing sector. Traditional types of retailers, whooperate small single-outlet businesses mainly using family labour, dominate this sector .In comparison, supermarkets account for a small proportion of food sales in India. However the growth rate of super market saleshas being significant in recent years because greater numbers of higher income Indians prefer to shop at supermarkets due to higher standards of hygiene and attractive ambience.HEALTH & BEAUTY PRODUCTSWith growth in income levels, Indians have started spending more on health and beauty products .Here alsosmall, single-outlet retailers dominate the market. However in recent years, a few retail chains specializing inthese products have come into the market. Although these retail chains account for only a small share of thetotal market , their business is expected to grow significantly in the future due to the growing qualityconsciousness of buyers for these products .CLOTHING & FOOTWEARNumerous clothing and footwear shops in shopping centers and markets operate all over India. Traditionaloutlets stock a limited range of cheap and popular items; in contrast, modern clothing and footwear stores havemodern products and attractive displays to lure customers. However, with rapid urbanization, and changingpatterns of consumer tastes and preferences, it is unlikely that the traditional outlets will survive the test oftime.HOME FURNITURE & HOUSEHOLD GOODSSmall retailers again dominate this sector. Despite the large size of this market, very few large and modernretailers have established specialized stores for these products. However there is considerable potential for theentry or expansion of specialized retail chains in the country.DURABLE GOODSThe Indian durable goods sector has seen the entry of a large number of foreign companies during the postliberalization period. A greater variety of consumer electronic items and household appliances becameavailable to the Indian customer. Intense competition among companies to sell their brands provided a strongimpetus to the growth for retailers doing business in this sector.
LEISURE & PERSONAL GOODSIncreasing household incomes due to better economic opportunities have encouraged consumer expenditure onleisure and personal goods in the country. There are specialized retailers for each category of products (books,music products, etc.) in this sector. Another prominent feature of this sector is popularity of franchisingagreements between established manufacturers and retailers.KEY DRIVERSChanges in consumer behaviorChanges in shopping patternIncreasing PopulationRising expectation of younger generationIncrease in the use of plastic cardsIncrease in the number of working womenRapid UrbanizationGrowth of consuming classIncreasing nuclear familyShift in consumer demand to foreign brandsThe growth of the population in the 20 to 49 years agePresence of both Domestic and Foreign playersDevelopment of Information and Communication Technology
RETAIL IN INDIA - A CHALLENGEThe retail industry in India is growing at a significant pace. However, there are several problems faced by theindustry. The major challenges for the organized sector include:Taxation laws that favor small retailers.Different structure of sales tax in different states.Lack of trained workforce.Problems of supply chain and logistics.High cost of real estate.Limited land available at prime locations.According to analysts, for this industry to thrive, Indian retailers need to emulate worldwide retail practicessuch as accuracy in financial reporting, increased levels of corporate governance and greater accountabilityamong employees. Retailers need to use the latest techniques to enhance the consumers shopping experience.Indian Beverage IndustryIndia is a growing and developing country which is having a very high economic growth with the drasticincrease into the population size. Due to the developing economic condition, there is increase in thecompetition among the manufacturers, retailers, dealers to promote their products at competitive prices. Theincrease in the India population has given a high demand of beverage market products. The Indian beveragemarket is segmented into the two major segments –Alcoholic and Non-Alcoholic Beverages.Again these categories of beverages are sub-divided into the carbonated and fruit based drinks. Tea and Coffeealso contributed majorly into the Beverage Industry. Indian Beverage market distribution and marketingchannel is highly networked and has an effective approach to the customers. Due to the globalization andtechnological developments highly innovative products are coming into the Indian Beverage markets which areappreciated by the Indian population. In India, here are various forms of beverage market Restaurants, Coffeeshops, Sport events, Hotels etc.
Factors that drive Indian Beverage Industry:Economic GrowthPopulation growthCompetition for Raw materialsPower of retailersGlobalization / RegionalizationResearch & DevelopmentTechnological DevelopmentsFood safety and regulationConsumer Demands and trendsCafé Retail IndustryThe coffee retail industry seems to have attracted a lot of interest over the last few years. The FDI inflow in tothe „Tea and Coffee industry‟ has increased from just 186 million in Jan 2010 to 460 million in Dec 2010 andthe increase has been very steady. However, there are a lot of pitfalls with such an investment on the industry.According to Coffee day 54% of Indians still prefer tea, 17% prefer plain milk while only 13% of Indiansprefer Coffee for a drink. Also, coffee is predominantly a south Indian drink where „filter coffee‟ is the mostpreferred which none of the coffee retail chains provide. This choice of the coffee retail chains has furtherrestricted the market potential.Secondly, the target market of these retail chains is largely the „affluent youth‟ in the up market. These retailchains have long ago moved from „product selling‟ to „experience selling‟. The value chain of the coffeeindustry is like this: Arabica grade coffee is valued at Rs. 142 per kg at production, exports yield a rate of Rs.165 and Retail selling is at a rate of Rs. 260+. However, in a CCD, the average price of coffee which used 12-16gram of coffee at a cost of Rs.4 is Rs. 42. This kind of pricing means that all new entrants will only becompeting in the up market leading only to increased competition.Thirdly, fixed costs are extremely high and in most stores, just the rent eats up to 20% of the sales. A lot ofthese stores require extensive styling and lot of initial investment goes into the outlet design. This nature of theindustry favors „price wars‟ which is bound to affect the industry‟s margins and pricing.
REASONS FOR TAKING CAFÉ BAR BUSINESS MODEL (‘PRIVATE SIP’)On studying the Café Industry we arrived at the opinion of going forward with a Café Bar business model. TheIndustry has a potential of growth year on year with the increasing number of coffee consumption in India. Tostart with such a business proposal the amount of initial funding required is minimum as compared to the otheroptions looked into. With the increase in per capita income and changing life style a café bar business holdsrelevant existence in the market.There are over 1,500 coffee cafes in India at present; of these, around 1,000 have opened in the past five years.Valued at around US$185 million, the organized café market in India is estimated to be growing at acompound annual rate of 26.9%. Stirring up the market is Indias growing youth segment: around 50% ofIndias 1.2 billion people are 25 or younger. By 2015, this is expected to increase to 55%. For this segment,particularly those with steady, disposable incomes, coffee shops serve as a social hub. “The growth of cafes hasbeen triggered by rising youth spending, paucity of alternative hang-outs and an increasing number of newoffice complexes and colleges. The market has the potential to touch US$800 million to US$900 million with atotal of 5,000 cafés by 2015.The other two business models that were considered and evaluated but not takenHealth SpaApparel Store1. Indian Health Spa IndustryThe industry globally the wellness industry is estimated at over $250 billion. There are about 75,000 standardspas world over that provide direct employment to about 1.5 million people. A study by the Federation ofIndian Chambers of Commerce and Industry (FICCI) suggests that the wellness industry in the country isgrowing at close to 20 percent annually and currently stands at Rs 1,500 crore with over 2300 spas that havecreated direct and indirect employment for about 400,000 people. The rise in the annual disposable incomewith high level of well being and growing level of health awareness has created strong opportunities forexisting and new players in the market. In the next four years, 700 new spas, both homegrown andinternational brands, will open in India to meet the growing demand. The spa industry has observed stronggrowth and expected to grow dynamically in the future. The Spa & body treatment segment is still in an infantstate in India, the industry projections suggest this segment to be worth Rs 4,000 crores over next four to sixyears.
ChallengesThe Spa industry is highly fragmented & unregulatedThere is lack of standardization and no regulatory body which ensure that a certain quality standard ismaintained across the IndustryEvery Spa in India does the same traditional treatments differently, simple therapy like ayurvedic massage isdone in different manner in different places, and for example, Shirodhara is done at any time of the day, whereas it is strictly contra indicated in the afternoonsLack of good training institutes result in availability of untrained manpower. Human resources are at premiumin the IndustryLack of Government support in promotion of industry except in few casesShady places working under the name of massage joints giving a bad name to the profession & industry2. Indian Apparel industry and key challengesThe Indian apparel industry is estimated to be worth Rs. 1,876 billion in FY11 and is expected to grow at aCAGR of 8.7 per cent till FY16. The growth would primarily be driven by the surge in demand for readymadeapparels in rural areas, rising income levels and youth population and increasing preference for brandedapparels.The domestic apparel industry constitutes of five segments – menswear, women‟s wear, Kids wear, unisex anduniforms. Menswear is the largest segment whereas uniforms and women‟s wear are the fastest growingsegments. Apparel manufacturing is the least capital intensive section of the textile value chain and is thereforecharacterized by low entry barriers. At the same time, it is highly labour intensive and requires skilled,unskilled and semi-skilled labourers. Indian apparel industry is highly fragmented in nature. Due to the lowentry barriers, numerous players have entered the industry.The raw material prices for apparel players have been on rise in the recent past due to the soaring cotton andcrude oil prices. The players have been unable to pass on the rise in cost to the consumers due to the stiffcompetition and limited pricing power. Therefore, the margins of the apparel manufacturers are expected toremain subdued over the medium term.
ENVIRONMENT SCANGLOBAL SEGMENTThe global segment of the Macro environment centres on the prospects of coffee firms operating on a globalscale. The coffee comes from various parts of the world and in varying types and qualities. The most popularcoffee types are Arabica, Robusta, or Liberica bean and are grown primarily in Africa, Central America, andSouth America (ICO, 2011). The global segment also refers to the quantity of coffee drinkers across the globe.On a global scale, the demographic characteristics will vary. The coffee industry sees this as an opportunity toincrease market share as it has previously in the US market. The prime example of this is Starbucks introducedgourmet, Italian-style coffee beverages to the domestic populace. The coffee industry has recently madeheadway into converting tea drinkers in the United Kingdom to gourmet coffee offerings. Multinational coffeehouses like Gloria Jeans and Starbucks have targeted Russia and its growing capitalist economy for retail storeexpansion .Furthermore, coffee giant Starbucks has set its sights on the one billion plus Chinese tea drinkers,and looks to change preferences to gourmet coffee beverages.
PEST Analysis Demographic Segment: The demographic segment of the coffee industry is involved with the population segments and characteristics of the consumers that purchase product from firms in the industry affect the tastes and buying habits of the industry‟s consumer base. Coffee drinkers over age 59 have different preferences than the 18-24 ages demographic. Also, the amount of coffee consumed and the times of day for consumption vary with demographic characteristics .The coffee industry will continue to innovate product offerings in an attempt to gain large demographic market shares of the different classes of consumers. This will be done by changing the preferences of targeted demographics like increasing gourmet coffee consumption in mature customers or by expanding into untapped coffee markets like Chinese tea drinkers •Daily, weekly, annual By type of Coffee •50-year trending Economic •Daily, weekly, annual Segment: By Age • By coffee type The economic • Total, Traditional, Gourmet segment is By Region characterized • By coffee type by the general By Time of Day • By location and share of cups economic • In-home vs. out-of-home conditions in By Location • By age the non •Demographics, traditional vs.gourmet drinkers controllable Consumer Profiles •Gourmet drinkers over time environment •Breakout of additives by type and by age that the Additives and Flavorings • Consumer flavor preferences, added and pre-flavored coffee • Country associations industryCoffee Origins/CertificConsumer attitudesations •Certification awareness operates in. The most notable factor is the global economic recession of 2008 and 2009. The recession affected both businesses with rising operational costs and lower profit margins, and consumers of the products that have seen product prices rise while wages remain the same and unemployment levels increase The outlook is improving and as confidence is also growing, the global economy will improve .The coffee industry competes on two levels, the undifferentiated traditional coffee offering and gourmet, Italian-style coffee beverages. By offering both lower cost coffee options to fringe customers and higher cost options to more affluent clientele, the coffee industry will attempt to serve coffee to all that want or need it. In 2008 during the economic crisis as consumers were making severe spending cutbacks, coffee drinkers in the global market still drank the same amount of coffee, 3.3 cups per day on average, but simply opted for the lower cost options
Political/Legal Segment: The coffee industry faces many types of political and legal pressures in the Macroenvironment. Coffee firms import coffee beans from a variety of countries, each with their own respectivecustoms and tariff regulations. On an international scale, these firms must gain expertise on how to importbeans from each different country and keep detailed tabs on political upheavals, changes to policies, and befearful of foreign government seizing company assets.On the legal front, firms must file for all necessary forms and permits to be authorized to do business. Thisincludes tax forms, business entity applications, legal contracts, store and factory leases, etc. The local andfederal governments will also dictate certain laws and regulations onto the businesses. These include labourlaws, food handling regulations, and business practices restrictions as in the arena of marketing andadvertising.Socio-Cultural Segment: The socio-cultural element focuses on how the consumers exert forces on theindustry and how the firms do business. As the consumer outcry for fair practices have grown and evolved, soto have many of the firms operating practices e.g. Starbucks implemented a C.A.F.E. program to addressconcerns about the social responsibility of the industry to perpetuate sustainability of coffee bean growers.As consumers become increasing more educated and health conscious, the industry must constantly monitorthe environment and adapt product offerings to meet demand. Although companies like Starbucks initiallyresisted using anything other than whole-milk in coffee beverage preparation, they eventually gave in topressure and adopted 2% milk as the standard and also offer non-fat milk as well.Technological Segment: The main influences in this portion of the environment are technology as it relates tocustomer interaction to the business, product innovation and product service, and customer ambience.Customers interact with the industry in a number of ways. Technological improvements allow for firms todirectly market new product offerings to consumers by way of text messages, emails, and social network sitesTechnology is readily available to all firms in the industry for relatively lower cost than traditional advertisinge.g. Dunkin Donuts has experimented with on-counter digital billboards that advertise messages to drivecustomers back to the store for same day purchases.Product innovation is another important aspect of the technology segment. Firms must keep pace withcustomer tastes and rivals. Technology allows for changes to product mix to compete in new market segmentslike Starbuck‟s VIA ready brew offering. Technology also improves the way firms can produce productthrough new machines and more efficient processes which will lead to improved service to the end consumer.The companies that stay on the cutting edge with process and equipment, like bean roasters and brewingmachines, will have an advantage. The industry is also influenced to utilize technology to improve the overallcustomer experience. This includes the use of Wi-Fi internet capability services as a draw to customers thatcan utilize the technology for business or personal purposes
SummaryThe coffee industry will continue to look for and find ways to increase to demographic that it services. Thiswill be done with continued product innovation and increased product offerings to fit the consumer‟s demand.The industry will also continue to expand globally into new markets to attract a larger number of customers.The stabilization and improvement of the global economic condition will lead to an increase of gourmetbeverage consumption among fringe consumers. Also, the competing firms must continue to be ever vigilantand monitor the global political landscape that affects coffee trade viability, retail markets, and sustainabilityefforts in social responsibility to all users of the value chain.
INDUSTRY ANALYSISIn the world approximately 150 billion consumers purchase and drink coffee beverages with 89% optingto brew coffee at home rather than purchase premade products from retailers and coffee houses. Theaverage coffee drinker consumes 1.3 cups of coffee per day. The amount of coffee that is consumed haslead way to an increase in firms offering pre packaged coffee in retail locations and large super marketchains. The pre packaged coffee producers include lower cost options like Folgers and Maxwell House,store brand alternatives like Archer Farms (Target) or Café Ole (HEB), and premium brands likeStarbucks and Seattle‟s Best.Industry Dominant Economic FeaturesThe dominant economic features of the coffee industry are characterized by ten general economiccharacteristics. The predominant characteristics are market size and market growth rate. Market size •Number of rivals •Number of buyers •Differentiation •Product innovation Coffee •Demand-Supply •Technological change Industry •Vertical integration •Economies of scale •Learning curves
Competition Analysis Competition in the coffee industry can be broken down into two different categories, direct and indirect competition. The direct competition would include firms that manufacture and product hot drinks. These firms will be retailers of ready-to-drink coffee and tea products, quick service restaurants, and supermarkets. Also, in this category are the large multinational companies that produce ground coffees and instant coffees Industry Competitors Competitive strategy will aim to position rival companies into strategic groups. These strategic groups consist of industry members that have similar goals and positions in the competitive industry. These groups are placed on a strategic group map for analysis on how industry firms are positioned. Firms in the coffee industry will be mapped based on price and quality of their products versus product line breadth. The size of the circle representing each firm on the strategic group map is symbolic proportional to the size of the firm‟s share of total group revenues. The major direct competitors in the coffee industry are listed in the following table. The firms are broken down by breadth of products offered to the market, industry related sales, and percentage of sales relative to rivals. Firm Product line Revenues (2011) in % of Total Group Breadth Millions Revenues Starbucks High 10,707 27% Dunkin Donuts Moderate 5,500 14% McDonalds Moderate 2,400 6% Green Mountain Coffee RoasterS Low 803 2% Kraft Foods, Inc Low 3,100 8% Nestle S.A. Low 17,700 44%
INDIAN ENVIRONMENTAL SCANNINGIndustry Analysis: The Indian food market is approximately Rs 2,50,000 crore ($69.4 billion), ofwhich value-added food products comprise Rs 80,000 crore ($22.2 billion). Despite food production inthe country is expected to double by the year 2020, not much attention has been given to the growth ofthis vital industry, with no standard publication highlighting the importance of this sector. F&B Newsaims to cover news, events, research, innovations, new products & processes, marketing and so on (bothnational and international), which will broadly cover around 75 key areas in the food, beverage and itsallied segments. These include food processing, bakery, confectionery, dairy, meat & poultry, fruits &vegetables, fisheries (including aquaculture), food ingredients, grocery retail, packaging, alcoholicbeverages, soft drinks and bottled drinking water, canning, fats and oils, filters and filtering materials,flavours and flavour enhancers, nutrient additives, frozen food/refrigeration and thermo processing,among others.With food production expected to double by 2020, large investments are already going into food andfood processing technologies, skills and equipment. Given the changing industry dynamics, it isparamount for F&B News to highlight news, issues and events in the sector, some of which are brieflydiscussed below.PESTThe food processing industry is witnessing a 20% annual growth rate and, consequently, the demand forprocessed foods and beverages in the country is constantly on the rise. There are 300 million upper-and-middle-class consumers of processed and packaged food in the country, and another 200 million saw ashift by 2010. In the scenario, the food processing industry has been accorded priority status by the newgovernment with Subodh Kant Sahai holding independent charge of the Ministry of Food ProcessingIndustries.Processed foods are primarily derived from agricultural commodities, which often incur multiple taxesat various stages. This multiple taxation has a cascading effect on prices. Moreover, there is a widevariation in the level of taxes across states, which creates a barrier to the free flow of materials from thefarm to the factory and ultimately to the consumers.
Post-Green Revolution, it is essential that agricultural research reoriented to address new challenges. Asthe existing crop seeds have reached yield saturation, there is an urgent need to evolve transgenicvarieties through the application of biotechnology, RNA use, and molecular biology. These varietiesshould have high yield, short maturity, pest and disease resistance, stress tolerance, and wideradaptability.With the help of indigenous breeds improvement programme, nutritional research and improved cost-effective vaccine programmes, India has achieved the distinction of being the highest milk producingcountry in the world. Similarly, with processes in place to improve quality of marine products forinternal and export markets, India is the seventh largest producer of fish in the world and is rankedsecond in inland fish production.Special foods are available for every patient today, be it hypertension, diabetes, obesity, or even weightreduction. For instance, diet food and nutraceuticals are the latest fad. The market for sugar-freeconfectionery and snack products is growing steadily. Motivated by a desire for maximum indulgencecoupled with a wish for calorie control and health benefits, consumers are increasingly choosing sugar-free and sugar-reduced products.Packaging of food products has become important in order to ensure safety and hygiene and to eliminatethe possibility of adulteration. In some cases, more than 50% of the price of a product goes towardspackaging. Good packaging will greatly catalyze the development of a food-processing sector.However, packaging industry is yet to achieve international standards in the country.Customer DemographicsA survey by the National Coffee Association, found that younger adults are less likely to purchaseregular coffee than older adults, but are more likely to purchase gourmet coffee or espresso than olderadults. The following chart shows the percentage of each age group that purchases regular coffee orgourmet coffee and espresso Coffee Consumption bv Type Age Regular(%) Gourmet/Espresso(%) 18-24 28 17 25-39 39 13 40-59 53 15 >60 61 11
COMPETITION SET Product Artificial Category Jewellery Chat Shops CompetitionProduct BaristaFormCompetition Movies Fast Food Chain Cafe on Wheels Local Quickies CCD Vans Mochas Canteens Ice Cream Parlour Games Parlour Generic Competition Budget Competition
COMPETITORS BARISTA: Barista coffee was establishes in 1999 with the aim of identifying growth opportunities in the coffee business. Increasing disposable incomes and global trends in coffee indicate immense growth potential in one particular segment. Barista Coffee is a chain of espresso bars in India. Headquartered in Delhi, Barista currently has espresso bars across India, Sri Lanka and the Middle East. It was founded in 1997 by Amit Judge and was part of his group of companies. He sold part of the equity to first Tata Coffee. Then after he and Tata Coffee fell apart, Sterling then bought over the firm. In 2007, Sterling divested all their stake to Lavazza. Barista Coffee Company is currently owned by Lavazza, Italy‟s largest coffee company Our aim is to passionately deliver the highest levels of experiential services. Maintain consistency in serving the highest quality products and become a globally competitive organization – one that is driven by an insatiable thirst for excellence. CAFÉ COFFEE DAY (CCD): is a chain of coffee shops in India having its headquarters in Chikkamagaluru, Karnataka. A division of Amalgamated Bean Coffee Trading Company Ltd. (ABCTCL), it is commonly known as Coffee Day or CCD. It opened its first cafe in 1996 on Brigade Road in Bangalore, and today has the largest cafe retail chain in India – with over 800 cafes in 112 cities. It has even tied up with World Space and Micro sense to enable its cafes with satellite radio and Wi-Fi, respectively. Its first Wi-Fi cafe was opened on Lavelle Road, Bangalore. Café Coffee Day sources coffee from 5000 acres of coffee estates, the second largest in Asia, that is owned by a sister concern and from 11,000 small growers. Global and Local Players Information: Private Sip
KEY DRIVERS OF THE BUSINESSThe first driving force is product innovation. The industry must continuously strive to innovativeproduct offerings for two reasons: to continue to attract new customers that do not buy from the currentproduct mix and to offer differentiated products from rival firms. The industry needs to listen to itscustomer base as they are one half of the product innovation equation. The customers know what theywant and will sound off by making current items popular and successful or by giving in-store or onlinefeedback as to what products and services they would like. Overall this driving force has a positiveeffect on the industry as it forces firms to lead follow or get out of the way. The successful firm will beone that is able to continuously bring new, successful products to market.The second driving force is changing societal concerns, attitudes, and lifestyles. As discussedpreviously, societal changes related to the coffee industry centre on two major topics. These are thetrends that consumers are increasingly demanding healthy alternatives to full-fat, high-sugar coffeedrinks, and the growing concern on the addictive properties of coffee and how long term coffeeconsumption may affect health.The third driving force is growing buyer preference for differentiated products. This force acts on theindustry to require firms to continually stay in touch with buyer demand. If every coffeehouse offeredthe same product mix then consumers would simply go to the closest store for their purchases. Bydifferentiating products, customers will travel to a certain firm or even a certain location of that firm toget their favourite products. Differentiation is a business strategy to give firms a competitive advantage.The final determinant driving force is globalization. Globalization as a force acts to open new marketsand new consumers to firms in the industry. Once firms have adequately reached a critical mass in acountry or region, they must seek new opportunities to continue to grow their business. The face anddefinition of how companies will act as globalization evolves is subject to debate, but firms will need tocontinue to grow across the globe to increase revenue production. Firms in the coffee industry will viewincreased globalization as a way to increase market share by changing consumer preferences or byexpanding into new untapped markets .This force acts on the industry in a strong positive manner ascontinued increases in globalization allow for continued increases in opportunities by way of marketexpansion.
KEY CHALLENGES FOR THE BUSINESSHigh Staff turnoverHigh absenteeism of the staff at the outletHuge expenditure on the inventoryIncurring LossesLess Profit MaximizationLess pay structure of the workersOutdated technology like machine of billingChanging Market Condition ConstantlyChanging Customer‟s Preferences Constantly
PERCEPTUAL MAPPING Low Medium High HighPr Mediumice LOW
REASON FOR POSITIONINGThe positioning of „Private Sip‟ can be reflected from its name, we are focusing on the privacyparameter of the customers. In a country like India most of the café‟s do not follow the concept ofproviding much privacy to its customers and are usually clustered. „Private Sip‟ would provide itscustomers who require privacy and leisure time with themselves, for such customers cabins would beprovided apart from the normal sipping alley in the café.„Private Sip‟ is more concerned with the personal feeling of the customer and making them feel athome. The positioning would be such that it would convey the message to the target audience that „Youcan find yourself on a coffee‟ and hence would be for all age groups that the business is catering to.4P’sProduct: Merchandise strategyHot and cold beverages: Coffee based drinks and also non coffee based drinks like litchi based coolersand others. The USP of the store is the privacy it offers. So there will be separate cabins on the firstfloor for customers to enjoy a sip of coffee in complete privacy. The product line will also contain readyto serve products like pastries with different flavors and cookies. For ice cream we have a tie up with thewell known brand “Baskin Robbins”. Various flavors will be offered. Along with these we havedifferent toppings on offer for the coffees and ice creams, like chocolate sauce, almonds etc. The storewill operate from 11 am to 10 pm on weekdays and 11 am to 1.30 am on weekends. The staff will be onrotation basis. All staff will have maximum of 60 hours of work each week. The Music played will bemild in nature so that people don‟t face any inconvenience in communicating/chatting with each other.Price: Pricing strategyOur target group will be the age group of 18-40 and SEC A/B. So the price will be in the higher range atpar with the competition, like CCD or Barista. The products availed in the cabins will be charged at arate of 6% higher than if it‟s availed in the normal zone.
Place: Location strategyThe location of the stores is vital. Since the usp of the store is the privacy it can‟t be located at a placewhich is extremely busy but neither can it be too far from the crowd otherwise its visibility will be poor.Also it has to be located in uptown places because that is where our target segment will be. Based onthese parameters we have selected the following locations in the city of Kolkata:-Park street, near St.Xaviers CollegeNear Landsdowne, padmapukur road.Salt lake, Sector 5Ballygunge place, behind St Lawrence SchoolJadavpur, opposite lane of Jadavpur University. Gate 3Promotion: Marketing & Promotion strategyThe initial or pre-launch promotions will be guided towards creating awareness through unorthodoxroutes.We will place posters and banners in front of few colleges, offices and movie theaters in and aroundPark street, Esplanade, Camac street, Ballygunge and nearby areas. The posters and banners will read“no need for PRIVACY.!!!!”. The words are highlighted in white on a red background.The second phase of pre launch promotion will have the existing banners & posters being replaced bysimilar looking banners and posters with the words “Warm coffee with warmth”. Parallel to thesepromotions in the second phase we will go to colleges and offices in the same zones and give coupons.This will also be an invite for the launch of the cafes around the city.We will have tie up with baskin robbins. Anyone who purchases ice cream worth Rs500 or more in onesingle bill from a baskin robbins store will get a discount coupon for our café. There will be a 10%discount on showing the coupon.Pamphlets will be circulated all over the city, 3 times a week, throughout the year. We will participate inthe Intra-city marathon. Through that we will create awareness about the café.In the future when the cash flow will be consistent we will go ahead and advertise in mass media likeradio and advertise through large frame hoardings around the town.
THE PENTAGON AND TRIANGLE ELEMENTS FOR ‘PRIVATE SIP’: Place System Communication Product Logistics Supplier Value People Place: Location, Layout and Design – International Ambience with cabin facilities (for privacy), Consumer friendly layout with a unique design in all the stores Product: Medium variety and medium assorted products People: Service, Knowledge and Climate – Friendly service, strong product knowledge, service speed and privacy will be given to the customers Value: Price and quality – Market right prices for SEC A,B consumers Communication: Positional and promotional – Meeting students in colleges and creating curiosity amongst them, Store graphics.
System: Location of the café, café design, café launch and CRM Service station training and food quality audits Logistics: Hub and Spoke Model, Route plan for movement of finished goods and reduction of pilferage and wastages. Suppliers: Supply relationships on Partnership basis yielding win - win situation for both and better payment terms. Tie-up with Baskin Robbins for ice-creamModel Store EBITDA: Private SipINVENTORY POLICY: Since it is a consumable product, having a very low shelf life, the stock isreplenished on a daily basis. If any food is left after the closing time and if it is consumable, then it will begiven to the old homes (free of cost).ROLL OUT STRATEGY The roll out strategy will be in accordance with the clustered expansion model. Initially we will open one store near St. Xaviers College in Park Street and once that kicks off we will open two stores each in the next two years in the city. In the long term after 5-6 years with atleast 15-17 cafés around the city of Kolkata already established, we would move the model in nearby metros of different states like Bhubaneshwar, Jamshedpur, Shillong etc. The inventory will be managed in a hub & spoke model. The central warehouse in the city of Kolkata will be somewhere in the region of Topsia.PEOPLE STRATEGY AND OWN VS. FRANCHISE STORES STRATEGY Starting a Business from Scratch - Pros Control and creativity - Starting own business allows to create a system from scratch and to make all the decisions relating to business. The business is likely to have a good feeling of accomplishment once the effort is a success. Profitability - If the business belongs solely to owner, owner reap in all the profits rather than having to pay a portion in royalty fees.
Less initial startup expense – Owned model usually have more flexibility in finding a business thatbegins at a lower cost, depending on the type of business. There is also the possibility of runningbusiness from one store for start to save on expenses.Starting a Business from Scratch - ConsMore time and effort – Owned model requires complete control from start to finish. One will need togain a great deal of knowledge on not only running the business, but also on starting the business as wellas all other aspects of managing a business. Included in this list is the preparation of a complete detailedbusiness plan, the work involved in obtaining financing, and the effort in hiring good employees.Competition - There is a good possibility that there will be established competition via franchisedbusinesses in the area. One will need to differentiate the business from the others in order to build acustomer base from scratch.Franchising store disadvantagesCosts involved: The cost involved in franchising a new business like ours against the time will take forbusiness to see a return on the investment.Loss of control: Usually when you own it, you control it, but in franchising it is the franchisee thatcontrols his/her unit and to a degree runs it their way. Its here when the operating manual comes intoplay and one would have to have a regular communication to make sure that the franchisee is doingthings properly and sticking to the business system and procedures to meet targets.Conflict between franchisee and franchisor: The biggest negatives in franchising are the conflictsbetween the franchisee and franchisor which as a worst-case scenario, but not uncommon, can lead tolegal proceedings. When franchisees are making money they are happy, but if they are not then theblame usually lies at the door of the franchisor.„Private Sip‟ is an owned business and hence going through the franchising disadvantages it gives bettersense for us to go for an owned business model as a start up. Franchisee best works for an establishedbrand in the long run.FINANCIAL ANALYSIS: Private Sip