CCDs Expansion

HRDs Restructuring &

Intervention
Group 1

Name

Roll. No

Anu Ranganikar

14F111

Debalina Ray

14F119

Kanika Bandooni

14F127

Neha Dua

14F134

Pallavi Gupta

14F138

Ruchika Singh

14F144

Tony Joseph

14F160

CCDs Expansion HRDs Restructuring & Intervention

Group 1

Introduction
Cafe Coffee Day is an Indian cafe chain owned by V.G. Siddhartha. It is basically owned by
Amalgamated Bean Coffee Trading Company (ABCTCL) now known as Coffee Day Global
Ltd. Caf Coffee Day was started as a retail restaurant arm in 1996.The first CCD outlet was
set up, at Brigade road in Bangalore, Karnataka.
Currently they have 1,530 stores and 600 kiosks across India as well as 30,000 vending
machines in 11,000 corporate offices across 29 states of India. CCD is a market leader in
India with 46% market share in terms of volume of outlets. Also CCD has its footprints in
Austria, Czech Republic, Dubai, Malaysia & Egypt.
Looking at their production capacity, they produce their own unique coffee beans and they
are one of the largest coffee exporter in India .Also their coffee machine costs lesser than the
western counterparts like Lavazza and Nestle machines. On an overall basis, revenue growth
has slowed to 9% year-on-year in FY14 after reporting a 34% revenue growth in FY13. On
an annualized basis, revenue growth has slowed further to 2.8% in FY15.
SCOPE: It encompasses strategic policies to be adopted for geographic and product
expansion.
Mission:
To be the best Cafe chain by offering a world class coffee experience at affordable prices
To achieve its mission Siddhartha has been constantly putting all his efforts to develop and
expand to maintain scalability in the market. Recently CCD has filed for an IPO in the
country. Coffee Day Enterprises is to offer 20% of its stake to the public for about $200
million.
Forbes based billionaires have made pre-IPO investments in the chain whose public offering
is expected to garner much investor interest. One of Caf days objectives is to utilize
nearly Rs.633 crore from the IPO proceeds towards loan repayments. The company is
thinking to expand globally and also putting efforts to enhance their range of product
offering. But there are certain challenges like:
- Ever increasing competition not only with late entrants global chains like Starbucks, Costa
Coffee, but also the newest, McDonalds McCafe which is soon going to be launched in India
- Rising cost of real estate and the ever challenging issue of recruiting and retaining the
expansive workforce across 1,700 outlets. Ever increasing attrition rate of as high as 40 per
cent at entry Level positions.
- Rising real estate cost and since they have no Franchise, they are paying high rents
- Providing range of product offering and changing the positioning of caf chain.

SWOT Analysis
STRENGTHS
WEAKNESSES
Largest retail chain of cafes
Weak brand image
ISO 9002 certified company
Lacks strength to maintain brand
loyalty
Quality and taste
Poor ambience and dcor
Youth oriented brand
Wrong site selection -losses
Preferred for informal meetings
Reduction in cost (Own production)
USP of brand Highly affordable
brand
OPPORTUNITIES
THREATS
Fastest growing industries in Asia
Competition with established brands
and other International coffee cafes
Gone international
like Starbucks, Costa Coffee, Coffee
Mochas, Gloria Jeans, Coffee, Coffee
Bean,
Hukka Parlours
PESTLE Analysis
Political

Easy sourcing of coffee beans

Cost control because of government regulations

Economic

Heavy coffee drinks in South India

Cheaper sourcing maintain quality

Social

Targets youth and middle class

Affordable for a meeting place

Technological

Wifi facility at every outlets and music

Digital marketing for promotions

Legal

Ethical and based on customer delight

Less consumer complaints and quick customer
service
Use biodegradable products

Environmental

Competitor Analysis: Caf Coffee Day has 1469 stores in India and had kept lowest price of
small Cappuccino i.e. Rs.66. Indian Coffee Market in food service was expected to grow at
13-14%. So many companies were interested to launch in India.

Caf Coffee Days reach was very high as compared to its competitors as they had 1530
stores.
Figure 1.1

India's Specialist Coffe Chains

1600

140
1469

129

1400

120

1200

105

107

95

106

100

95

90

88

1000

80
800

70

66

60

600
40

400
200

175

20
100
18

17

17

11

No of Stores
Small Cappucino Cost(April 2015)

Series 3

We are taking one of the competitors into consideration to reflect on where CCD differs.
Caf Coffee Day v/s STARBUCKS differentiation strategy
Parameters
Store Format
Ambience Experience
Target Customer
Affordability
Service Quality
Price

Caf Coffee Day

Tata Starbucks
Multiple-Lounge, Caf and Single Format
Square
Satisfactory
Highly Satisfactory
Caters to wide range of age Above 30 plus age group
groups
Affordable
Aspirational
Not up to the mark
Supreme quality
Average Price Range
Highly Expensive( 50% more
expensive than CCD)

Coffee Quality
Location Preference

Supreme quality
Supreme quality
Located in highly populated Premium locations near to offices
areas such as railway stations,
airports and hospitals

Comparing certain factors between CCD and Starbucks

Factors
Ownership

Number of Stores

Brand Status
Type of Locations
Segment Profile

Product

Price

CCD
ABCTCL Exports
(Private Large Scale company)
1530 Stores (1423 Cafes, 102 lounges
and 5 squares)
1000 Xpress Kiosk
450 Fresh and Ground Retail outlet
22,000 Vending machines
Local brand
CCD
Lounges
and
Square:
Metropolitan Cities
Young people between ages of 15-30
from Middle and upper-class
60% of customers were regular, visiting
twice or more than twice a week or
more.
CCD Lounge: 28-36 Age groups, in
Bengaluru
Teenager and college student under 25
Classic coffee, cold coffees , iced drinks
Food Items: Ready to eat sandwich and
burgers
Indianised snacks like samosas and
chicken tikka sandwiches
Desert like brownies, pastries and ice
cream.
Merchandise including Tee
Shirts,
bags, pen and coffee filters
Cappuccino Rs 66, Sandwich Rs 85

Average Consumption ( Rs 175

Bill for two)
Profit Margin
26%
Workforce
7000
Staff Payroll
Rs 8000 13000
Promotional Activities
Sell tickets for rock concert

Starbucks
U.S Based Starbucks Coffee
Company & Indias Tata
Group ( Joint Venture, 50:50)
11 Single store format

Global brand
Metropolitan cities
Working professional over 25
Tourist
people

and

well-travelled

Starbucks loyal customer

Cold coffees, Hot coffees

Tandoori chicken sandwich
Elachi mawa croissant

Cappuccino Rs 95, Sandwich

Rs 125
Rs 450-600
34.60%
267 approx.
Rs 16000-26000
Just say YES policy, Service

Create contest around popular TV shoes experience, Calling customers

and youth oriented brands, with winners by first name, remembering
receiving merchandises and paid trips
their favorite drinks
Challenges faced by CCD

Services: Self service is now getting replaced by the waiter-service have led to
increased cost to the company

Staffing: Lack of good quality training, poaching of employees, lack of loyalty and
commitment among its employees and mitigating attrition in front line employees

Lack of Global Presence: Loss of excitement in youth and they may get bored of the
existing products and services

Real Estate prices: High store set up cost and increased monthly rent and too many
stores increases the fixed cost of the company

Profit Margin: Affordable prices as compared to the competitors

Changing taste of consumers: New and innovative products are the need of an hour
and they concentrate on maintaining an updated menu and store appearances with
consumer preferences

Cost of renovation: Huge cost is involved in upgrading existing cafes and Lounges
( $55,250 and $84,500 respectively)

In order to attain a competitive advantage, CCD needs to build socially complex resources
and capabilities. It needs to build a social resources like reputation, trust, teamwork, culture
cannot be easily imitated. It needs to thoroughly review its HR investment in the various
sectors to see if business performance is aligned with the HR Strategy and serves its purpose.
As the current environment is very much changing because of changing customer preferences
and needs, CCD needs to develop dynamic capabilities to gain a sustained competitive
advantage. To ensure all this, below are the following business goals.
Business Goals

To build the resource and capabilities to manage the workforce through HR policies
and practices

To effectively manage attrition in frontline employees and to focus on effective HR

investments

To develop socially complex resources and to develop dynamic capabilities to handle

future

Business Strategy: Clear and effective tracking of HR investment and business performance
and building capabilities and capacity to gain competitive advantage
HR Strategy

To inculcate the KASO among the HRs and new recruits in order to meet
organizational goals
To build the resource and capabilities to manage the workforce via implementation of
new HR policies and practices

Consumer Value Proposition

Brand Experience: CCD has become the adda or the second place for most of the
youngsters in India. This is because of its laid back and relaxed environment it
provides to them and also because of the cost effective offerings.
Brand Reinforcement Cluster Approach: CCD has multiple outlets within a close
radius of its other outlets. E.g. The Bandra area has 6 CCDs in the same vicinity to
make it the Spot for sudden hunger pangs coupled with some warm conversation.
Multiple Formats: CCD has various formats of Cafes which include Squares,
Lounges, High Street Cafes, Garden Cafes, Mall Cafes, Xpress, etc.
Franchisee Company Owned: All the outlets are company owned. It may make it
more expensive to run but ensures there is no brand dilution.
Vertical Integration: With the value chain integration, from bean to the cup,
ABCTCL was able to reduce costs, assure adequate supply demand, and gain
economies of operation and scale.

Value Chain
Value Chain General Trend
Elements

CCDS Capability

Capabilities: A capability is the ability to perform or achieve certain actions or outcomes

through a set of controllable and measurable faculties, features, functions, processes, or
services. A business capability is what a company needs to be able to do to execute its
business strategy. When a firm expands, the task of global strategists is to build a platform of
capabilities culled from the resources, experiences and innovations of units operating in

multiple locations; to transplant those capabilities wherever appropriate; and then to

systematically upgrade and renew them- ahead of the competition. The following points
summarize the approach:
1. Exploit existing capabilities: The exploitation of existing capabilities can also take
place through the acquisition of companies in the new location. Two crucial questions
every strategist must ask are how well the companys capabilities will travel and
where they might best be replicated. One way to answer these questions is to use what
we call the RAT Test; RAT stands for relevant, appropriable and transferable.
2. Create new capabilities: Developing new capabilities is on some occasions achieved
through a single, deliberate action, such as the acquisition of a foreign company
known to have mastered a particular technology, but at other times it derives simply
from coping successfully with the challenges presented by another countrys
competitive and institutional environment. In order to evaluate the potential for
enhancing the current sources of advantage through the assets and new capabilities
developed in foreign markets, global strategists can use what we call the CAT Test.
CAT stands for complementary, appropriable and transferable.
3. A continuous cycle: Taken together, RAT and CAT represent a cycle of capability
exploitation and enhancement. The result is a continuous cycle of exploration,
exploitation, adaptation and enhancement. A systematic process for incorporating
these improved capabilities into the companys overall core capabilities can complete
the cycle.
Geographic Expansion Capabilities: As companies stake their growth strategies on
global expansion and pursuit of new markets:
Their ability to forge a human capital strategy and HR capability
Their functional capabilities that can improve profitability
Their Infrastructural capabilities that can be critical to the success
Product Expansion Capabilities: As the company goes global, it requires:
The ability to market and brand the locally-specific products through their marketing
capabilities and efficient distribution and logistics capabilities
Sub Capabilities: Following points provide details on how geographic and product
expansion capabilities can branch out further:
(a) Human Resource Capabilities:
- Hiring new people across different global markets
- Understanding and complying with varying labor laws
- Understanding varying attitudes and policies towards workers in different cultures
- Structuring an organization so that credible and competent leadership is placed in
the right locations
- Fashioning a culture that is consistent but also accommodates local differences

Providing career opportunities to employees and engage employees, so as to bring

down the attrition rates

(b) Functional Capabilities:

- When a company is expands regionally, areas like financial management, internal
communications, financial reporting, sales and marketing, public relations, and
risk management, in order, require most changes.
- When a company is expands globally, areas like sales and marketing, risk
management, financial management, supply chain, internal communications, and
IT, in order, require most changes
(c) Infrastructural Capabilities:
- Developing a vision (to-be) of what the infrastructure will look like in the future
- Developing a current capabilities map (as-is)
- Mapping the infrastructure capabilities to overall business architecture and
requirements (difference between as-is and to-be)
(d) Distribution and logistics Capabilities:
- Deciding whether to develop in-house or outsource distribution and logistics
capabilities
- Managing the system of distribution centers, wholesale operations, and retail
stores
(e) Branding and Marketing Capabilities:
- Understanding the culture in different geographies
- Deciding the additions to made to the menu in new locations
- Incorporating the cultural differences when deciding on which products to add to
the menu
- Designing branding strategies on the basis of different cultures
- Deciding the promotions strategies taking into account the cultural differences
Practices: Following practices would be required once Caf Coffee Day is on-board:
(a) HR Capabilities:
- Attracting and retaining skilled workers
- Training in terms of Regulations around the handling and sharing of employee
data across countries
- Training in terms of skills in accordance with the global business strategy
- Training to familiarize with the companys culture
- Grooming in terms of emotional and psychological mind-sets needed
- Rethinking the global structure and organizational design
(b) Functional Capabilities:
- Developing a sophisticated finance function by knowing the multiple financial and
accounting environments, since they vary across the globe

Planning tax, as it can play an important role in accelerating the transition to

profitability
Having the right incentives and controls in place to manage expansion, as rapid
growth exacerbates risks
Having frequent communication between headquarters and local management
teams
Building mutually beneficial relationships with suppliers and other partners
Choosing which functions should be global, and which will be local. Functions
such as finance and IT can remain centralized

(c) Infrastructural Capabilities:

- Infusing fresh capital helps establish infrastructure capabilities
- Deciding the layout and design of each of the cafes in all locations
- Improving/advancing the machinery and technology to be used in the new
locations
(d) Branding and Marketing capabilities:
- Recruiting a local marketing head for each geography, who can incorporate the
cultural differences in the marketing and branding strategies
- Deciding the location and layout based on the demographic and geographic
profiles of the target market
- Building the technology that supports product expansion
(e) Distribution and logistics Capabilities:
- Deciding the number of distribution and wholesale centers across each location
- Developing capabilities to forecast demand and, then decide the distribution
network accordingly
- Deciding the logistics in terms of regulations (e.g. on truck sizes), transportation
and its costs, etc.

Figure1: Changes required when a Company expands- Results of a Survey

Metrics

1. Cost per hire (Advertising cost + Consultancy fees + Total Interview cost / Total
Hires):
It measures the effectiveness of recruitment efforts
Helps organizations to understand how much they are spending per hire
2. Voluntary Turnover Rate (Total Voluntary Separations [except temporary] with 0 to 1
year of service / Total Headcount [except temporary]):
It can point to poor hiring decisions
It also points organization is lacking in benefits and relevant support
3. Orientation Rate (New hires oriented / Total new hires):
% of new hires receiving an orientation program
4. Time to fill (Total days to fill/Total hires ):
analyses the average time it takes to fill a vacancy
5. Cost to orientation Rate(Cost to Orientation / Total new hires):
tracks the average cost of orienting newcomers to the Organization
6. New Hire Performance Rate (Average performance score of headcount within 0-1
years of services/ Average Performance rating of total headcount [excluding
temporary staff]:
allows for the assessment of the quality of the candidate
7. New Hire Promotion Rate (Total promotion of headcount with 0-1 year of service /
Total new hires in 1 year):
tracks the effectiveness of the recruitment
Capability Gaps
A capability gap refers to the space between "where we are" (the present state) and "where we
want to be" (the target state). A gap analysis may also be referred to as a needs analysis, needs
assessment or need-gap analysis. A gap analysis is a method of assessing the differences in
performance between a business' systems to determine whether business requirements are
being met and, if not, what steps should be taken to ensure they are met successfully.
Caf Coffee Days present problems:
1. Attrition:
-

Currently Caf Coffee Day is facing 40% attrition at the entry level

This rate is too high in comparison to the industry average and poses a threat to Caf
Coffee Day as an employers brand image

2. Product Portfolio:
-

Currently Caf Coffee Day has the same menu across the country , where as they
could cater to different cultures by localizing their menu according to the region

Their menu has been restructured many times but does not offer anything that is
specific to a certain region

3. Consultants- hiring strategy : CCD has tied up with 10 consultants for hiring
purposes, but they do not provide a specified time period or job description which
ends up hindering their whole recruitment process

4. Global expansion:
- In order to compete with Starbucks, CCD needs to look into global expansion
- Caf Coffee Day aims to be one of the top four coffee chains around the globe, in
order to do that they need to focus on international expansions
- Their competitor, Starbucks, is prevalent throughout the world
How can Caf Coffee Day fill these gaps?

I.

A more comprehensive and standardized hiring process and solve the attrition
issue at hand
-

II.

Since CCD is facing a attrition rate of 40%, they need to work on their hiring process
as well as their retention plan. This can be done after identifying the problems with a
comprehensive analysis of the employee environment. This analysis can be done
through conducting ssatisfaction surveys
Also coaching, training, mentoring, stretching jobs and providing adequate
advancement opportunities can be used as ways to retain employees
Effective implementation of the induction and on-boarding process

III.

Caf Coffee Day is dealing with a very high attrition rate thus it needs to concentrate
on the whole hiring process with some changes in the on-boarding and induction
system
Localized menus and store ambience in order to attract new customers

Currently Caf Coffee Day has the same menu across the country, where as they could
cater to different cultures by localizing their menu according to the region. Their
menu has been restructured many times but does not offer anything that is specific to
a certain region.

IV.

Specified time frame, job description , with clearly defined roles and
responsibilities

The hiring process at CCD lacks clarity, hence they need to work on the job
description of entry level employees with a clarity on the roles and responsibilities.
CCD does not give a specified period of time to fill a position thus the position
remains empty for a while which causes problems in the whole functioning of
branches. At times they are understaffed and at times they are over staffed which
results in a loss of efficiency and money.

V Develop a strategy in order to expand internationally

The CEO of Caf Coffee Day, Mr.Venu Madhav said that Caf Coffee Day aspired to
be one of the top four coffee chains in the world. In order to do so Caf Coffee Day
needs to look into global expansion in Asia for starters.

HR Plans to acquire the capabilities

1. A more comprehensive and standardized recruitment process
Attracting and retaining skilled workers would mean CCD has to come up with the best and
comprehensive hiring process. The initial screening to selection of lower, middle and upper
level should have high levels of HR involvement. Despite the importance of hiring, CCD
should make sure it's interview process is reflective of it' working culture. The focus should
be on personality traits - the qualities and customer service skills. Keep in pace with the new
trends the lower level employees should be forward-thinking, technologically savvy, and
deeply vested in their desire for purpose and meaning in their work.
Like Starbucks, a simple application form which can be filled in any store or online should be
followed .Structured interviews should be conducted giving priority to interpersonal and
leadership traits. All interview questions are based on a competency style questions. For
middle and upper management vacancies, importance to prior experience and industry
experience should be given more weightage. Effective implementation of the induction and
on-boarding process will also lead to obtaining high performance employees. CCD can make
use of Gamification and/or newer HR online induction practices to engage aspirants.
Standardized induction and on-boarding procedures will allow new recruits proper training
and bonding to company culture. It can also consider outsourcing its recruitment processes to
experienced HR agencies. Internal recruitment methods that can be used in CCD are job
postings and promotion from within, as well as a career path for the management employees.
External recruitment methods that can be used in CCD are walk-ins, where people apply on
their own and also employee referrals, where current employees recommend possible job
applicants. Specified time frame, job description, with clearly defined roles and
responsibilities.
2. Hiring new people across different global markets
As of March 2015, there are 1530 outlets across 29 states of India. Cafe Coffee Day has also
expanded outside India with its outlets in Austria (Vienna), Czech Republic, Dubai, Malaysia
& Cairo, Egypt. CCD should slowly start expanding and venturing into newer markets
whereby improving its footprint as well as attracting newer talent. By employing local
baristas and middle management, more informed decisions can be made.
The customer service and labour regulations are more smoothly carried out. Can exploit
Eastern and European markets. Diversification strategy can be followed and college students
(for full and part time) can be utilized.

Foreign college students and hospitality majors can be targeted so as to reduce the cost of
training. CCD can even target the university level recruitment avenues offered in foreign
educational institutes to get fresh talent at affordable package bands. CCD should strive to
become an Equal Opportunity employer. All qualified applicants should receive consideration
for employment without regard to race, national origin, age, sex, religion, disability, sexual
orientation, marital status, or any other basis protected by local, state or federal law.
3. Attracting and retaining skilled employees
Keeping in mind the high attrition rate in the industry it is very important to attract and retain
talented employees. CCD should occupy significant mind share amongst prospective
aspirants. By becoming the employer of choice in the coffee retail industry, the brand
visibility widens. If the employees are treated well, they perform well. Enough and more
career opportunities and training will attract skilled talent. By coming up with newer
employee welfare and benefit schemes existing employees can be retained.
Baristas and younger employees can be given tuition and education assistances. New
recognition programs, career sabbaticals and other time-off programs for employees at every
level. Plus, 30% in-store and online discounts can be considered. More employer branding
through word-of-mouth and social media can attract talent. Employee stock option facilities,
medical and health care insurances as well as performance based incentive schemes can
retain talent to a huge extend.

4. Employee engagement activities

At Caf Coffee Day job satisfaction comes only when the employees love their job. At CCD,
there's no reason not to! Hence, the E.E. Club was formed as an initiative to encourage interdivisional engagement. By hosting a plethora of events like outbound trips, employee picnics
and Friday fun days, etc the employee morale can be boosted.
A constant check on the employee satisfaction levels through surveys and random checks can
lead to higher employee productivity. By introducing monthly employee engagement
activities to drive a forum can be created for talent expression as well as to provide
opportunities to network with employees of the group companies.
Best performer awards and best caf of the region titles should be kept so as to have spirited
competition. CCD brand is nothing without its baristas. By giving employees reasons to
believe in their work and that theyre part of a larger mission, An employee with a
connection to the work of the company will then operate for its good just like a personal
matter. Treat each store like a small business and be creative with training sessions.
STARTEGY

Objectives

Measures

Targets

Initiatives

FINANCIAL
S

Market
share
growth

Growth
Shareholder value

Increase market
share to 70%

CUSTOMER

Customer
satisfaction

Improve customer Menu expansion

satisfaction by
Reduce order time
30%
Discount offers

INTERNAL
BUSINESS
PROCESSES

Process
performanc
e

Time
Service
Satisfaction
Retention
Operational
efficiency

LEARNING
AND
GROWTH

HR
practices

Employee
retention
Employee
satisfaction

Global and local

expansion
IPO

Increase process
Lounge and square
efficiency by 10% redesign
Automation of
equipment
Reduce attrition
EE club
by 10%
Outbound trips
EE survey and
feedback

References
1. http://sloanreview.mit.edu/article/building-your-companys-capabilities-throughglobal-expansion/
2. https://www.accenture.com/pl-en/insight-outlook-manage-global-workforce.aspx
3. http://www.ey.com/GL/en/Issues/Driving-growth/Beyond-Asia---Challenge4
4. http://www.chinabusinessreview.com/developing-china-sales-and-distributioncapabilities/
5. http://www.cafecoffeeday.com/
6. http://www.financialexpress.com/article/industry/companies/cafe-coffee-enterprisesbrews-rs-1150-crore-ipo/90650/
7. http://www.livemint.com/Money/ZBzgpvrFUU5W5ZgabVxprM/Coffee-Day-IPOthe-cup-looks-halfempty.html
8. http://www.forbes.com/sites/saritharai/2015/05/28/cafe-coffee-day-starbucks-rival-inindia-filing-for-ipo-at-1-billion-valuation/
9. https://en.wikipedia.org/wiki/Caf%C3%A9_Coffee_Day
10. http://landor.com/#!/work/case-studies/caf%C3%A9-coffee-day/
11. http://tejas.iimb.ac.in/articles/79.php
12. https://www.scsglobalservices.com/files/cafe_man_verinsops_v5_2_010614.pdf