CAFÉ COFFEE DAY

Café Coffee Day, a part of Coffee Day Global Limited, is India’s favourite hangout for coffee
and conversations. Popularly known as CCD, it strives to provide the best experience to its
guests. CCD coffees are sourced from thousands of small coffee planters. It opened its first
cafe in 1996 at Brigade Road in Bangalore – the youth and the young at heart immediately took
to the cafe, and it continues to be one of the most happening places in the city. CCD to the
youth is a “hangout” spot where they meet people, make conversations, and have a whole lot
of fun over steaming cups of great coffee. It’s been an exciting journey since then to becoming
the largest organised retail cafe chain in the country. It is also present in Austria, Czech
Republic and Malaysia, so if your travel takes you there, do stop by its outlets to get a taste
from back home.

QUESTION 1

CAFÉ COFFEE DAY – CURRENT CLIMATE AND SITUATION

Café Coffee Day or CCD has come a long way since its inception 19 years ago. The homegrown
café chain, credited with the start of the coffee shop culture in India, now finds itself facing a
deluge of competition not just from international chains such as Starbucks, Costa Coffee or
Barista but also from various domestic players and concept cafés. “From a brand standpoint,
the biggest challenge is to stay relevant and fresh given the rising competition in the category.
It is, however, the best time for consumers in terms of choices,” says Bidisha Nagaraj, group
president, marketing, Coffee Day. The rise of tea bars such as Chai Point and Chaayos is also
eating into the traditional coffee-led café segment. The chain café and tea bar market stands at
1,820 crore, growing at 20% in value, and constitutes 27% of the overall café and tea bar market
at 6,750 crore (source: Indian Café and Tea Bar Market report, November 2015, Techno park).
Clearly, the opportunity is huge and CCD is leaving no stone unturned to capitalise on its first
mover advantage.

INDUSTRY – COFFEEHOUSE

The size of Indian Coffee Chain market has shown a phenomenal growth in the last couple of
years. This market has witnessed substantial build-up, which is backed by rising income level,
increasing young population, rapidly changing lifestyle and increasing westernization
influence. India has emerged as one of the most favoured destinations for coffee chain players.
The entry of global coffee chain retailers like Starbucks, Barista, The Coffee Bean & Tea Leaf,
etc. has turned out to be one of the key growth drivers of the coffee retail market. These coffee
houses not only attract the regular coffee goers, but also the executive segment like corporate
officials, businessmen and celebrities. The country’s youth population is increasingly visiting
coffee houses for socializing, thus creating growth opportunities for brand operating in the
country, both chained as well as independent coffee shops. This section of population forms
the majority of the customer base for cafe chain outlets. The professions with the constraint of
not having official space, use the cafe houses as a meeting place. Hobby groups, Journalists,
Writers, and Women’s clubs also opt coffee houses to spend time for leisurely get-together.
Now-a-days, consumer can easily spend on dinning out, which has been seen as a major
participating factor behind the consistent growth momentum of coffee chain market in India.

According to the new research report "Indian Coffee Chain Market Outlook 2022", coffee
chain market in India is still being on the pace of development, and is on a continuous
transformational phase. It is anticipated that the sector will grow at a CAGR of around 18%
during 2015-2022. Further, our report reveals that the market will witness a dramatic change
in the competitive landscape over the next few years. A large number of global coffee chain
players will foray into the lucrative Indian market. Moreover, the large untapped market in the
unorganized sector is anticipated to witness concrete market developments, which will provide
further impetus to the Indian coffee chain market.

RETAIL SECTOR

CCD belongs to the category of speciality stores as well as the mall formats in the retail sector.
Specialty stores usually sell larger volumes of a particular type of product. Examples of
specialty stores include retail businesses that sell books, women's lingerie, and motorcycle
parts, sporting goods, vitamins, coffee, cell phones, pet supplies or office supplies. Specialty
stores are usually smaller than most traditional retail stores; and have higher costs because they
operate will less volume. Consequently, prices in specialty stores are usually higher than at
other retail establishments. Pioneering the coffee café concept in India, Café Coffee Day was
launched in 1996 with equal weightage on being an Internet café and as a speciality coffee café.
Today there are over 1450 Café Coffee Day stores in 200 cities in India where around 500,000
guests visit the cafes every day. The stores range from 800 to 2000 square ft. All cafes are
company owned and operated. There are 45 Café Coffee Day Lounges that are targeted towards
families and the trendy affluent and offer more varieties of food (breakfast, lunch items etc.)
and better ambience.

CONSUMER BEHAVIOUR AND COMPETITIVE PRESSURES

Café Coffee Day (CCD) is perhaps the market leader in terms of retail footprint with 1,586
cafés at 220 cities, as of December 2015, including multiple formats and 600 kiosks called
Value Express. But just being present at convenient locations is not enough in the
hypercompetitive segment. So when CCD conducted a research to understand if consumers
would accept home delivery from cafés, the response was overwhelming. Home delivery is
very counterintuitive to the model as people come to cafés for experience. But the research
shows consumers are looking for quick meal options and beverages to be consumed at office
spaces and home get-togethers. While the insight was right, CCD discovered it needed to have
a differentiated food experience for home delivery, a menu that complemented the service. So
it introduced home delivery in Bengaluru with a menu different from its traditional café one -
freshly assembled food including filter coffee and brewed tea flasks, hot dogs, Afghani chicken
biryani, tawa pizza etc. Initially, the home delivery menu was different from that of the cafés.
But when it became a success, CCD thought it makes business sense if they also roll it out at
their cafés. It plans to leverage its vast network of cafés to expand this service to major cities.
At present, CCD has mapped 50 cafés in Bengaluru to deliver orders within a three-four km
radius. The challenge for players in this space is to not only adapt to the changing demands of
consumers but also to not deviate too much from their core promise. And that for food retail is
convenience, quality and price.

The principal factors affecting competition in the coffee retail sector include pricing,
product/service quality, brand perception, taste and product variety. To differentiate itself from
competition, CCD has built its retail strategy on 3As: ‘Affordability’ to cater to the value
conscious youth segment; ‘Accessibility’ to ensure cafés are at an arm’s reach for high-
footfalls, and ‘Acceptability’ to portray it as a non-intrusive, non-judgmental place where
consumers can hang out for long hours — a third place after home and office. Its deeper
footprint on digital platforms such as Twitter, Facebook and Instagram further adds to customer
engagement. It recently created its first digital content property with a character, Beano, to
engage consumers. At the end of the day, with more than 1,500 outlets, CCD is in more in the
business of real estate — the biggest cost in the café business. “In India, we see a complete
mismatch in the prices of merchandise and the price of real estate that this merchandise actually
occupies. CCD should concentrate on maximising the value of its real estate. Merchandise
should be of high value, move quickly off the shelves and should not occupy a lot of space.
CCD is competing not just against coffee chains but an array of quick service restaurants,
vending business as well as players in the hospitality industry. Its primary competitors are other
café chains such as Starbucks, Costa Coffee, Barista and many other local cafés. It also compete
with other quick service restaurants operators such as Westlife Developments (McDonald's),
Jubilant Foodworks (Dominos and Dunkin Donuts) and Yum! Brands (KFC, Pizza Hut and
PHD). With Starbucks expanding at an unprecedented pace, the competition has intensified
further. Even quick service restaurants like McDonald’s are entering the coffee chain market
with McCafe and have plans to set up around 50-75 cafes by December this year. The Company
carefully monitors the prices offered by its competitors and continuously adjust its pricing and
promotions to maintain competitiveness. CCD believes that the principal factors affecting
competition in the coffee retail sector include pricing, product and service quality, brand
perception and taste and product variety. CCD distinguish itself from its competitors on the
basis of strong branding and ownership of the same, high levels of customer service, good café
locations, trendy café format, competitive pricing and a wide range of products.

E - COMMERCE AND TECHNOLOGY

Beyond food, the focus is on getting the experience right. CCD launched its app in February
2016 to track consumer behaviour, personalise offers and promotions, and enable cashless
transactions through built in wallets and build loyalty. The app is currently available only in
Bengaluru, and once in full swing, can also be used to preorder food and beverages. After
Bengaluru, it will be launched in Maharashtra and Gujarat, followed by a national rollout.
It also recently tied up with Freecharge to enable cashless transactions at the outlets. Customers
can use their mobile numbers to pay and complete the transaction with an on-the-go pin
reportedly in less than 10 seconds. Currently, CCD has tied up with third party vendor Swiggy
for the last mile in Bengaluru. It later plans to integrate B2B delivery players like Grab and
Roadrunnr with its app for a bigger spread.
Cafe Coffee Day (CCD), the cafe chain company has tied up with Wi-Fi service provider O-
Zone Networks to provide free Wi-Fi access to customers at its cafes in select cities across the
country. CCD will now provide high-speed connectivity to its tech-driven customers through
a dedicated leased line at its cafes. Apart from Wi-Fi, CCD will take another step in digital
innovation with O-Zone Networks providing bandwidth and IP to run the cafe chain’s PoS
systems and camera. In addition to that, CCD users in 24 CCD outlets in the initial phase will
be able to avail O-Zone’s association with SpeedFetch to download digital content such as
games, Hollywood and Bollywood content at hyper speeds.

QUESTION 2

EVOLUTION OF CCD

V.G Siddhartha, famous as the founder of Café Coffee Day, one of India’s largest coffee chains,
was born in Chikmangaluru district of Karnataka. Being born into a family that had been
planting coffee for over 140 years, V.G. Siddhartha literally had coffee in his blood. Then,
inspired by a chat with the owners of Tchibo, a German coffee chain, Siddhartha decided to
open his own chain of cafes in India, at that time in a country that had no formative cultural
grounding in cappuccinos. Then he looked at the basics of coffee business, the numbers threw
him off. The world grows around 120 million bags of coffee bean every year which costs
around $7 billion approximately. But when the same bean is retailed as a cup of coffee the
value becomes $100 billion. Siddhartha thought himself that he wanted to chase the $100
billion mark, not $7 billion. The first Cafe Coffee Day outlet was set up on July 11, 1994, at
Bangalore, Karnataka with the tagline ‘A lot can happen over a cup of coffee’. Soon enough,
apart from the first store, he opened 20-25 store in Bangalore and 20 stores in Chennai. In 2011,
Cafe Coffee Day was named ‘most popular hangout joint amongst youth’ at 3rd youth
marketing forum and ‘India’s most popular coffee joint’ at Indian Hospitality Excellence.
Today Cafe Coffee Day chain has 1534 outlets in 135 cities across 28 states in India. Café
Coffee Day also has international outlets in Karachi, Vienna, Dubai and Prague. The Company
turned over revenue of US $450 million in 2014, and Siddhartha today has a net worth of US
$ 1.3 billion. Siddhartha succeeded in giving the Indian consumer a new lifestyle experience,
which is within the reach of common people.
PRIMARY BUSINESS

Cafe Coffee Day's divisions include:

 Coffee Day Fresh 'n' Ground, which owns 450 coffee bean and powder retail outlets
 Coffee Day Square, a high level coffee bar in Bangalore, Chennai, Mumbai, New Delhi
 Coffee Day Xpress, which runs 900 plus Coffee Day kiosks
 Coffee Day Beverages, which runs over 34,000 vending machines
 Coffee Day Exports, its exporting wing
 Coffee Day Perfect, its fast-moving consumer goods packaged coffee division
 Coffee Day B2C Plant, Coffee vending machine manufacturing division

Café coffee day is the primary business of Coffee Day Global Limited. They mainly focuses
on the coffee shops to maximize their revenue. Café Coffee Day was started as a retail
restaurant in 1996. As of March 2015, there are 1530 outlets across 28 states of India. Cafe
Coffee Day has also expanded outside India with its outlets in Austria (Vienna), Czech
Republic, Malaysia, Egypt and Nepal.

BUSINESS MODEL
The profit formula essentially deals with the financial sustainability of the business in the
long run. It consists of the revenue model, the cost structure, the margin model, and the
resource velocity. Each of these is discussed below.

Revenue Model

The revenue model decoded would be the market potential for the business (viz. how much
money can be made). Quantitatively it can be expressed as price times volume. In the CCD
case the volume is unlikely to pose a challenge. According to Mr Siddhartha, in 1996, India
had a capacity for about 15 cafes. Today, it is about 2000 cafes. In another five years, it could
rise up to 5000 cafes. Cafe Coffee Day today has about 1500 stores in 210 cities in India and
it could go up to 2500 stores in five years. Today the CCD chain has 70% of market share
and even with the impending foreign competition, it might still have 50% market share. So
the market is on the growth path. With more café chains and superior promotion, consumer
awareness would increase and in turn the market size is set to grow further. On the price
front, CCD follows four different pricing models based on the cost of real estate and the
purchase potential of the place. Hence, one can safely assume the sustainability of the
revenue model of the CCD chain.

Apart from that, the market size and brand awareness of CCD increases multifold due to the
18,500 vending machines all over the country and over 900 kiosks in schools, colleges, and
railway platforms selling 50 million cups of coffee and tea per day. Even though it is an
indirect retail model, it definitely does contribute to the robustness of the revenue model.
Also in the long run, the brand awareness and customer satisfaction might lead to cross
selling in the CCD cafes.

Cost Structure

The cost structure model includes the allocation of costs over the various activities (viz. key
assets, direct costs, indirect costs etc.) and the economies of scale. While the exact cost
structure is not available for this article, the background information provides adequate input
concerning the assets and the economies of scale. The brief on Coffee Day Co. gives ample
evidence of the complete optimisation of the procurement and supply chain. The company
owns the plantation and the curing as well as roasting facility and hence the complete input
supply. Being one of the largest exporters of coffee in India, they also have access to the best
quality coffee in the country. They also own the cold chain and logistics for efficient and
effective delivery of their input raw materials. Therefore, the economy of scale in
procurement and supply chain of CCD is evident. So it is again quite safe to accept the
optimality of cost structure of the retail vertical of Coffee Day Co. While exact figures were
not available, the available information sources indicate that margins and inventory turnover
are quite adequate and satisfactory for sustainability and growth of CCD.

Key Resources

Key resources play the most significant part in the delivery of the customer value proposition.
The key resources of any firm include the people, technology, products, equipment,
information, channels, partnerships, alliances, and the brand. Cafe Coffee Day has strong
assets to support a sustainable business model.
CORPORATE STRATEGY AND GOALS

Café Coffee Day’s used two types of strategies to make it a great success.

 Focused Cost Leadership strategy – here CCD focussed to offer its products to only one
group of customers at a low price. This made that particular segment of consumers very
loyal to CCD.
 Localization strategy – by localizing the pressures to reduce cost will be reduced as
well as it will get good responses from its local areas.

GOALS

Mission - To be the best Cafe chain by offering a world class coffee experience at affordable
prices.

CCD has set a goal of reaching 2000 coffee shops in different parts of India in the coming
years, since Indian Coffeehouse industry has got a market potential of nearly 5000 coffee
shops. Currently there are roughly 2,000 cafes in the organized market and roughly 500-600
‘mom-and-pop’ cafes. So there’s a lot of potential.

REVENUE

The major revenue generating business for CCD is coffee and related business. It contributes
about 52% of the total revenue of the entire business done by CCD. It totalled to 1326 Cr INR
in 2015. With over 5 lakh people walking into CCD’s cafes around the country every day, the
coffee chain, which garners 60 per cent of its revenue from the sales of beverages, 35 per cent
from food and 5 per cent from merchandise it sells in cafes, is trying to increase in-home
consumption of coffee.

FUTURE PLANS

CCD already has over 1,500 cafes spread across 300 cities and towns in the country and over
900 Xpress outlets in public places such as hospitals, airports and railway stations. CCD is
targeting a 10 per cent growth in outlets and an 18-20 per cent growth in revenue. There is a
potential for 5,000 cafes in India. And one measure of assessing this potential is the number of
malls in India – there are 800 malls in the country and each mall can ideally take one cafe.
Similarly, every residential area, high street, mass transit location, etc. can have cafes.

QUESTION 3

CORPORATE ANALYSIS

Parent company – COFFEE DAY ENTERPRISES

COFFEE DAY ENTERPRISES is the parent company of the Coffee Day Group, which houses
Café Coffee Day that pioneered the coffee culture in the chained café segment in India. This
coffee goes all over the world to clients across, Europe and Japan, making them one of the top
coffee exporters in the country. It opened its first Café Coffee Day outlet in Bengaluru in 1996,
it had a new vision—one where coffee was more than just a beverage. It was a cup that brought
coffee aficionados, budding coffee drinkers, and well, friends together over a cup of freshly
brewed coffee. Today, its subsidiary Coffee Day Global Limited has established the largest
footprint of café outlets in India-spread across more than 200 cities. Its forays into diverse
businesses are marked by the same passion with which they started Coffee Day Global Limited.
Their portfolio includes Technology Parks & SEZs, Logistics, Investments, Financial Services
and Hospitality.

It was originally formed as a partnership firm constituted under the Indian Partnership Act,
1932 on February 1, 2008 under the name Coffeeday Holding Co. Coffeeday Holding Co. was
thereafter converted from a partnership firm to a private limited company under Part IX of the
Companies Act, 1956 as Coffee Day Holdings Company Private Limited. The name of the
Company was changed to Coffee Day Resorts Private Limited and subsequently, as Coffee
Day Enterprises Private Limited. The Company was converted into a public limited company
and the name of the Company was changed to Coffee Day Enterprises Limited thereafter.

RETAIL BUSINESS PORTFOLIO

Its retail sector is named COFFEE DAY GLOBAL. The following comes under its retail sector;

 CAFÉ COFFEE DAY - Café Coffee Day is a coffee shop for the young and the young
at heart. CCD is a part of Coffee Day Global Limited. The first café opened in 1996 on
Brigade Road in Bengaluru, India. A smart, simple space that they could call their own
for a while, sit down, talk and listen to conversations, hold short meetings or even have
 a lot of fun, all over steaming cups of coffee. It's been an exciting journey since then,
becoming the largest organized retail café chain in the country – in terms of number of
café outlets. What's more if your travels take you to Vienna, Austria or the Czech
Republic, do stop by at Café Coffee Day for the taste of a blend from home.

 COFFEE DAY BEVERAGES - Going one step further, its vending business brings
coffee to ever more convenient locations—your home or office. An important part of
its vertically integrated business model, they have developed vending machines using
in-house technology that dispenses hot coffee as well as teas of different flavours.

 COFFEE DAY FRESH AND GROUND - Fresh & Ground (F&G) serves fresh and
branded coffee beans and powder to customers through 424 F&G outlets, the majority
of which are owned and operated by the company across South India and Maharashtra.
They started serving coffee through F&G outlets in 1995 and currently offer over 25
exclusive coffee blends. They have also introduced a specialised coffee machine 'Kaapi
Guru' for its F&G business, which is used by large number of small restaurants and
eateries in South India.

 COFFEE DAY EXPORTS - To ensure they're providing the best possible coffee—in
compliance with their high quality standards—they control purchasing, roasting,
packaging, and distribution of coffee used in each of their businesses. They purchase
coffee beans from three coffee-producing regions in Karnataka—Hassan, Chikmagalur
and Coorg—and roast them to their exacting standards for many blends and single
origin coffees.

OVERALL MARKET STRATEGY

Both its parent company as well as the retailer CCD follows the same strategy. They primarily
focus on Focussed cost leadership strategy combined with localisation strategy designed in to
their vertical integration business model. In the vertical integration model, they have their own
coffee plantations. From these plantations, quality coffee beans are extracted and are made in
to coffee, then these are distributed out through their retailers. Since they are having their own
coffee plantations, they do not have to import high quality coffee beans from abroad, this will
help them in reducing cutting costs of their production.
QUESTION 4

COMPETITORS OF CCD

CCD operate in a competitive retail landscape and face competition, especially from other
retailers of coffee products and café operators in India. Their primary competitors are other
café chains such as Starbucks, Costa Coffee, Barista and many other local cafés. We also
compete with other quick service restaurants operators such as Westlife Developments
(McDonald's), Jubilant Foodworks (Dominos and Dunkin Donuts) and Yum! Brands (KFC,
Pizza Hut and PHD). In food and grocery (F&G) business, it competes primarily with Nestle
and Hindustan Unilever (HUL). In the vending business, they have limited competition from
the organized sector from Lavazza in the fresh milk segment, but they indirectly compete in
the overall vending space with Nestle and HUL.

COMPETITIVE ADVANTAGES

 CCD has a 3000 acre of land under coffee plantation. The supply of coffee beans
to C C D w e r e o f b e s t q u a l i t y a n d w o u l d n o t c o s t a t m a r k e t r a t e .
T h i s p r o v i d e d competitive advantage of price.
 The organization was totally integrated vertically, from its beans to the furniture in
the cafes and lounges, in as much as a large portion of its rivals outsource the
dominant part of their supply chains
 It likewise offers excellent quality in its novel and in-house recipes, mixes and blend
and has a well-established and loyal customer base
 CCD had a 1stmover’s advantage in the market, when it formally started as a concept
of Cyber Café, it had no competitors. Due to this its products were sold in a premium
price.
 Its target segment was of youth from age group 15 to 30, of which 60%
were its regular customer, this made possible for their staff to make an emotional
connect with them to increase brand loyalty.

COMPETITIVE STRATEGIES OF CCD

The company carefully monitors the prices offered by its competitors and continuously adjust
its pricing and promotions to maintain competitiveness. The principal factors affecting
competition in the coffee retail sector include pricing, product and service quality, brand
perception and taste and product variety. CCD believe that it distinguish itself from its
competitors on the basis of strong branding and ownership of the same, high levels of customer
service, good café locations, trendy café format, competitive pricing and a wide range of
products.

COMPETITIVE THREATS

CCD is enjoying its position as a market leader in coffeehouse industry. Currently no major
players are able to compete with CCD, the first mover advantage and cost leadership strategy
used by CCD has already established it as the king of coffeehouses. Even though Starbucks
comes with a huge brand image, it is believed that the premium pricing of Starbucks can never
reduce its cost so as to compete with CCD. Other players are also facing the same issue.

QUESTION 5

a. SEGMENTATION AND TARGETING

CCD today has become the largest youth aggregator, and from a marketing standpoint, the
success has come by focusing on the 3As: Accessibility, Affordability, and Acceptability. It
targets youth in the middle and higher income namely students & working professionals. CCD
has different formats such as cafes, lounge, square etc. to cater to different segment of
consumers. The CCD brand is, and always has been, extremely focused towards youth. In India
where over 40% of the population is under the age of 20, there is huge potential for CCD to
become one of the country's largest youth brands. The untapped market and potential for future
growth is enormous. CCD targets customers in the bracket of 15- 29, so it tries to fit into the
wallet of this range of age group.

b. POSITIONING

When CCD opened its first outlet at Brigade Road, Bangalore in 1996, it positioned itself more
as a Cyber Internet Cafe. These were the early days of internet boom in India. CCD realized
that there exists a potential for building a coffee brand for the Indian market, and hence it
launched the first cyber café based on international trends, but keeping with Indian ethos,
replaced beer with coffee. In its early days, however, CCD had neither clear positioning in
sight nor significant presence. But after few hiccups, CCD fought back with vengeance. Its
subsequent strong positioning as a "third place" away from the home and college or workplace
for the "young" and "the young at heart" turned the tables in CCD's favour. With the advent of
cable TV and growing consumerism due to increase PPP, the urban youth was exposed to the
lifestyles of youth across the world. They were looking for an experience that was of world
class standards and yet easily accessible. CCD fulfilled this intrinsic demand. Value for money
proposition: Café CCD is positioned as an "affordable" brand. This strategy has worked
extremely well thus far.

As far as its competitors like Starbucks, Costa Coffee, Barista Lavazza are concerned, they are
premium brands that will cater only to those who are willing to give some extra for the quality
of products and services provided. So the competitors of CCD is so far unsuccessful in
penetrating the markets.

c. TECHNOLOGY

Beyond food, the focus is on getting the experience right. CCD launched its app in February
2016 to track consumer behaviour, personalise offers and promotions, and enable cashless
transactions through built in wallets and build loyalty. The app is currently available only in
Bengaluru, and once in full swing, can also be used to preorder food and beverages. After
Bengaluru, it will be launched in Maharashtra and Gujarat, followed by a national rollout.
It also recently tied up with Freecharge to enable cashless transactions at the outlets. Customers
can use their mobile numbers to pay and complete the transaction with an on-the-go pin
reportedly in less than 10 seconds. Currently, CCD has tied up with third party vendor Swiggy
for the last mile in Bengaluru. It later plans to integrate B2B delivery players like Grab and
Roadrunnr with its app for a bigger spread. Cafe Coffee Day (CCD), the cafe chain company
has tied up with Wi-Fi service provider O-Zone Networks to provide free Wi-Fi access to
customers at its cafes in select cities across the country. CCD will now provide high-speed
connectivity to its tech-driven customers through a dedicated leased line at its cafes. Apart from
Wi-Fi, CCD will take another step in digital innovation with O-Zone Networks providing
bandwidth and IP to run the cafe chain’s PoS systems and camera. In addition to that, CCD
users in 24 CCD outlets in the initial phase will be able to avail O-Zone’s association with
SpeedFetch to download digital content such as games, Hollywood and Bollywood content at
hyper speeds.
 d. GLOBAL PRESENCE

Apart from more than 1500 outlets in different cities in India, CCD also has its outlets in
European countries like Austria, Czech Republic and other Asian countries like Malaysia,
Egypt and Dubai. CCD has been eyeing an entry into Philippines, Vietnam and neighbouring
countries but according to a company official, who heads international operations said that
plans got delayed and the company was still in the process of chalking out firmer plans. With
global coffee chain major Starbucks entering India, the home grown company is looking to
focus more on the domestic business, which is its domain.

e. LOCATION STRATEGIES

Café Coffee Day opens its outlets in strategic locations where there are high foot falls like
shopping malls and busy streets. It maintains three kinds of outlets like Café coffee day stores,
CCD lounge and CCD Square. CCD stores are for majority segments where they can enjoy
coffee, food and spend time with friends and family. Lounges are for niche segments. These
are premium outlets aimed at the coffee connoisseurs who love to pay premium for a great cup
of coffee. Square outlets sell variety of single origin coffee from the countries that produce
them. It also has wide menu of food items of different cuisines. These Café Coffee Day stores
have Wi-Fi, presentation screens and valet parking services attracting business class customers.

f. MANAGING HUMAN RESOURCES

Every CCD store is company owned. CCD has around 10,000 employees on its payroll, where
a major chunk of employees is out at the various stores, some even in tier 2 and tier 3 cities.
CCD is doing a very good job at keeping its staff, even in the remotest of stores, happy and
motivated. The employees are majorly from rural India for whom the whole hospitality industry
and the concept of coffee chains are new. CCD offered most of them an opportunity for
dignified labour, weaning them away from the interiors of the country where life was difficult
in multiple ways. CCD’s effort to give them clear growth paths and appreciate good work was
what made them happy to be employed there. Every individual is appointed in a role or place
that best suits her/his ability and preferences. A lot of focus is given on training and
development. The employees appreciated the fact that the company, through its area managers,
ensures that they have a link with the senior management. The area managers not only address
their grievances but are also responsible for their growth. A weekly meeting of area managers
with other leaders is organised to address the issues and/or ensure that all employees on the
floor get their due. Each senior member of the team, including the CEO, visits all the stores
and kiosks in the country frequently. This practice gives the employees on the floor a chance
to interact with them directly. There is no dearth of appreciation for good work at CCD. They
are well taken care of and they pass on the resulting happiness to their customers.

g. MERCHANDISING STRATEGIES

Café Coffee Day product mix constitutes a wide range of products that appeal primarily to
Indian coffee and snack lovers. Products have a decided Indian taste to it – be it food or
coffee. Most of the eatables have been adopted to meet the Indian taste buds like samosa,
biryani, masala sandwich, tikka sandwich etc. Thus they have been trying to capture the Indian
taste along with classic coffee. The best-selling item in summer is frappe, which is coffee and
ice cream blended together. The young people favour it. In winter it is cappuccino. Their
merchandising includes funky stuff like t-shirts, caps etc. CCD is not mainly focussing on the
merchandising. The sales of merchandise only contributed to 8.72% of the total sales of CCD.
There is a complete mismatch in the prices of merchandise and the price of real estate that this
merchandise actually occupies. CCD should concentrate on maximising the value of its real
estate. Merchandise should be of high value, move quickly off the shelves and should not
occupy a lot of space.

h. PRICING

Café Coffee Day prices according to its divisions, square and lounge are premium priced and
Café is priced by competitive pricing. Café Coffee Day also follows value based pricing in its
marketing mix by offering the items in different quantities like small, medium and large. Also
by adding extra ingredients like chocolate sauce or extra cream CCD prices beverages at
premium range. So the pricing strategies are not rigid and through its flexible and varied prices
it caters to the customers in different segments like students and corporate employees. CCD
sells vending machines to other business clients and advertising space at its outlets for other
revenue streams.
 i. ADVERTISEMENT AND SALES PROMOTIONS

Café Coffee Day does promotions in wide variety of ways both ATL and BTL. But proportion
of mass media campaigns are less comparatively. Café Coffee Day does promotional activities
in spaces where its target audience are available. CCD uses television commercials and
advertisements in print media, co-branding in movies and television series. It also does sales
promotions like happy hours, combo deals and coupons. Café Coffee Day ties up with brands
and provide them space on the walls of its outlets to advertise. It conducts contests and uses
tent cards in its restaurants for effective promotions. CCD believes it’s close to 1500 outlets
is biggest source of advertisement. Apart from that it is very much into social media marketing
(Facebook, twitter etc.) because of its targeted youth market. Tie-ups with youth centric brands
are another mode of communication. CCD also sells its merchandise through its outlets and
also spending heavily on e-commerce.

j. CHALLENGES IN RETAIL MARKET STRATEGY

The retail market strategies employed by CCD can be considered successful to a greater extent.
Apart from certain areas, they are doing a great job to stay a class apart from its competitors.
The areas like its global presence and merchandising strategies have to be improved a lot in
order to increase its sales revenue in the future. Apart from India, CCD is only known to a few
international countries, which will result in a relatively lower brand image as compared to its
competitors like Starbucks. They are also facing a lot of challenges in expanding their services
to the foreign countries. Also the merchandises of CCD are occupying most of its outlets, but
the sales volume is low compared to the cost that has to be paid to display the merchandises.
So CCD should come up with better merchandising strategies to bring out bigger revenues
from the same. The HR and marketing strategies of CCD are so good that they are the key
factors that drives more sales revenues.
QUESTION 6

FINANCIAL ANALYSIS

 REVENUE GROWTH

FY16 FY17
CAFÉ COFFEE DAY 931 CR INR 1030 CR INR
STARBUCKS 235 CR INR 272 CR INR

With lesser number of shops in hand, Starbucks is performing very well to add on to the
growth of its revenue. With only 91 outlets in hands Starbucks has increased its revenue
from 235 cr to 272 cr, which shows each Starbucks store is selling products worth Rs 3 cr.
Whereas CCD is having 1500 outlets and more and the total revenue stands to Rs 1030 cr,
which indicates that each CCD outlet is only having a sales of 84 lakhs.

 RETURN ON ASSETS

CAFÉ COFFEE DAY FY16 FY17

RETURN ON ASSETS 91.38 87.80

Return on Assets has reduced from 91.38 to 87.80. This shows that the ratio of Net Income
to Total Assets has come down this financial year as compared to previous year.
QUESTION 7

SWOT ANALYSIS OF CCD

Strengths

 Quality of products and services – CCD is offering high quality coffee which was not
tasted by Indians ever. Its first mover advantage along with the quality services
provided, made the customers loyal to CCD.
 Targeting the youth segment – CCD targeted primarily on the youth segment. Its
customers belongs to the age group 20-35 yrs. The products were made according to
the tastes and likes of the youth. Also CCD shops were designed in such a manner to
attract students and professionals, who will make it as a spot to hangout during their
leisure times.
 Low pricing of its products – CCD owned plantations of its own and coffee beans were
extracted from their own plantations. These helped them to reduce the production cost
as coffee beans was not imported. As a result it enabled them to sell their products at a
comparatively low price as compared to its competitors.
 Large number of outlets – CCD started almost 1500 outlets with in India itself. So we
are able to find a CCD outlet in every nook and corner of the country. It acted as a good
promotion for the café. Almost everyone in India became aware about the brand CCD.
It increased the brand image of CCD.

Weakness

 Poor merchandising – the merchandising strategies adopted by CCD is very poor. Due
to the reduction in sales of its merchandises, CCD has loss in many ways. The large
number of outlets increases the real estate cost of CCD and most of these outlets are
occupied by these merchandises which are not selling at a pace.
 Lesser global reach – CCD is mainly focusing in the Indian market. Even though their
presence are there in some countries, most of the foreign people are unaware of the
brand CCD, compared to other brands like Starbucks.
 Lack of individual attention to special customers – in all café’s it is not possible to give
special attention this will create a negative impression on customers mind.
Opportunities

 Indian coffeehouse market has a potential market of nearly 5000 cafes. Currently the
players in the organised as well as unorganised segments totals to only 2000 shops. So
in the coming future, the CCD can expand its business by opening more number of
shops.
 Coffeehouse industry has got good acceptance all over the world, so instead of
focussing only in Indian markets, CCD can expand its business to major countries in
the form of joint ventures or acquisitions.
 CCD has got a good brand image among Indians. CCD mainly focuses on the youth
segment. Gradually it can move in to other segments as capturing the attention of
people is quite easy as they are already well established.
 CCD can add new items to their menu as the coffeehouse industry is showing great
promises. It can also focus on improving their merchandises as more people are visiting
the coffeehouses quite often. It can also change the ambience of the retail outlets to get
more customers.
 Providing services 24/7 is also a good option to increase its sales.

Threats

 Increased competition – Indian market is showing a promising platform for

coffeehouses. After the success of CCD major players in the industry like Starbucks
has set their foot on Indian market. Starbucks is coming with a great brand equity,
automatically the customers will have a tendency to switch its brands. Other brands like
Costa Coffee, Barista Lavaza are also strong in the market.
 CCD also have to fight with competitors in the organised as well as unorganised sectors.
The promising market for Coffeehouses has even tempted the food chain like
McDonald’s to open their own café named McCafe. In India, consumer needs and
preferences are changing rapidly, and global brands are new attractions for
India’s youth and young working professionals.
QUESTION 8

CCD is the market leader of Indian Coffeehouse industry. Starting its first outlet in 1996, CCD
started writing its own success story. Till now CCD was successful in conquering the minds of
Indian population. Since coffee industry is showing a promising future, CCD has a lot to do to
defend its position as the market leader. Indian market potential for coffeehouses is 5000 cafes.
So to secure a bright position in the future, CCD should make sure that the majority of the
market potential is achieved by CCD.

If I get an opportunity to work as the CEO of CCD, I would like to implement the following
strategies,

 Improving the merchandising strategies of CCD

 Try to increase the number of stores in the market by expanding into new places.
 Collaborate with foreign countries and try to get more exposure through joint ventures
and acquisitions.
 Introduce innovative advertisement campaigns and promotional activities.
 Try to bring more innovative practices to stay ahead in competition with global leaders
like Starbucks.

CONCLUSION

Café Coffee Day is the coffeehouse from Indian origin that has introduced a new culture in
front of the Indian population that does a lot of things over a cup of coffee. The story of CCD
is just like a fairy tale. After opening its first Café in 1996, CCD started growing year after year
and achieved what all things that it could possibly have. With the famous tagline “A lot of
things can happen over a cup of coffee” it captured the minds of people all over India. Now
Café Coffee Day has turned into the third most visited destination of students as well as young
professionals.
BIBLIOGRAPHY

 https://www.rncos.com/Market-Analysis-Reports/Indian-Coffee-Chain-Market-
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 http://www.dnaindia.com/business/report-coffee-day-takes-on-competition-with-
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 https://www.livemint.com/Companies/pjwwDanTlmYB1f69FDhmFJ/CCD-wants-to-
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 https://www.sciencedirect.com/science/article/pii/S0970389613000499
 http://www.coffeeday.com/ourbusiness.html#coffeeday-scroll
 https://www.mbaskool.com/marketing-mix/services/16992-cafe-coffee-day.html