Storm in A Cuppa - Revised

Storm in a Cuppa:
What`s brewing in the consumer`s mind?

Prof. Rachna Sharma
Faculty, IBS Business School, Mumbai

Avneet K Ghai

Student, IBS Business School, Mumbai

%ABLE OF CON%EN%S

Abstract ................................................................................................................................... iii
List of Illustrations .................................................................................................................. iv

SEC%ION 1: Introduction ........................................................................................................ 9
1.1Project proposed
1.2Description oI the project in brieI
1.3Objective oI the project
1.4Timeline

SEC%ION 2: %he Coffee Caf Industry ................................................................................. 12
2.1 The birth oI organized coIIee retail
2.2 The Indian coIIee culture and coIIee retail market

SEC%ION 3: %argeting the Customer ................................................................................... 18
3.1 Marketing strategy planning process
3.2 Marketing Mix
3.3 Adapted Growth-Share Matrix
3.4 Consumer Behavior

SEC%ION 4: Case Study on Costa Coffee ............................................................................. 25
4.1 Costa CoIIee Corporate ProIile
4.2 Marketing Strategies
4.3 Prime Competition
4.4 SWOT analysis

SEC%ION 5: Competitor Analysis ........................................................................................ 25
5.1Market leader: CaIe CoIIee Day
5.2Market Iollower: Barista
5.3New entrant: Gloria Jean`s CoIIees
5.4New entrant: The CoIIee Bean & Tea LeaI
5.5Market nicher: Java Green
5.6Future aspirant: Starbucks

SEC%ION 6: Market Research Survey .................................................................................. 35
6.1Problem deIinition
6.2Research design
6.3Costa CoIIee Consumer ProIile
6.4Comparative ratings and consumer preIerences
6.5Limitations
6.6Recommendations

SEC%ION 7: ODC Marketing and client acquisition ............................................................ 53

SEC%ION 8: Attachments ...................................................................................................... 54
A. Consumer Survey Form
B. Internal Questionnaire
C. Market research analysis tables

SEC%ION 9: References ......................................................................................................... 65

ABS%RAC%

As a legacy oI the British Raj, India has been a nation oI tea drinkers. CoIIee was conIined to the
South, and the south Indian 'kaIi was Iamous Ior its Iresh rich brew. CoIIee drinkers could be
Iound in either the decrepit government-run coIIee houses or the South Indian co-operatives,
thronging the university campuses.

The objective oI this project was to gather customer proIile and preIerence inIormation via a
market research survey. Mapping the consumer perspective through a consumer response survey
helps in marketing strategies have successIully captured the target clientele.

Based on the Iindings oI an in-store market research survey in Pune, Mumbai and Vashi, this
paper proIiles the taste oI new India. The areas oI excellence and improvement have been
identiIied based on Iactual inIormation, in light oI which recommendations and suggestions have
been provided Ior the overall improvement oI the organizations in the Iuture. This research was
conducted in 2009 in Mumbai and Pune, India; so the inIormation is relative to these cities.

LIS% OF ILLUS%RA%IONS

%itle Pg.
%able 1.0 %imeline of the internship project. 11
%able 2.1 A brief timeline of coffee retail. 14
Figure 2.1 World coffee consumption sales and growth. 17
Figure 3.1 Marketing Strategy Planning Process. 19
Figure 3.2 Price-Quality Matrix for the Indian coffee retail market. 20
Figure 3.3 Price-Market share Matrix for the Indian coffee retail market. 23
Figure 3.4 Buyer Decision Process by Cohen (1991). 24
Figure 4.1 SBUs of RK1 corporate group. 26
Figure 4.2 Costa Coffee counter, India. 27
Figure 4.3 Beans are exported from Costa U.K. but are freshly ground in the
stores.
28
%able 4.1 New product range at Costa Coffee India. 30
%able 4.2 Costa Coffee store formats and target markets in western India 31
Figure 4.4 Costa Coffee Corporate Discount scheme 32
Figure 5.1 Caf Coffee Day Logo 35
Figure 5.2 Barista Logo, Figure 5.2b. IPL 2009 promo offer by Barista. 38
Figure 5.3 Gloria 1ean`s Coffees Logo 39
Figure 5.4 %he Coffee Bean & %ea Leaf at Rajiv Gandhi International Aiport,
Hyderabad.
41
Figure 5.5 1avagreen Logo 42
Figure 5.6 1avagreen`s summer menu (April 2009). 42
Figure 5.7 Starbucks Logo 43
Figure 5.8 Mocha Logo 44
Figure 6.1Marketing information system and its use to marketing managers. 45
Figure 6.2 %arget market characteristics and key measurement variables. 47
Figure7.1 A model of the Out-Door Catering (ODC) counter of Costa Coffee. 55

SEC%ION 2: %HE COFFEE CAF INDUS%RY

2.1%he Birth Of Organized Coffee Retail

The second most traded commodity in the world, second only to oil, coIIee or qahwa` as the
Arab traders oI 1000 A.D called it, has much lore and Iable interlinked with its origin.

India's contribution to world coIIee lore is the story oI 'Baba Budan and the Seven Seeds.
Sometime, Baba Budan in the 17th century rallied the IaithIul in Iront oI a holy cave in the
Chandragiri Hills in Chikmagalur and deIeated a murderous chieItain. ThereaIter Baba
decided to go on a pilgrimage to the Holy City oI Mecca, and disappeared into the cave. On
reappearing he giIted seven seeds oI a wondrous plant which would serve as "Iood and drink"
Ior them. These seeds were planted on the Chandragiri Hills, which Irom that day came to be
known as the Baba Budan Hills. Unlike the legend, historians share the belieI that Baba
Budan had smuggled the seeds Irom Yemen "strapped to his belly!" The legend oI Baba
Budan identiIies India as an "origin" and lends substance to the antiquity oI India's coIIee
growing traditions.
(wikipedia)
But how did we go Irom a potent drink with ample Iolklore to the glitzy coIIee bars in urban
centers today? Follow the coIIee trail and rediscover coIIee.

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Comment |A1]: 1able below was Laken from a
webslLe rewrlLe ln own words

%he first Persian coffee house opens. 1672
1683 %he first coffee house opens in Vienna.
Edward Lloyd`s coffee house opens. It
eventually becomes Lloyd`s of London, the
world`s best-known insurance company.
1688
1695
%he first sign of the French Revolution
had its
roots in Parisian cafs where the people`s
movement started gathering steam.
%he Dutch becomes the first to transport
and cultivate coffee commercially. Coffee
is smuggled out of the Arab port of Mocha
and transported to Sri Lanka and India for
cultivation.
1700
1721 %he first coffee house opens in Berlin.
One of Europe`s first coffee houses,
Caf Greco opens in Rome. By 1763,
Venice has over 2,000 coffee shops.
1750
1780
India's first coffee house opened in
Calcutta after the battle of Plassey.
%he prototype of the first espresso
machine is created in France.
1822
1827
Bengal Club in Calcutta. followed soon
after by the Madras Club in 1832 and the
Bangalore Club in 1863
%he first commercial espresso machine is
manufactured in Italy.
1905
1908
%he invention of the world`s first drip
coffeemaker. Melitta Bentz makes a filter
using blotting paper.
Dr. Ernest Illy develops the first
automatic espresso machine.
1933
1936
%he first India Coffee House opened on
Churchgate Street in Bombay. Much like
the coffee houses of Europe, the India
Coffee House quickly became a
rendezvous for the intellectual and the
dilettante alike. At the height of its glory,
the India Coffee chain, operated by the
Coffee Board, numbered 72 outlets, and
essentially introduced the coffee habit in
the tea-drinking north of the country.
Achilles Gaggia perfects the espresso
machine with a piston that creates a
highpressure
extraction to produce a thick
layer of cream.
1945
1980s
Coffee is now the world`s most popular
beverage, which leads to a boom in retail
and hotel cafs. %he American retail caf
Starbucks in born.
With the growth of the Internet, cyber
cafs are born, providing Internet access
and coffee to users. Caf Coffee Day
launches in 1996 on Brigade Road,
Bangalore.
1990s
2000s
With an increased penetration of PCs in
homes, cyber caf chains close, and
re-immerge as retail coffee caf chains.
More than 500 cafes in India.
International brands like Costa Coffee,
Gloria 1ean`s Coffee and Starbucks eye
expansion.

%able 2.1: A brief timeline of coffee retail.

Coffee Factoids:

O There are 73 species oI coIIee trees, out oI which only two are cultivated: Arabica &
Robusta.
O When raw, the coIIee beans are somewhat odourless, tasteless and indigestible.
O Instant coIIee mass production was invented in 1938 by a Swiss company to assists
the Brazilian government in solving its coIIee surplus problem. It is named NescaIe.
O Chickmanglore & Coorg in Karnataka are the highest growers oI Arabica & Robusta
CoIIee in India. ( javagreen.com, |accessed: May 12, 2008|)
2.2 %he Indian Coffee Culture and coffee retail market

Booming domestic coffee market

The coIIee retail market in India is witnessing a boom like never beIore. The organized coIIee
retail business is valued at approximately Rs. 8 billion ($17 million) according to sources
(indiacoIIee.org, |accessed: May 12, 2008|). Additionally it is believed that India has the
potential Ior nearly 3,000 outlets.

Currently coIIee consumption in India is earmarked at 75,000 tonnes 1/10
th
the consumption oI
tea, 7, 57,000 tonnes. The non- carbonated beverages (tea and coIIee, that is) market pegged at
around Rs 8,000-Rs 10,000 crore.

Furthermore the coIIee retail in India will Ioresee growth rates that will be exceeding that oI the
rest oI the world. Internationally, coIIee sales are virtually stagnant, moving ahead at 0.5 per
cent. According to a 2005 research report by the United Nations Food and Agriculture
Organization, actual consumption oI coIIee in India has gone up Irom 52 tonnes (1988-1990) to
56 tones (1998-2000) and is projected to touch 96 tonnes. This is a projected growth rate
increase Irom 0.8 in 1990-2000 to 5.5 by 2010!

Liquid coIIee in India is retailed in the Iollowing modes:
1. CoIIee Parlors: like CaIe CoIIee Day and Barista.
2. Vending Machines: like Brooke Bond, Nestle and Tata coIIee.
3. Fresh roasted and ground coIIee vending machines: such as Fresh and Honest.
%he changing face of India

Today a techie can be as comIortably seated with his coIIee and laptop in Bangalore as his kin in
Silicon Valley. CoIIee chains have mushroomed all over the country and guarantee the same
quality and experience as any global coIIee giant. You`re not cool iI you swing along with the
traditional Rs. 5 cuppa. The youth identiIy with expresso bars that oIIer the same ambience and
culture as they witness on their Iavorite TV shows like Friends.

It all started with CaIe CoIIee Day, an Indian Iirm that has now gone global and has set shop in
Vienna (Italy), the birthplace oI coIIee shops! Since then coIIee shops have sprouted all over the
country.

Mr. Yogesh Samat, CEO oI espresso bar brand Barista, told the Hindu Business line (Sudha,
2004) that they were not aIraid oI the competition. Barista has changed hands Iast and the Italian
multinational Lavazza caught the opportunity and took over.

Mr. Shashi Chimala, CEO, Chimayo Chains which owns Qwiky`s brand oI coIIee bars noted that
most coIIee chains sell ambience as opposed to product. Qwiky`s is branded more like a coIIee
pub than a coIIee shop. Mocha CoIIee & Conversations on the other hand oIIers a hookah lounge
with cushions and Moroccan handicraIts. Either case coIIee bars are now evolving to oIIer their
customers the experience they seek. CaIe CoIIee Day and Barista seek college kids that kick to
racy music and low prices.

Global chains have now spotted opportunity in the Indian markets and have unrolled their multi-
crore plans oI expansion. Costa CoIIee is UK`s second biggest coIIee chain and has announced
an expansion plan oI 300 outlets in the next Iour years. Australia`s largest coIIee giant, Gloria
Jean`s has also opened Iive outlets in a span oI a year and are Iast expanding.

Unlike the domestic players, Costa CoIIee and Gloria Jean`s CoIIees cater to an older age
bracket with a more Iormal setting to hold their proIessional meetings or work on their executive
presentations.
All-in-all, the change in the Indian public that now seek coIIee shops Ior their gossips and
hangouts can be attributed to income shiIts, increasing inIluence oI western culture and resulting
liIestyle changes. Food, beverages and tobacco industry dominates the Indian retail industry and
is anticipated to grow at a CAGR oI nearly 8 during 2008-2012 says the 'Indian Food and
Drinks Market: Emerging Opportunities, a latest industry analysis. According to the report, the
vast and burgeoning middle class urban India is creating the demand.
Further, the IT and retail boom Iollowed by the high success in the outsourced industries
BPOs, KPOs etc has put Iresh money in the pockets oI the youth. The increased spending power
has set thus set the pace Ior the retail boom. It is thus imperative to study the consumer motives,
perceptions and wants to cater to this new Iace oI India.
Essentials of a Coffee Business

Running a caIe is a hospitality business and one needs to create the right ambiance and
experience and back it up with strong logistics.

To open a coIIee outlet an approximate estimate oI Rs 18-22 lakh oI investment is required Ior
an espresso bar (such as Barista) whereas a high-end, Iull-service caIe (such as Mocha) could
cost as much as Rs. 75 lakh.

The next essential Iactor is location and coIIee chains don`t mind shelling out as much as Rs.
250-300 per square Ioot in rentals to ensure proximity to their target clientele (reIerence:
icmr.icIai.org).

Besides beverages, Iood retail accounts Ior a sizeable portion oI outlet`s sales - 50 to 55. The
uniqueness oI style, menu and concept results in walk-ins oI about 700-800 per day Ior Mocha,
CaIe CoIIee Day`s 500 and Barista`s 300-700. An average cheque per person amounts to Rs 96
at Mocha, Barista, CaIe CoIIee Day and Qwiky`s (reIerence: coIIeeresearch.org, |accessed: May
2009|).

International Factoids:

O World coIIee consumption: 120 million (60kgs) bags in 2007-08.
O The second most traded commodity in the world.
O Market growth rate: World coIIee exports totaled 8.01 million bags in June 2007, an
increase oI 3.6
O Top three Players:
1. Starbucks
2. Costa CoIIee
3. Gloria Jean`s CoIIee
(ReIerence: coIIeeresearch.org)

Figure 2.1: World coffee consumption sales and growth.

SEC%ION 3: MARKE%ING S%RA%EGY & CONSUMER BEHAVIOR

3.1 Marketing Strategy Planning Process

Every company goes through diIIerent phases in the business. The phase is very similar to that oI
the product liIecycle. In order to sustain in the market and to maintain its market share it is
essential Ior the company to have a right marketing mix. The company has to have a mix oI
proper product that is relevant to the target audience, proper price, proper reach i.e. the place
and relevant promotion that keeps the target audience interested in the company (Kotler et al.,
2007).
The marketing strategy planning process guides the selection oI a target market and the
development oI a marketing mix. The process will be aIIected by inIormation gathered about
customers; mission, objectives, and resources oI the company; competitors; trends in the external
environment: technological trends, political and legal trends, social and cultural trends, economic
trends.
Process then narrows down Irom this broad view to a more speciIic Iocus on a target market.
Marketers must use segmentation techniques that help pinpoint target groups.
In order to narrow down to a superior marketing mix, one that is better than what current
competitors oIIer, marketers need diIIerentiation, to Iine-tune the elements oI the marketing mix
to the unique needs oI the target market.
S.W.O.%. analysis oI strengths, weaknesses, opportunities and threats highlights the advantages
and disadvantages oI each strategy.
Figure 3.1: Marketing Strategy Planning Process

Comment |A2]: lnd source
The role oI marketing is planning and executing the 4 P`s (product, price, place and promotion)
in order to satisIy the business enterprise and its customers. The management is responsible Ior
getting the right goods and services, to the right people, at the right place and time, with the right
price, through the right blend oI promotional techniques.
It is important to note that empowerment and teamwork are 'buzzwords in corporate culture
today. The point here is to show how the linkage between CRM and Marketing Research gives
them real objectivity within a corporation`s culture. Working in teams and empowering
employees encourage relationship building among customers. When coupled with training and
market knowledge the business enterprise is 'energized and ready to implement a relationship
marketing strategy reIerred to as 'customer relationship management or CRM.

3.2 Marketing Mix
1) PRICE:
There are many ways to price a product. Let's have a look at some oI them and try to
understand the best policy/strategy in various situations.
O Premium Pricing. Use a high price where there is uniqueness about the product or
service. This approach is used where a substantial competitive advantage exists. Such
high prices are charge Ior luxuries such as Omega wrist watches, business class air tickets
etc.
O Penetration Pricing. The price charged Ior products and services is set artiIicially low in
order to gain market share. Once this is achieved, the price is increased. Introductory
oIIers by companies Iollow this approach.
O Economy Pricing. This is a no Irills low price. The cost oI marketing and manuIacture
are kept at a minimum. Supermarkets oIten have economy brands Ior soups, spaghetti,
etc.
O Price Skimming. Charge a high price because they have a substantial competitive
advantage. However, the advantage is not sustainable. The high price tends to attract new
competitors into the market, and the price inevitably Ialls due to increased supply.
ManuIacturers oI digital watches used a skimming approach in the 1970s. Once other
manuIacturers were tempted into the market and the watches were produced at a lower
unit cost, other marketing strategies and pricing approaches are implemented.
Figure 3.2 maps all the big players in the Indian coIIee retail market. Further discussion on
the same is continued in Section 4 and Section5.

Comment |A3]: ewrlLe accordlng Lo dlagram
below

QUALI%Y

ECONOMY
Low price, Low Quality

PENE%RA%ION
Low price, High Quality

SKIMMING
High price Low Quality

PREMIUM
High price High Quality

Figure 3.2: Price-Quality Matrix for the Indian coffee retail market.
3.3 Adapted Market share-Growth Matrix
The matrix in Figure 3.3 is an adaptation Irom the well-known BCG Matrix, shows Pricing and
Market-share Ior seven brands.
Mocha has a low price and low market-share; it is a small player that will eventually either
buckle under the pressure oI the large volume players, or get acquired. It currently caters the
youth and is more successIul as a hookah bar than a coIIee retail. It is thereIore catering to a new
niche.
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Barista is the high-end market-leader that enjoys a price premium; an enviable position to be
in. This is not usually a sustainable position unless the player has a considerable competitive
advantage that acts as a barrier to entry Ior other players. It is a Iollower when compared to the
market share oI CaIe CoIIee Day but Ior the Iact that it lies in the premium segment. It has been
lowering its prices to enter CaIe CoIIee Day`s economy territory which might prove Iatal as it
will dilute its brand image.
Costa CoIIee is now entering rapidly into the premium segment. It is priced high but with the
correct marketing strategies and its strong marketing mix will increase its market share and give
Barista a run Ior their money.
Gloria Jean`s CoIIees and The CoIIee bean and Tea LeaI are the niche market players that enjoy
a price premium, usually Ior the high-end segment oI the market. A proIitable but risky strategy
due to a lack oI diversiIication. They are new entrants in the coIIee retail sector.
CaIe CoIIee Day and Java Green are the high volume price discount players. They maintain their
market position by keeping very low margins and making proIits on volume. Java Green has
positioned itselI in-stores and has the highest outlets oI the in-store Iormat. Nonetheless, CaIe
CoIIee Day still remains the indomitable market leader with it`s Ior the masses pricing and vast
network oI store locations.

Economy
Low price, High Market share

Premium
High price, High Market share

Small player
Low price Low Market share

Niche
Low market share High Price

Figure 3.3: Price-Market share Matrix for the Indian coffee retail market.

SEC%ION 6: MARKE% SURVEY

6.2 Problem Definition

In this marketing research we used a combination oI some oI the above mentioned research
analysis types.

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A situation analysis, segmentation and perIormance monitoring research mix have been used as
per the needs oI the organization.

The study was done to primarily ascertain the Iollowing:
1) atchment. The customer proIile oI Costa CoIIee`s current clientele taking into
account demographics, psychographics, product usage, brand preIerences and
decision process.
2) cceptance of the osta Brand. in IT versus non IT sectors.
3)

Target Market
Characteristics
Key Variables to Measure
Demographics
Age, gender, education, industry, annual
income, average monthly expense on
entertainment and outings, Iamily back
ground.

Psychographics
Favorite Iast Iood, use oI wireless
internet service, average coIIee
consumption.

Product usage
Time oI visit, purpose oI visit, average
expenditure per visit.

Brand preference
Pre-purchase decision, brand preIerence
rating, product preIerence rating.

Decision process
Size oI purchase, degree oI inIluence on
experience and purchase decision

Figure 6.2: %arget market characteristics and key measurement variables

Currently Costa in western India has locations in the Mumbai International Airport, up market
elite malls and IT parks. By studying the above mentioned points recommendations Ior Iuture
store setups and target markets will be made.

6.3 Research Design

The designed survey (reIer attachments) was an in-store random sampling oI Costa CoIIee
clientele. Since the viewpoint oI the current customers is sought, an in-store survey gets the
desired sampling. An online survey was also conducted as a pretest and control group to compare
Costa clientele viewpoints with that oI the general public and make any desired changes in the
Iinal questionnaire.

Note, the sample size oI each store varied due to poorer IootIalls in some stores as opposed to
others but overall a minimum oI 25 customers per store/outlet were sampled.

Fieldwork, Data collection and analysis tools:

i. Online Survey:
A pilot study was conducted by emailing online survey Iormulated in oogle Documents
Form and esurveyspro.com to prospective customers. The data collected was transported
to Microsoft Excel Ior Iurther analysis. The Iinal questionnaire was tweaked as per
response Irom the online survey. Some questions that were irrelevant and made the
questionnaire unnecessarily lengthy were removed.

ii. Field Survey (In-store):
The Iinal consumer survey questionnaire was distributed in Pune (3 outlets), Mumbai (4
outlets) and Vashi (1 outlet). Customer responses were then Ied into oogle Documents
Form beIore being exported to SPSS 16.0 soItware.

iii. Analysis: Detailed consumer proIile and preIerence analysis Irom the data derived Irom
the survey using the SPSS soItware and BRM research methodology.

Secondary data Irom Prowess and web sources was used Ior Adapted BCG Growth-
Market share matrix (Figure 3.3) and Price-Quality Matrix (Figure 3.2).

6.3 Costa Coffee Consumer Profile

Demographics

Factors considered: age, gender, education, industry, annual income, average monthly expense
on entertainment and outings, Iamily back ground.
The segmentation criteria were as Iollows:

O (19-23): college students
O (23-29): working proIessionals
O (30-45): established top execs and business owners, homemakers
The survey conducted was well balanced with the ratio oI men to women being relatively close
except Ior Mega Mall which showed a higher volume oI women (24 more). This could be
attributed to the Iact that the survey was conducted on a Sunday aIternoon, a prime time Ior
women shoppers to visit malls.

The online survey sample had a clean majority oI 72 (reIer Figure 6.2) people belonging to the
23-25 years age bracket. The overall age bracket Ior Costa customers Ialls between 19-30 years
oI age Ior all locations except Ior Phoenix mills which has shown to be well received by people
in their Iorties as well. Overall teens Iorm 5 oI the sample, college students and young
proIessionals Iorm 55 oI the sample, the older age groups take up 15 oI the sample size.

The customers oI Costa CoIIee generally come Irom the well educated English speaking, upper
middle class oI India. They belong to Iamilies with inherited wealth, business Iamilies or top
executives and proIessional managers. The minimum level oI education was at the collegiate
level and an almost equivalent percentage oI people had undergone post graduation or a
proIessional course.

Annual income Ior visitors oI all the surveyed stores was above 2.5 lakh and a greater number
disclosed their income to Iall within the 10-15 lakh per annum bracket (Figure 6.4).

Average expenses on monthly outings and entertainment would prompt on the willingness oI the
customer to spend on eating out. People Irom Pune seemed most unwilling to spend (40 oI
them spent below Rs. 3000 per month) as opposed to the Phoenix mills and Mega Mall. Pune
and Vashi tend to be towns that are conservative on their spending and have indicated to preIer
home Iood to restaurants and eating out.

All oI these indicate Iactors indicate upper middle class, well educated working proIessionals
Irequent Costa coIIee. Quite the reverse oI CaIe CoIIee Day whose prime target is school and
college students who are not yet earning and live on their pocket money or part time jobs and are
not supplemented with a Iulltime income to splurge on premium class products and services.

Psychographics
Factors considered: Iavorite Iast Iood, use oI wireless internet service, average coIIee
consumption.

Pizzas, pastas, sandwiches and subs (90 overall) were Iavorites at all the outlets. Vashi mall
also showed an extremely high preIerence Ior south Indian Ioods (31). (ReIer Figure 6.15)

At Vashi, Mega Mall and Pune outlets, the people indicated that they would utilize wireless
internet service provided it was Iree oI cost (19 Ior paid, 43 Ior Iree, rest would not preIer
service). Again it was expected as IT proIessionals can catch up with their work while sipping on
a latte but a shopper would Iind little use oI the service.

Highest coIIee consumption is seen in Phoenix mills (more than 6 cups/ day) though majority oI
the people have indicated that they consume 1-2 cups per day or 2-3 cups per week. We can
make the assumption that Costa is Irequented by coIIee drinkers as non coIIee drinkers were Iew
and Iar between. (ReIer Figure 6.18)

Product usage
Factors considered: time oI visit, purpose oI visit, average expenditure per visit.

The upper crust oI Mumbai resides closer to Phoenix Mills which is one oI Mumbai`s most posh
and upscale malls and houses premium luxury brands. Customers are generally shoppers who
would hence no doubt be Irom the aIorementioned backgrounds. Some customers Irom
neighboring oIIices and residences also visit Costa during lunch hours at the mall outlets.
The IT Parks, Mega mall and Inorbit mall (Vashi) see heavier IootIalls in the evenings as
opposed to lunch time. (ReIer Figure 6.13)

Undoubtedly, people Irom all locations indicated that they generally visited Costa to catch-up
with their Iriends. Although located in IT parks in Pune, majority oI the people indicated that the
purpose oI their visit is to spend quality time with their Iriends as opposed to holding inIormal
proIessional meetings. Mega Mall and Vashi clients indicated visiting with their Iamily members
which might be as so as they might be shopping with them (58 and 65 respectively, reIer
Figure 6.14). Overall, 90 opted that they visited coIIee shops to meet Iriends. Pune alone stood
at a high oI 28 Ior proIessional meetings as the purpose oI visit.

50 oI the respondents (overall) spend Rs. 100-200 per visit. 32 oI the respondents(overall)
spend between Rs. 200-250. Expenditure per visit is about Rs. 96 at CCD, Mocha and Barista
(Section 2.2). Costa is priced higher and the target group has more spending power.
As Iar as quantity is concerned, majority oI the people preIer smaller quantities oI coIIee and this
can be linked culturally to the traditional Indian coIIee drinking preIerence oI smaller cuppas.
(Overall percentages: 210ml: 42, 250ml: 36, 350ml: 15, rest: 440ml).

Brand preference
Factors considered: pre-purchase decision, brand preIerence rating, product preIerence rating.

Costa has established itselI as a premium brand. Majority oI the people have rated Costa over
Barista Ior its better ambience and service though Costa has yet to establish its supremacy when
it comes to Iood and beverages products.
CaIe CoIIee Day being the economically priced market leader was ranked the most preIerred
brand. Costa being a late entrant and priced high will take time to Ioray into the mindsets oI the
general middle class but as a luxury nicher is already making waves.
Costa customers Irom Phoenix visit Barista more regularly (2-3 times a month daily). CaIe
CoIIee Day is Irequented by Phoenix customers and Mega Mall customers. Vashi customers are
most loyal to Costa and preIer not going to Barista or CaIe CoIIee Day. People who visit Costa
regularly as all occasionally were present at all locations.

Customers at Phoenix preIer Costa`s Ioods as well as coIIees. The rest showed interest in
coIIees, cold blended beverages and desserts range only. Star products in Costa`s kitty are its
Ilavored muIIins, Frappe Royale (which is similar to CCD`s Devil`s Zone) and salads. Most
people have complained about the sandwich stuIIings being too bland and not spicy enough Ior
the Indian palate additionally requests have been made Ior keeping all products in stock as most
get sold very quickly by evening. Other requests were against the poor mall air conditioning or
lack oI restrooms at the Pune outlets. Some people also put in requests Ior additional plug points
Ior charging their laptops. Most were content with the service and Iood quality and requested
more stores openings.

The ratings Ior Barista Iood products again indicate a preIerence Ior their coIIees over other
products. CCD`s Iood range shows a similar preIerence Ior all their products. This is indicative
oI the Iact that coIIee lovers preIer going to Barista and Costa as opposed to CCD and recognize
and value the superior brand.

Taste was rated the most important Iactor in the pre-purchase decision. It is undoubtedly the
taste oI Costa`s coIIees that gets customers through their doors. It is then Iollowed by proximity
as convenience oI location is integral in any retail Iormat especially Iood service industry. Brand
name and price then Iollow. Costa customers lay more emphasis on taste and availability than
price, branding or promos. Advertisements were a strict no-no in this category.

Decision process
Factors considered: size oI purchase, degree oI inIluence on experience and purchase decision

Majority oI the customers have indicated preIerences Ior the smaller quantities oI coIIee (210
and 250ml). The Indian consumer preIers a smaller cuppa and the new introductory Piccolo size
(120ml) should be a rage.

Again as mentioned earlier, Costa customers have rated taste, quality and ambience as the most
important Iactors that inIluence their selection decision (Figure 6.23). Costa places a premium on
all the above as seen also in its latest promotion campaign 'WE MAKE IT BETTER.

6.4 Acceptance of Costa Brand in I% versus non-I% sectors

The IT sector was targeted Ior opening Costa locations as the young proIessionals Iit well with
the Costa culture and Costa has much to oIIer them when it comes to a comIortable inIormal yet
sophisticated ambience and high grade Iood quality and service.

From the research analysis, Costa customers do not necessarily come Irom the IT sector. Being
located in the IT parks, Pune outlets thereIore showed a much higher ratio oI people Irom IT
backgrounds (39 IT, Figure 6.22). Vashi Iollowed at (12 IT). Phoenix Mills and Mega Mall
ranged between (4-5, IT).

Majority oI the survey takers were students, housewives, proIessionals Irom the marketing,
advertising, media and entertainment sectors. Although not given any surveys, Costa`s secondary
clients are Ioreigners and businessmen who are touring the country. They were oIten seen in the
stores during the surveys.
6.5 Limitations

O The market research surveys are limited geographically to Mumbai, Pune and Vashi. It is
not reIlective Does not capture the mindset oI consumers in outlets in the North, South
and Eastern regions oI India.
O Surveys conducted inside the stores and online reIlect opinions oI a small random
sampling.
O Unorganized sector and local players were not analyzed and are a signiIicant portion oI
current market
O Secondary clientele, Ioreigners, were not analyzed.
O For deals struck Ior ODC`s and some aspects oI the project have been withheld as
conIidential data cannot be disclosed as part oI company policy.
O Secondary data is used Ior competitor analysis and might not reIlect true and complete
market scenario.

6.6 Recommendations

O More augmented services: Free wireless internet service could be setup in outlets in IT
parks. People have requested board games to play with their Iriends and TVs to watch the
news updates.

O Seek new target markets: Promotional oIIers should target untapped market oI age
groups 30-45 to draw them into the stores especially homemakers and mothers Irom
upper middle class households. The customers oI Costa CoIIee generally come Irom the
well educated English speaking, upper middle class oI India, with collegiate or higher
level oI education. Costa coIIee should seek companies with similar catchments Ior cross
promotions and tie-ups. Some recommendations include business magazines and
newspapers such as Outlook, India Today and Economic Times or high end women`s
magazines such as Vogue India and Cosmopolitan. A higher age bracket oI women and
men visit Costa as opposed to CaIe CoIIee Day and Barista.

O Company discounts: Besides IT Iirms, Costa can oIIer special discounts to media,
design entertainment, marketing/PR and Iashion houses as a large segment oI Costa`s
clients are Irom these industries. Tie-ups with Sodexho Ior Iood coupons could also be
done to encourage increase in IootIall, brand awareness and sales.

O More food variety: Pastas should be introduced to cater to the Iavorites oI the
customers. Pizzas can also be brought in and the menu can be Iurther indiani:ed or
adapted as per local tastes through new product oIIerings.

O Focus on non-coffee beverages: Costa has a wide variety oI non-coIIee beverages
including hot chocolate, teas and iced Frescatos. These non-coIIee beverages should be
promoted to attract non-coIIee drinkers to the store.

O More stores and outlets: Costa`s customers Irequent Costa because oI its wonderIully
tasting Iood and coIIee range. Emphasis should remain on the product and redevelopment
or innovation oI the same (new products, seasonal oIIering etc.). Costa need not get
heavily involved in advertising or endorsements as it has a well established strong
international image. Additionally price is not consequential to Costa regulars and so
Iocus should be on opening more store locations to reach the customer as opposed to
promotional oIIers and discount schemes.

O Exploit wellness trends among the young: Today`s youth is Iigure conscious and health
conscious so are the people who are hitting their middle ages. Costa should promote its
healthy salads and introduce more health Ioods as a point oI diIIerentiation Irom the other
retail coIIee players.

O Cater to the middle class: Marketing strategies should Iocus on increasing average
spending and Irequency oI visits to increase sales. Discount scheme cards Ior regulars
currently used could be popularized more. Target the middle class with penetration
pricing policies (reIer SWOT analysis in Section 4)

O Generate brand awareness: Cross promotions and tie-ups with existing established
brands to generate brand awareness. Use word oI mouth and advertisements on radio. Do
in-Iilm advertising to generate awareness oI Costa. Additionally blogging and web
communities such as facebook.com and orkut.com today serve as a great medium Ior
communication. Costa should build its own web community Ior Costa CoIIee lovers to
interact and provide Ieedback both among themselves as well to the company. The latest
promos could be uploaded online and instantly inIorm Costa`s prime customers.

O Run in-store promotions: By oIIering meal combinations at special pricing Ior limited
time Ior holidays and special days such as Mother`s Day, Friendship Day etc.
Additionally seasonal oIIerings such as promotion oI their iced beverages or introducing
a new cold beverage during the summer should be done.

O Merchandise: Additionally Costa should start its own merchandising and sell products
like Costa coIIee mugs, coasters, T-shirts etc. Costa India should increase its limited
ground beans varieties and oIIer more oI the products that are available abroad.

O Costas ODC`s division should target annual college Iestivals oI prestigious institutions
such as IIT`s Mood Indigo and Xavier`s Malhar or management Iestivals and quizzes.
Costa can also provide sponsorship Ior such events.

A. MARKE% RESEARCH ANALYSIS %ABLES
%able 6.1 Gender
Survey Location Male Female
Online 64 36
Pune 49 51
Phoenix 56 44
Mega Mall 38 62
Vashi 53 47

%able 6.2 Age Group (in yrs)
Survey Location Online Pune Phoenix
Mega
Mall Vashi
16-18 0 10 3 14 0
19-22 23 27 13 38 18
23-25 72 25 31 14 29
26-30 6 25 17 24 35
31-35 0 4 10 0 6
36-45 0 4 11 5 0
45 0 4 15 5 6
na 0 0 0 0 6
%able 6.3 Education
Survey Location Online Pune Phoenix Mega Mall Vashi
School 0 2 1 5 0
College 4 47 37 57 35
Post graduation 72 22 30 29 35
ProIessional course 25 29 32 10 29
%able 6.4 Annual Income (in lakhs of Rs.)
2.5 81 18 7 0 0
2.5-5 6 12 17 29 29
5-7.5 2 14 11 14 0
7.5-10 6 12 10 10 6
10.0-15 4 10 15 14 24
15 2 0 4 0 0
na 0 35 35 33 41

%able 6.5 Average Monthly Expense on entertainment and outings (in Rs.)
500-1000 30 20 6 10 0
1000-3000 36 20 17 10 18
3000-5000 19 8 11 38 0
5000-7000 11 8 7 10 0
7000-9000 4 14 3 0 12
10000 0 6 27 29 24
na 0 25 30 5 47

%able 6.6 I visit Costa Coffee
Almost daily 0 18 18 14 12
2-3 times a week 0 16 13 19 24
2-3 times a month 6 14 11 24 6
Once a month 9 6 0 0 0
Occasionally 34 22 30 10 35
Never 51 12 1 29 18

%able 6.7 I visit Caf Coffee Day
2-3 times a week 8 12 25 19 6
2-3 times a month 23 25 23 5 18
Never 2 22 20 14 29

%able 6.8 I visit Barista
2-3 times a week 6 12 15 0 6
2-3 times a month 15 12 14 14 0
Never 13 45 24 43 24

%able 6.9 I prefer at Costa Coffee
CoIIees 47 82 67 50 75
Non-coIIee beverages 9 24 26 19 33
Food range 12 39 50 13 17
Cold Blended beverages 47 24 24 44 33
Desserts Range 18 30 37 38 25
People may select more than one checkbox, so percentages may add up to more than 100.

%able 6.10 I prefer at Caf Coffee Day
CoIIees 52 55 51 67 80
Food range 22 38 30 61 20

%able 6.11 I prefer at Barista
CoIIees 43 65 59 30 75
Food range 13 15 31 10 13

%able 6.12 Please rank in order of preference (1 being most preffered)
CaIe CoIIee Day

20 25 26 29
Barista

12 14 7 21
Costa CoIIee

21 21 14 20
No preIerence

46 39 52 29


%able 6.13 I generally visit around
Morning 0 7 2 10 0
Lunch 0 4 5 20 0
AIternoon 16 26 52 15 35
Evening 96 78 53 50 71
Night 31 13 8 5 18
Late Night 12 4 3 15 6

%able 6.14 %he purpose of my visit is
Personal: with Iriends 98 83 92 89 94
Personal: with Iamily 6 17 26 58 65
ProIessional 4 28 12 5 6

%able 6.15 What is your favorite type of fast food?
Burgers 39 26 15 25 25
Pizzas and Pastas 63 47 44 50 44
Wraps and Rolls 22 23 20 35 13
CoIIee House 29 19 11 20 13
Sandwiches and Subs 55 43 54 30 50
South Indian/ Udipi 20 26 8 5 31

%able 6.16 If offered at your coffee shop would you use wireless internet?
Paid 15 22 18 19 18
Only iI Iree 68 47 38 43 47
Not really 17 31 44 38 35
%able 6.17 Average expenditure per visit to favorite Coffee Shop
100-200 66 51 51 29 53
200-250 25 37 31 38 29
250-300 9 6 7 14 6
300-400 0 6 11 19 12
%able 6.18 Average coffee consumption
2-3 cups per week 58 41 30 38 35
1-2 cups per day 28 39 35 38 53
4-5 cups per day 6 14 11 14 0
More than 6 cups per day 2 6 17 0 6
Don`t drink coIIee 6 0 7 10 6

%able 6.19 What is the most important factor for you to choose a Coffee Shop?
Taste oI coIIee/Iood 43
People/ Service 24
Value Ior money 43
Ambience/ Experience 55
Proximity/ Location 27

%able 6.20 Most preferred quantity of coffee intake
210 ml

43 42 38 47
250 ml

43 30 48 24
350 ml

8 20 5 29
440 ml

2 1 0 0
550 ml

4 7 10 0

%able 6.21 Prepurchase decision
TV commercials 8 7 5
Celebrity endorsement 5 0 2
Availability (location/ proximity) 54 36 39
Brand name and visibility 49 11 18
Promotional schemes and discounts 19 7 10
Taste 89 84 77
Packaging 22 5 18
Quantity 41 30 21

Price 54 55 32

SEC%ION 9: REFERENCES
Books:
KOTLER P, KELLER K.L., KOSHY A., JHA M., 2007. Marketing Management. South sian
Perspective. 12
th
Edition. New Delhi: Pearson Prentice Hall Inc.
KOTLER P., AMSTRONG G., 2008. Principles of Marketing. 12
th
Edition. New Delhi: Pearson
Prentice Hall Inc.
MALHOTRA N., 2004. Marketing Research. 4
th
Edition. New Delhi: Pearson Prentice Hall Inc.
WEITZ L., 2003. Retailing Management. 5
th
Edition. New Delhi: Tata McGraw-Hill Publishing
Co., Ltd.

Websites:
O http://www.barista.co.in |Accessed: May 12, 2009|
O http://www.cafecoffeeday.com/
O http://www.coIIeeresearch.org |Accessed: May 2009|
O http://www.costacoIIee.org |Accessed: May 5, 2009|
O http://www.costa.co.uk
O http://icmr.icIai.org |Accessed: May 12, 2009|
O http://www.indiacoIIee.org |Accessed: May 12, 2009|
O http://www.javagreen.com |Accessed: May 12, 2009|

O 2008. ndian Food and Drinks Market. Emerging Opportunities. |online|.Available Irom:
O http://www.bharatbook.com/Market-Research-Reports/Indian-Food-and-Drinks-Market-
Emerging-Opportunities.html |Accessed May 12, 2009|

O 2008. osta offee plans 300 stores in 4 years, undertakes an eight-fold expansion
drive.|online|IndiaRetailBiz. Available Irom:
http://www.indiaretailbiz.com/blog/2008/01/17/costa-coIIee-plans-to-expand-eight-Iold-
in-4-years/ |Accessed May 12, 2009|

O MENON, SUDHA, 2004.offee. Life in a new brew.|online|.The Hindu. Available Irom:
http://www.thehindubusinessline.com/bl10/stories/2004012800873100.htm |Accessed
May 12, 2009|

O SINGH SANGITA. Starbucks Who.|online|. Business Outlook. Available Irom:
http://business.outlookindia.com/print.aspx?articleid1652&editionid43&catgid8&sub
catgid793/ |Accessed May 12, 2009|

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