Threat of a “me too” perception: a case of

Café Coffee Day

Richa Agrawal, Mudra Institute of Communications Ahmedabad,
India*

Café Coffee Day (CCD), India’s largest organised retail café chain, had done a great
job of creating a distinct brand identity and communicating it successfully to its
TG. In a three-pronged approach adopted by the company, CCD had revamped its
logo, altered the look ‘n’ feel of its cafés and created a unique brand positioning
to win customers over time. CCD in its new “avatar” was targeted at the young
or the young at heart and was promoted as an every day hang-out that was
essentially about good coffee and affordable fun.
The case provides a vivid narration of the journey of CCD since its inception in
1996 and illustrates all significant events therein. Besides this, the case describes
the beginnings of café culture in India, the changing café consumption habits of
urban Indians, and the spread of café culture beyond the metros and into the tier
I, II and III cities. All major recent events in the Indian café industry, such as the
growth of new café chains in the country, the entry of multinational companies
in the market, changing consumer tastes and preferences, and changing market
dynamics etc. are also showcased. Finally, the problem of competing brands
offering an increasingly similar café experience and the threat of a “me too”
perception are highlighted. Readers are required to assess the impact of all recent
events on the specialist coffee chains and suggest alternative strategies to help
ensure distinctiveness and growth for CCD in future.

Keywords Café chain, Café market in India, Café Coffee day, ABCTCL, Brand
positioning, Building distinct brand identity, Specialist coffee chain

Introduction

Siddharth, Chairman of Coffee Day, and the man behind Café Coffee Day, a
successful coffee café chain in India, was deep in thought. Should he dismiss
the comments as mere musings over a cup of coffee or was there really a
reason for concern. Turning back to his laptop, Siddharth re-read the postings
on the consumer’s blog. The blog read –

In a service category like coffee cafes where a number of me too brands

*Correspondence details and a biography for the author are located at the end of the article.

The Marketing Review, 2009, Vol. 9, No. 3, pp. 251-271 doi: 10.1362/146934709X467811
ISSN1469-347X print / ISSN 1472-1384 online ©Westburn Publishers Ltd.
252 The Marketing Review, 2009, Vol. 9, No. 3

exist, and good coffee, ambiance, service, music and snacks can quickly
become generic, cafes need to understand what more could they offer
to the customers to remain relevant in the market and to enjoy a distinct
identity of their own.

Siddharth, whose long and close association with coffee and cafés had kept
him abreast of the changing nature of the Indian café industry, felt there
was no real reason for concern. Coffee retailing, in his opinion, was poised
for great and interesting times ahead. However, despite his confidence in
a promising future for cafes in India, Siddharth found it hard to dismiss
the blogger’s comments. Not only did the blogger appear to enjoy good
coffee but seemed to have a good understanding of the café industry as
well. Sentiments voiced by the blogger could well be a timely reminder of the
impending issues and challenges in the Indian café industry.

Company background

Café Coffee Day, the leading retail café chain in India, was a division of the
Amalgamated Bean Coffee Trading Company Ltd. (ABCTCL), one of the
largest coffee conglomerates in the country. Popularly known as Coffee Day,
ABCTCL was a Rs.40billion, ISO 9002 certified company, run by Siddhartha
(Chairman, Coffee Day), a successful technology venture capitalist from
Bangalore. In what may be called a golden phase of his life, Siddhartha had
made a killing in a personal bull run in the stock markets between 1985 and
1992, and used the proceeds to purchase coffee plantations that were being
sold at a loss. A visionary and a true entrepreneur, Siddharth nurtured the
plantations well and from growing the finest varieties of Indian coffee on his
2000 hectares of coffee estates at Chikmaglur (second largest in Asia), he
went on to own all aspects of coffee business in India. The various business
divisions in his company, ‘Coffee Day’ included Coffee Day Fresh ‘n’ Ground
(having 386 coffee bean and powder retail outlets across India), Coffee
Day Xpress (having more than 500 Coffee Day kiosks across the country),
Coffee Day Take Away (which includes 7000 vending machines across India),
Coffee Day Exports and Coffee Day Perfect (the FMCG packaged coffee), and
Café Coffee Day (the retail café chain having nearly 600 outlets in India and
abroad).

Going the café way…

It was on one of his business trips abroad that Siddhartha, Chairman ABCTCL,
visited a coffee shop in Singapore and was so impressed with the whole
concept that he decided to set up a similar facility back home. Siddhartha’s
proposal to start a café found ready acceptance with his business team in
Bangalore and work on the project started immediately. It was in the late
1990s that the project became a reality, and Café Coffee Day (CCD), India’s
first coffee café, threw open its doors to the public in November 1996 in
the city of Bangalore. The 1990s was the time when satellite culture was
beginning to catch on in India and the Internet was still a novelty. It was
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 253

therefore no surprise that the first Café Coffee Day outlet located on the busy
Brigade Road in Bangalore was a coffee shop-cum-cyber café. Interestingly
enough, Café Coffee Day, that pioneered the café concept in India, had
been promoted with the intention of capitalising on the Internet wave
sweeping across urban India and not to make profits through copious coffee
consumption. It was only when the internet boom and the ensuing rapid
mushrooming of internet parlours made the Internet a facility that was too
cheap and too easy to access that CCD decided to concentrate only on the
café aspect of its business.

Beginnings of café culture in India

In a nation comprised predominantly of ‘Chai’ (tea) lovers, coffee consumption

had remained somewhat restricted to the intellectuals, the south Indian
traditionalists, and the five-star coffee shop visitors. It was only with the
advent of the new millennium and increased exposure to global trends that
things started undergoing change. By late 2000, coffee consumption patterns
in India were witnessing a sea of change. Coffee was shedding its traditional
image and becoming a lifestyle statement of the young professionals and
affluent Indians. Coffee cafés were not the preferred hangouts of the
intellectuals and the traditionalists alone, but were increasingly finding favour
with the mainstream youth of the country. Further, as the BPO (Business
Process Outsourcing) boom caught on, the resultant increase in the spending
powers of the urban youth gave rise to the need for a relaxed and fun place
to hangout with friends. The need for such a place saw the beginnings of
a café culture wave in India that swept across the metropolitan cities and
marked the beginning of several coffee café chains in the country.

Market for coffee hots up

As more and more young Indians warmed up to coffee in the wake of the
café culture wave sweeping across urban India, many leading players joined in
the café business. Qwicky’s, a coffee café chain, joined the café bandwagon
in 1999, while Barista, a retail café chain promoted by a leading Indian
business house, entered the café business in 2000. By the year 2002, Barista
and Qwicky’s had 105 and 21 cafes each, in 18 and 5 cities, respectively.
Café Coffee Day, one of the first to enter café business in 1996, had in the
meantime started some 50 outlets across 9 cities in the country. By late 2002,
coffee cafés had become big business and everyone was vying for a share.
Recognising the potential that lay ahead, Café Coffee Day embarked on
a dynamic journey to become one of the largest organised retail café chains
in the country, having a distinct brand identity of its own.

Brewing the strategy at CCD

An extensive survey of more than 2,000 people, undertaken by CCD in the

year 2001 revealed two important things –
254 The Marketing Review, 2009, Vol. 9, No. 3

1. that the brand CCD was perceived to be essentially “South Indian”,

and
2. that the highest footfalls (more than 80%) at various CCD outlets
came from the customers belonging to the demographic breakup of
15-29 years.

Knowing that a “South Indian” café chain perception among its young
customers did not augur well for the future, CCD chalked out a strategy that
would help create the desired image in the minds of its customers and make
CCD more relevant and appealing to its patrons. Interestingly, the Indian
demographic landscape showed a visible skew towards the demographic
breakup of 15-29 years, making it a potential and promising segment for
businesses. CCD, which had the highest footfalls from this segment, started
working on a strategy that would find favour with the young consumers.
Customer surveys undertaken by CCD revealed that more than a cup of good
coffee, customers were essentially looking for a good experience. Selling
good coffee was no longer sufficient as the young customers desired much
more. A change in strategy from “product selling” to “experience selling”
was therefore introduced at CCD, and a massive overhaul was undertaken on
various fronts to create an experience that would delight the young consumers
and be savoured and enjoyed by them. Working towards providing such an
experience CCD went in for an immediate revamp of its logo, look ’n’ feel of
its retail outlets and brand positioning in the market.

Getting the right look ‘n’ feel

Services of some of the most celebrated store designers were enlisted to
help create an ambience that was both youthful and lively. All elements of
a store’s interior such as colour, lighting, music etc. were considered crucial
in enhancing customers’ experience at the café. It was felt that the use of
right shades of colour and lighting would help in creating the right mood at
the cafés and would also set the right tone. Rich vibrant colours and warm
tones were used in all the outlets making the cafés appear both inviting
and relaxing. State-of-the-art, touch screen interactive digital jukeboxes were
installed at most CCD cafés which allowed its patrons to browse through
some tens of thousands of songs and list them in the player. Music playing
from these smart jukeboxes added to the youthful spirit of fun and enjoyment
making the environment informal, playful and peppy. Moulded furniture
with contemporary designs, imported mainly from Malaysia was used to
provide comfortable indoor/outdoor seating. In a nutshell, CCD offered it’s
customers a place where they could sit back and enjoy not just a cup of their
favourite brew but an experience that was uplifting, invigorating, engaging
and interesting.

Revamping the logo

As a part of the new strategy, a brand new CCD logo was introduced that was
predominantly red and white in colour with a paint brush stroke of green.
The new logo symbolised liveliness, growth, fun, passion, and everything
else that brand CCD stood for. CCD’s core ideology of keeping the brand
vibrant and lively was well reflected in the colour and design of the new logo.
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 255

The colour Red in the new logo connoted leadership and passion; White
indicated purity of purpose and invigorating properties of coffee; and the
touch of Green showcased CCD’s coffee growing heritage of more than 125
years (as posted on the CCD website).
Besides the logo, changes were made in CCD’s by-line as well. The old
by-line that said that Café Coffee Day was “Just the Place to Be” was replaced
by a new by-line that read “A Lot Can Happen over Coffee”.

Repositioning the brand

From the time it started working on its revamping strategy, CCD had been
striving hard to create a distinct brand identity of its own. In so doing, it
had not only changed the “South Indian” coffee shop perception among
its customers but had come to be seen as an everyday hang-out that was
essentially about affordable fun. Customers described it as the third most
frequented place after home and workplace or college. It was a place where
they met their friends and colleagues in groups of three or more, and
rejuvenated themselves. CCD in this sense was very much like the coffee chains
overseas that were essentially about juke boxes, an upbeat environment,
fun and enjoyment, and good and affordable coffee and food. Unlike other
popular coffee cafés that were described by customers as places to be “seen
at”, Café Coffee Day was a place where customers could chill out and be
themselves. CCD in its new “avatar” was therefore about good coffee, about
hanging out, about being oneself and about having a nice time.

The TG

The customer profile at CCD showed that 25% of its customers were
teenagers, 38% were 20-24 years in age, and another 23% belonged to
the age group of 25-29 years. Typically, a CCD customer would be male or
female between 15-29 years of age, belonging to middle or upper middle
class (For more information on customers see Appendix 1). However, despite
this demographic categorisation, CCD in its new positioning had a brand fit
with the youth and the young at heart. Thus, people who were youthful or
young in terms of age, outlook, or mindset qualified as CCD customers. In
256 The Marketing Review, 2009, Vol. 9, No. 3

fact, anyone who was young or young at heart and wanted to hangout at
CCD because of its informal atmosphere and ambience, was a part of CCD’s
target group.

Mission CCD

A simple and clear mission had been formulated at CCD to enable it to serve
its customers well. The mission statement stated that as a retail coffee café
chain, Café Coffee Day aimed –

“To be the best cafe chain in the country, by offering a world

class coffee experience at affordable prices.”

Staying true to its mission, team CCD had been working towards creating
and offering such experiences that would be on a par with the experiences
offered by some of the best coffee cafés, internationally; at prices that were
affordable and within reach of its target consumers. The company did not
aim at generating profits through high margins but believed in generating
revenues through high volume and increased walk-ins. Each CCD café,
depending on its size, attracted anywhere between 400 to 800 customers
everyday (company average stood at 500 footfalls per café per day). The
average bill size at CCD remained Rs.120 only.

Serving them right

Intent on offering one of the best café experiences to its customers, CCD
made all possible efforts to determine what served customers interests the
best. Believing firmly in the fact that customers were the only people who
could help them in understanding and serving their customers better, a
variety of dipstick surveys and national level customer surveys were conducted
by CCD on a fairly regular basis to find out more about customers’ likes
and dislikes, tastes and preferences, and their experiences at CCD cafes.
Information collected through these surveys was used by the company for
taking important decisions. For example, in one of the surveys undertaken
by CCD it was found that customers did not like their names to be shouted
out when their orders were ready; the company therefore decided to provide
table service at all CCD outlets instead of self-service. In another instance,
where a CCD survey revealed that customers preferred to have food that was
more filling than snacks; light meal preparations, such as pasta and biryani
were introduced. To accommodate the diversity in local taste and preferences
(learned through customer surveys), changes were allowed in the food menu
for different cities and regions even while a standard beverage menu was
continued in all CCD outlets.
Café Coffee Day, which was primarily about coffee, had extended
its menu to include over 250 different varieties of customised food and
beverages and combined the coffee menus at all of its cafés with the right
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 257

kind of eats, such as a dessert or a snack, to ensure that customers got

the right accompaniments with their coffee. Monthly specials like kathi rolls,
paneer tikka, veg potlis etc. had been introduced and changes were made in
the menu every four months to prevent food fatigue.
Besides dishing out the right menu, CCD worked towards creating the
perfect café experience and offering all conceivable facilities to its customers,
and more. In so doing, Café Coffee Day had got together with Microsense, a
wireless computing solutions provider, to wi-fi enable initially a 100 and later
all of its cafés across India. Wi-fi facilities offered at CCD cafés featured Plug
and Play functionality, VPN support and Always On connectivity. Wi-fi facilities
at CCD was immensely popular with business customers and laptop and PDA
owner,s who found it convenient to access the Internet while munching their
preferred snacks and sipping their favorite brew.
Through a co-branding exercise with WorldSpace Satellite Radio, a global
player in satellite-based digital radio services, CCD had installed WorldSpace
satellite radio receivers in 100 Café Coffee Day outlets across India. The
alliance enabled CCD customers at these outlets to access various genres
of music from more than 40 WorldSpace stations that included Spin - an
international Pop and Rock station, UpCountry - the country music station,
and Jhankaar and Farishta - 24-hour Hindi music stations, all through the
day.
Café Coffee Day had introduced a variety of café formats to offer exciting
choices to its customers and redefine “the café experience” for them. Some
of the popular café formats at CCD included -

• Lounge cafés that combined the style and luxury of a lounge with
the lively ambience and comfort of a café. The lounge cafés at Hauz
Khas, Delhi and Southern Avenue, Kolkata and Jubilee Hills, Hyderabad
had exquisite interiors, a team of well poised hostesses, thematic
music and an exotic menu to offer a fine experience to discerning
customers.
• Garden cafés that offered customers the joy of rejuvenation and
pots of coffee amidst lush green landscapes.
• Music cafés that provided customers the choice of playing their
favourite tracks on the digital audio jukeboxes and/or watch their
favourite music videos on the video jukeboxes installed at these
cafés.
• Book cafés that were essentially targeted at those who felt like
browsing through a bestseller or reading a classic to make their coffee
experience complete. CCD’s book cafés had revived the romance of
“coffee and books”.
• Highway cafés that provided the road weary travellers a cool and
comfortable place to sit back and relax over coffee and snacks before
hitting the road again. Besides providing a great ambience these cafes
offered clean restrooms, a facility that was much appreciated by the
travellers.

Cafés in a variety of other formats, such as cyber cafés and sports cafés, also
existed alongside. Effort was also on to introduce two new café formats
258 The Marketing Review, 2009, Vol. 9, No. 3

- the singles café, and the fashion café, as soon as possible. Besides these,
the company ran 49, 24/7 cafés. The 24/7 cafés ensured a round-the-clock
presence at tourist destinations and airports, and helped CCD in serving
people working in IT and BPO companies. Also, to serve the needs of the
customers on the go, the company had started installing a number of express
coffee vending machines at malls, petrol pumps, shops and offices towards
the end of 2002.
Team CCD often reiterated that they were not in the business of “selling
coffee” but in the business of offering a warm and friendly place to its
customers for social interactions and hanging out. Towards this end, serving
staff at CCD outlets had been given special instructions not to hurry their
customers even if it meant losing new business. In the case of customers that
sat around for a long time without ordering anything, only a polite inquiry
such as – “Are you being served?” or “Is there something more we could get
for you?” was advised. Members of the serving staff had been trained to
make conscious efforts to establish a friendly rapport with regular customers
and to make sure that they had a pleasant experience at CCD. Further, to
ensure that they served their customers well, CCD encouraged its customers
to voice their complaints, and made sure that each of the complaints was
attended to within 24 hours of receipt.

Keeping it affordable

To ensure that the CCD experience remained affordable for its TG, stringent
cost control measures were adopted by Café Coffee Day. The company sourced
coffee beans from its own coffee estates, encouraged in-house designing of
IT solutions, inculcated cost consciousness amongst its employees, persuaded
its serving staff to also do housekeeping, and sourced quality furniture from
China and other East Asian countries that cost 25% less than custom-made
furniture in India. It also imported better quality, similarly priced crockery
from Bangladesh and Sri Lanka, and used local food suppliers to minimise
transportation costs, etc. However, despite the various measures adopted for
controlling costs, CCD made sure that they did not cut corners at any time
nor compromised on quality and that all its cafés continued to provide a
great experience to all its clients.

Coffee plus+

Apart from coffee, CCD sold cookies, wafers, mints, and other merchandise
under the Coffee Day brand. Various other paraphernalia such as caps, T-
shirts, bags, filters, pens and coffee mugs were also promoted exclusively
through the CCD cafés. While sale of the merchandise was started more as
a sentimental thing to reward the coffee lovers, they had become serious
business and contributed nearly 5% to the overall revenue. Recently the
company had ventured into the premium-priced bottled water segment.
The company believed that the packaged water foray would increase brand
visibility and help in building the Coffee Day brand.
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 259

Promoting CCD

As a matter of policy, Café Coffee Day did not use mass advertising to promote
its brand. Instead, the company leveraged its brand communication through
tie-ups with similarly positioned brands such as Levi, WorldSpace Radio, etc.,
creating visible brand connect. The company utilised on ground promotions,
branded merchandise, live music, touch screen jukeboxes, Café Beat (a 12
page monthly tabloid published by CCD for circulation at all its outlets) etc.,
to attract its TG.
As part of its efforts to promote the brand, CCD had been doing in-
film promotions through barter deals. Although initially CCD had no plans
to associate with movies, realising that Bollywood was a passion with its
TG, CCD had taken a conscious decision to be seen in movies like Khakee,
Main Hoon Na and others. CCD had been placed in some known Bollywood
ventures, such as Kyun Ho Gaya Na starring Amitabh Bachchan, Aishwarya
Rai, Vivek Oberoi, and Sajid Nadiadwala’s Mujshe Shaadi Karoge starring
Salman Khan and Priyanka Chopra. Quite a few movies, whose target
audience matched that of the consumers at CCD, were allowed to shoot a
few scenes of the movie in the café with prominent CCD brand placement.
Interestingly, the company made barter deals with advertisers as well. An
HDFC1 ad for example was shot in one of the CCD cafés.
On the small screen, CCD organised contests in association with Zee for
their programme Friends which was essentially a youth-based programme
and the characters were often seen sipping coffee at a café. The café
sponsored the ‘Get Gorgeous’ contest along with Channel [V] and conducted
a contest with The History Channel for ‘Hollywood Heroes’. The most
innovative marketing programme by CCD, however, was the co-promotion
it did with other brands and space selling within the store. CCD had had
several successful in-store promotions with popular brands like Levi’s, Fast
Track, Radio City, Airtel and Sony Ericsson. Numerous promotional initiatives
revolving mostly around on-ground events had also been undertaken in the
past. CCD had also been actively involved in the sale of tickets for the Enrique
Iglesias and Elton John concerts. The Head of Marketing at CCD believed that
the company made substantial gains from all such activities.

Any event where the company either sold tickets, or organized promotion
campaigns, CCD was eventually rewarded by very high walk-ins that
pushed up sales.

On the flip side however, the various on-ground and in-store promotions
cluttered the cafes and intruded on the café experience. A consumer in his
blog observed that –

Over the years CCD has become too commercial a space and youngsters
have started gathering at places like Java City and Mocha of the world…
the CCD coffee experience …… is no more unique.

1
Housing Finance Development Corporation Ltd. working in the area of Insurance,
Banking, Sales and Realty.
260 The Marketing Review, 2009, Vol. 9, No. 3

Money in the mug

Financially, Café Coffee Day had been doing well. It was estimated that the
company had a top line of Rs.38billion that would reach Rs.50.5billion in
2008, Rs.64.5billion in 2009, and a little over Rs.80billion by the end of the
financial year 2010. CCD’s EBIDTA2 that was around 15% was expected to
be more than 17% by 2010; its net margin that was a little under 6%, was
expected to reach 9 % by the end of the financial year 2010. In a recent
development, ABCTCL had indicated that it would spin off Café Coffee Day
into a separate entity, paving the way for making Café Coffee Day a listed
company in the near future. ABCTCL’s retail business that had recently raised
some $35 million through private equity and debt from Sequoia Capital and
the International Finance Corporation was set to raise an additional $95
million through the private equity route (Economic Times 2007). Company
sources said Deutsche Bank AG and Darby Overseas Investments, the private
equity arm of Franklin Templeton Investments, were investing in the massive
expansion plans of the Coffee Day chain of coffee bars across India and in
certain areas of Europe and the Middle East. Once the deal was finalised,
promoters’ share in the closely held ABCTCL would decrease from the current
90% to 80% share (other investors being Sequoia Capital and IFC). Enterprise
value of ABCTCL’s retail business was $600 million, with debts.

Expansion and growth

Aware of the fact that the purchase of coffee was primarily impulse driven,
Café Coffee Day had been increasing the number of its coffee outlets over
time. From a single modern coffee outlet in November 1996 to a handful of
coffee cafés in 6 Indian cites in the first 5 years of its operations, Café Coffee
Day currently (July 2008) owned some 600 coffee cafés, 500 kiosks and 7000
coffee vending machines, across 80 cities in India. CCD aimed at increasing
the number of its cafés to 1000, expanding its automatic vending machine
(AVM) segment to 10,000 installing units, and increasing the number of
Coffee Day Express kiosks to 1,000 kiosks by the end of December 2009.
To attain this growth, the company was exploring possibilities of setting
up cafés in ‘B’ and ‘C’ class cities like Lucknow, Kanpur and Jamshedpur, it
had entered into tie-ins with petroleum companies like BPCL and HPCL for
starting cafés at gas stations along the highways, and with IT companies
like Wipro, Accenture and Infosys, to run CCD outlets in their offices. CCD
had entered into a partnership with Ginger Hotels that enabled it to run its
cafés on Ginger Hotel premises and had signed agreements with Air Deccan
and Go Air, for airline catering. To ensure that a CCD outlet would be within
easy reach of its customers whenever the latter had the time and inclination
2
Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA measures
a company’s annual earning before the subtraction of interest payments, taxes,
depreciation, and amortisation. It reflects a company’s earnings based solely on
its operations. EBITDA makes it easier to compare companies across industries
if any one of the companies has significant assets that require large amounts of
depreciation or amortisation or if they have a large amount of debt which leads
to large interest payments.
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 261

for a “cuppa” CCD had started cafés and kiosks at colleges, airports, service
apartments and malls. Plans to set up drive-through cafes on the highways
were also underway.
Besides India, Café Coffee Day had set up three outlets in Vienna (Austria)
– the coffee capital of the world, two in Karachi (Pakistan), and one in Dubai
(UAE). The company planned to have 50 cafés at various international
locations in the Middle East, in Germanic-speaking countries in Europe - like
Switzerland, Germany and Czechoslovakia, in West Asia, Eurasia, Egypt and
South East Asia, in addition to Pakistan and the US by December 2008.

Ownership vs. franchise

As a part of its strategy, Café Coffee Day owned and managed all of its
cafés in India. While self-owned cafes were more expensive in the short
term, the company felt that a too-hasty switch to a franchisee model would
undermine the value of brand Coffee Day. Café business did not lend itself
to franchising since each coffee was prepared individually and could not be
mass produced. Self-owned cafés meant greater control on product quality,
service and training and were hence, considered crucial for ensuring quality
and maintaining the brand. Incidentally, the company followed the franchise
route in the case of Coffee Day Xpress. Xpress outlets that were smaller in
size, used automatic coffee machine and had limited food/snack offerings,
worked well with the franchise model. Almost 50% of the Xpress outlets
were franchised.
In the case of cafés operating on foreign shores, services of a franchisee
had been enlisted to run the cafés in Karachi, while a fully-owned subsidiary
had been registered in Cyprus to manage the cafés in Vienna.

Café industry and coffee consumption in India

After a long stagnation from 1991 to 1999, consumption of coffee in India

had been steadily increasing. As per an estimate, coffee consumption in India
had gone up from 55,000 tons in 1999 to 90,000 tons in 2007 (Economic
& Market Intelligence Unit Coffee Board 2008). The Coffee Board of India
intended to pump in Rs.900 million over the next five years to boost per capita
consumption of coffee in India. Per capita consumption of coffee was only
80 grams, in India as opposed to 8kg in Austria, 4.09kg in the U.S., 3.03Kg
in the UK and 3.41kg in Japan (Food Industry News 2007). Of the total coffee
consumption in India, branded coffee accounted for nearly 53% of total
sales, unbranded coffee 40% while cafés accounted for the remaining 7% of
coffee consumption in the country. Industry experts claimed that the overall
domestic market for branded and unbranded coffee in India would grow by
10% to 15% year-on-year for the next five years. Out-of-home consumption
of coffee was expected to grow by 12-13%, which was significantly more
than the growth in in-home coffee consumption. Restaurants and cafés
would account for nearly 85% of the total coffee consumption in the out-
of-home segment (Food Industry News 2007). Estimated at INR 4 billion,
growing at around 20-25% per annum, the Indian café market was expected
262 The Marketing Review, 2009, Vol. 9, No. 3

to have the potential for as many as 3,000 outlets. Coffee chain owners,
however, felt that the café market in India had the potential for nearly 5,000
outlets by 2010 (tea&coffeeasia 2007).

Competition

Within the café industry Café Coffee Day worked hard at creating a distinct
identity of its own. Unlike other cafés that had an upper class image, CCD
was all about good coffee, about hanging out and having a nice time. CCD
was not interested in becoming another upper class coffee shop that catered
to the connoisseurs’ taste but rather in serving to the popular taste. Thus,
even while the US based coffee major Starbucks waited in the wings to
take the Indian coffee market by storm and prominent other players like
Coffee World, Java City, Java Green, Barista, Mocha and Qwicky’s thronged
the market; team CCD reiterated that the café chain was essentially not in
competition with anyone else and continued to work towards maintaining a
distinct identity of its own. However, Café Coffee Day did not underestimate
other players in the market.
In 2007, Italy’s largest coffee company, Lavazza Group, had signed an
agreement with the Sterling Infotech Group to acquire 100% of Barista
Coffee Co Ltd and Fresh and Honest Café Ltd, helping it gain immediate
access to Barista’s and Fresh and Honest’s nationwide networks. Starbucks,
the global café giant, was also waiting to move into India. Commenting
on CCD’s preparedness to compete with Starbucks, Siddharth said that 700
odd cafés across India would be an ideal number to take on Starbucks. CCD,
which had some 600 odd cafés by July 2008 was hence busy adding more
outlets.

Brewing future plans

Café Coffee Day, that had pioneered the café concept in India and brought
about a paradigm shift in the café space, had great plans for the future.
The coffee café chain aimed to be among the top-three global coffee giants
over the next five years with a marked presence in some 2,000 odd locations
across 65 countries of the world. While, the target was ambitious, team CCD
felt that it was not impossible. Especially, as they felt they knew what it took
to stay ahead of the game.
While the confidence of his team made Siddharth extremely proud,
he knew that taking CCD to the next level would involve fresh thinking
and the formulation of a whole new set of strategies. Not only had the
typical Indian coffee consumer evolved with time, consumers of coffee in
India had become more discerning in their tastes. There were many more
coffee connoisseurs in India today that could tell the difference between a
macchiato and an espresso. The café industry in India had also witnessed
a significant increase in the number of café chains in the country and an
expansion of specialist coffee chains beyond the metros into tier II and tier
III cities. Several multinational specialist coffee chains such as Costa Coffee
from Britain, Gloria Jeans from Australia, Illycaffe from Italy, Café Brio, Café
World etc., had ventured into the Indian café market and were raring to
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 263

make it big. Costa Coffee for example was in expansion mode, taking its
outlet count from 9 in 2005 to 35 in 2007.
Siddharth realised that the expansion of multinational specialist coffee
chains across India would alter the nature of the industry and create a whole
new flavour of competition. He also felt that the mushrooming of specialist
coffee cafes across cities, each not very distinct from the other offering a
similar mix of music, food, coffee and fun, would pose a whole new set of
challenges for the company. With an increase in the number of many “me
too” cafés, not only was there the danger of CCD losing its unique identity
and being perceived as one of the many cafés in the market but also of it
losing customer loyalty.

‘The blogger was right’, Siddharth thought to himself. ‘Cafés did indeed
need to understand what more they could offer to their customers to
remain relevant and unique in the market and to ensure continued
success.’

Questions

Q1. CCD had moved from strength to strength because of its clear
positioning. In the changing market scenario where one café was not
much different from the other, how could CCD maintain its unique
identity?
Q2. With more and more players entering the café market, what
more should CCD offer to its customers to ensure their continued
patronage? Suggest a strategy.
Q3. A huge potential for growth for cafés existed in the domestic
market. However, returns from overseas cafés were much higher. What
in your opinion should be CCD’s approach towards the domestic and
foreign markets so as to maximise its returns?

References

Economic & Market Intelligence Unit Coffee Board (2008), Database on Coffee,
March 2008.
Economic Times (2007), “Retailing – PEs to take a sip of Café Coffee Day for $95mn”
Economic Times, November 13, 2007.
Euromonitor International (2008), “Cafés/bars – India”, Euromonitor International:
Country Sector Briefing, October 2008.
Food Industry News (2007), “India’s Coffee Consumption Seen up 6 pct in 2007”
Food Industry News, Reuters, November 15, 2007.
Joy, Sony (2008), “DSN - Mobshare BlueZone, now at a Cafe Coffee Day near you”.
Mobshare.in Blog. Weblog. [Online]. Available from: http://www.blog.mobshare.
in/dsn-mobshare-bluezone-now-at-a-cafe-coffee-day-near-you/[Accessed
January 25th 2009].
Mukhopadhyay, Ropel (2007), “Tissue Issues”. Blogger. Weblog. [Online] Available
from: http://www.tissue-issues.blogspot.com/2007/04/caffeinexperience.html/
[Accessed January 25th 2009].
tea&coffeeasia (2007) “The Rise and Rise of Coffee in India”, tea&coffeeasia, June-
August, 2007. Available at: http://www.teacoffeeasia.com/, [Accessed June 25th
2008].
264 The Marketing Review, 2009, Vol. 9, No. 3

Appendix 1 Customer profile and related information

AGE PROFILE OF CUSTOMERS

40

30
TAGE

>45
35-44
PERCENT

20
30-34
25-29
10
20-24
5.3 15-19
0 5.3
3.3
23.4
AGE G 37.9
ROUPS 24.8

FREQUENCY OF VISIT

frequently 18%

occasionally 22%

weekly 44% monthly 16%

GENDER PERCENTAGE
T

female 40%

male 60%
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 265

Appendix 2 Recent developments

• CCD had recently set up its own furniture division with about 600
people. The division supplies furniture to all its cafés.
• Siddharth, in his personal capacity had set up a residential hospitality
college in Chikmaglur (Karnataka) to train youngsters in the hospitality
business who would then be employed at the cafés. Plans are
underway to set up another such institute in North India.
• In a major equity deal with JP Morgan, Siddhartha was expected to
raise additional funds amounting to $250 million.
• Café Coffee Day had recently crossed the magic figure of 100milllion
customers in a year. CCD aimed at increasing the number to 120
million.
• The latest at CCD was the creation of BlueZones. BlueZones were
Bluetooth enabled areas that allowed users to upload mobile pictures
to DSN (vertical 52” LCD TV’s) via Bluetooth. The pictures one sent
appeared on the screen within minutes. Also, the pictures got splashed
across all CCD outlets in the country. Bluezones that had been created
through an association between CCD and Mobshare were currently
installed at 30 CCDs in Mumbai, 24 in Delhi, 4 in Gurgaon and 2 in
Kanpur.

Appendix 3 Fact files

• An advanced level wireless retail automation system (LERA) had been

deployed in all CCD cafés to track customer preferences through past
billing patterns and to speed up order processing and billing.
• Investments of almost Rs.50millions had been made to develop
innovative technical solutions for managing the supply chain, point
of sale activities etc.
• CCD often created clusters of cafés in an area to blanket it completely.
The chain had 6 cafés in the suburb of Bandra, Mumbai, and had 6
cafés within an area of half-a-kilometer at another location.
• Employee incentives at CCD depended on profits and not just sales.
• As a policy, the company closed down any café that failed to deliver
profits within six months of starting operations. 14 CCD outlets had
been closed so far.
• Initially, CCD was priced some 30% less than the competition. Today
CCD prices were on a par with the competition but the low-price
image had stuck.
• A CCD café cost Rs.2.5-3million in India, the same cost Rs.17million,
in Europe.
• Outlets in Austria, Europe, were much larger than those in India and
usually covered a minimum of 4,000 square feet area.
• Realisation from investment in overseas outlets worked out to be six
times more in Europe, than in India.
266 The Marketing Review, 2009, Vol. 9, No. 3

• CCD had won platinum, gold, silver and bronze medals at the Barista
Championship 2002.
• The non-coffee portfolio that included food, non-coffee based drinks
and merchandise accounted for nearly 40% of the total turnover.

Appendix 4 Industry data

Table 1 Cafés/bars by subsector: units/outlets 2002-2007

Outlets
2002 2003 2004 2005 2006 2007
Cafés/bars 48,418 52,558 56,628 60,656 63,816 67,088
- chained cafés/bars 694 933 1,220 1,452 1,755 2,280
- independent cafés/bars 47,724 51,625 55,408 59,204 62,061 64,808
Specialist coffee shops 221 397 601 802 1,065 1,560
- chained specialist coffee 191 362 558 752 1,005 1,490
shops
- independent specialist 30 35 43 50 60 70
coffee shops
Other cafés/bars 48,197 52,161 56,027 59,854 62,751 65,528
- other chained cafés/bars 503 571 662 700 750 790
- other independent café/ 47,694 51,590 55,365 59,154 62,001 64,738
bars

Source: Official statistics, trade associations, trade press, company research, store checks, trade
interviews, Euromonitor International (2008) estimates

Table 2 Cafés/bars by subsector: % units/outlets growth 2002-2007

% Units/outlets growth
2006/07 2002/07 CAGR* 2002/07 TOTAL
Cafés/bars 5.1 6.7 38.6
- chained cafés/bars 29.9 26.9 228.5
- independent cafés/bars 4.4 6.3 35.8
Specialist coffee shops 46.5 47.8 605.9
- chained specialist coffee shops 48.3 50.8 680.1
- independent specialist coffee shops 16.7 18.5 133.3
Other cafés/bars 4.4 6.3 36.0
- other chained cafés/bars 5.3 9.4 57.1
- other independent cafés/bars 4.4 6.3 35.7

*CAGR - Compound Annual Growth Rate

Source: Official statistics, trade associations, trade press, company research, store checks, trade
interviews, Euromonitor International (2008) estimates
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 267

Table 3 Cafés/bars by subsector: foodservice value 2002-2007

Rs million
2002 2003 2004 2005 2006 2007
Cafés/bars 234,264.2 258,578.2 285,667.5 320,413.3 356,510.4 398,737.8
- chained cafés/bars 2,775.6 3,869.4 5,018.5 6,071.9 7567.7 9,641.5
- independent cafés/bars 231,488.7 254,708.8 280,649.0 314,341.3 348.942.8 389,096.4
Specialist 1,162.9 2,020.9 2,807.5 3,658.0 4,806.8 6,497.5
coffee shops
- chained specialist coffee 1,042.3 1,876.1 2,626.5 3,440.8 4,541.8 6,176.9
shops
- independent specialist 120.7 144.8 181.0 217.2 265.0 320.6
coffee shops
Other cafés/bars 233,101.3 256,557.3 282,860.0 316,755.3 351,703.7 392,240.4
- other chained cafés/ 1,733.3 1,993.3 2,392.0 2,631.2 3,025.9 3,464.6
bars
- other independent 231,368.0 254,564.0 280,468.0 314,124.2 348,677.8 388,775.8
cafés/bars
Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews,
Euromonitor International (2008) estimates

Table 4 Cafés/bars by subsector: % foodservice value growth 2002-

2007

% Value growth
2006/07 2002/07 CAGR* 2002/07 TOTAL
Cafés/bars 11.8 11.2 70.2
- chained cafés/bars 27.4 28.3 247.4
- independent cafés/bars 11.5 10.9 68.1
Specialist coffee shops 35.2 41.1 458.7
- chained specialist coffee shops 36.0 42.7 492.6
- independent specialist coffee shops 21.0 21.6 165.7
Other cafés/bars 11.5 11.0 68.3
- other chained cafés/bars 14.5 14.9 99.9
- other independent cafés/bars 11.5 10.9 68.0

*CAGR - Compound Annual Growth Rate

Source: Official statistics, trade associations, trade press, company research, store checks, trade
interviews, Euromonitor International (2008) estimates
268 The Marketing Review, 2009, Vol. 9, No. 3

Table 5 Brand owner shares of chained cafés/bars 2003-2007

% Value
Company 2003 2004 2005 2006 2007
Amalgamated Bean Coffee Trading Co. Ltd 23.3 29.4 30.8 33.7 38.8
(ABCTCL)
Lavazza SpA, Luigi - - - - 15.0
Java Green Pvt Ltd 0.3 5.3 5.9 5.5 4.5
Sarovar Park Plaza Hotels & Resorts Pvt Ltd 2.3 2.6 3.2 3.1 2.9
Whitbread Plc - - 1.1 2.2 2.5
Impresario Entertainment & Hospitality Pvt 1.2 1.5 1.9 1.8 2.2
Ltd
Qwiky’s Corp 1.5 1.5 1.5 1.7 1.3
Global Franchise Architects Co. Ltd. - - 0.5 0.6 0.7
Barista Coffee Co. Ltd. 17.2 15.8 16.2 15.8 -
Others 54.2 43.9 39.0 35.5 32.2
Total 100.0 100.0 100.0 100.0 100.0

Source: Official statistics, trade associations, trade press, company research, store checks, trade
interviews, Euromonitor International (2008) estimates

Table 6 Brand shares of chained cafés/bars 2004-2007

% Value
Brand Brand Owner 2004 2005 2006 2007
Café Coffee Day ABCTCL 25.1 23.9 25.1 28.3
Barista Coffee Co Lavazza SpA, Luigi - - - 15.0
Coffee Day Xpress ABCTCL 4.3 7.0 8.6 10.5
Java Green Java Green Pvt Ltd 5.3 5.9 5.5 4.5
Geoffrey’s Sarovar Park Plaza Hotels & 2.6 3.2 3.1 2.9
Resourts Pvt Ltd
Costa Coffee Whitbread Plc - 1.1 2.2 2.5
Mocha Impresario Entertainment & 1.5 1.9 1.8 2.2
Hospitality Pvt Ltd
Qwiky’s Qwiky’s Corp 1.5 1.5 1.7 1.3
Coffee World Global Franchise Architects Co. - 0.5 0.6 0.7
Ltd
Barista Coffee Co. Barista Coffee Co. Ltd. 15.8 16.2 15.8 -
Others 43.9 39.0 35.5 32.2
Total 100.0 100.0 100.0 100.0

Source: Trade associations, trade press, company research, trade interviews, Euromonitor
International (2008) estimates
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 269

Table 7 Forecast sales in cafés/bars by subsector: units/outlets 2007-

2012

Outlets 2007 2008 2009 2010 2011 2012

Cafés/bars 67,088 69,963 72,712 75,090 77,450 79,505
- chained cafés/bars 2,280 2,830 3,415 4,000 4,580 5,105
- independent cafés/bars 64,808 67,133 69,297 71,090 72,870 74,400
Specialist coffee shops 1,560 2,078 2,635 3,190 3,745 4,250
- chained specialist coffee shops 1,490 2,000 2,550 3,100 3,650 4,150
- independent specialist coffee 70 78 85 90 95 100
shops
Other cafés/bars 65,528 67,885 70,077 71,900 73,705 75,255
- other chained cafés/bars 790 830 865 900 930 955
- other independent cafés/bars 64,738 67,055 69,212 71,000 72,775 74,300

Source: Official statistics, trade associations, trade press, company research, trade interviews,
Euromonitor International (2008) estimates

Table 8 Forecast sales in cafés/bars by subsector: % units/outlets

growth 2007-2012

% Units/outlets growth 2007-12 CAGR* 2007-12 TOTAL

Cafés/bars 3.5 18.5
- chained cafés/bars 17.5 123.9
- independent cafés/bars 2.8 14.8
Specialist coffee shops 22.2 172.4
- chained specialist coffee shops 22.7 178.5
- independent specialist coffee shops 7.4 42.9
Other cafés/bars 2.8 14.8
- other chained cafés/bars 3.9 20.9
- other independent cafés/bars 2.8 14.8

*CAGR - Compound Annual Growth Rate

Source: Official statistics, trade associations, trade press, company research, trade interviews,
Euromonitor International (2008) estimates
270 The Marketing Review, 2009, Vol. 9, No. 3

Table 9 Forecast sales in cafés/bars by subsector: foodservice value 2007-2012

Rs million
2007 2008 2009 2010 2011 2012
Cafés/bars 398,737.8 432,277.6 464,329.2 496,331.4 527,862.8 558,715.4
- chained cafés/bars 9,641.5 12,026.3 14,628.5 17,369.9 20,131.9 23,026.2
- independent cafés/bars 389,096.4 420,251.3 449,700.7 478,961.4 507,730.9 535,689.2
Specialist 6,497.5 8,588.8 10,905.8 13,373.2 15,882.3 18,552.0
coffee shops
- chained specialist 6,176.9 8215.2 10,474.4 12,883.6 15,331.4 17,937.8
coffee shops
- independent specialist 320.6 373.5 431.4 489.6 550.8 614.2
coffee shops
Other cafés/bars 392,240.4 423,688.9 453,423.3 482,958.2 511,980.5 540,163.4
- other chained cafés/ 3,464.6 3,811.1 4,154.1 4,486.4 4,800.4 5,088.4
bars
- other independent 388,775.8 419,877.8 449,269.3 478,471.8 507,180.1 535,075.0
cafés/bars

Source: Official statistics, trade associations, trade press, company research, trade interviews, Euromonitor
International (2008) estimates

Table 10 Forecast sales in cafés/bars by subsector: % foodservice

value growth 2007-2012

% Value growth 2007-12 CAGR* 2007-12 TOTAL

Cafés/bars 7.0 40.1
- chained cafés/bars 19.0 138.8
- independent cafés/bars 6.6 37.7
Specialist coffee shops 23.3 185.5
- chained specialist coffee shops 23.8 190.4
- independent specialist coffee shops 13.9 91.6
Other cafés/bars 6.6 37.7
- other chained cafés/bars 8.0 46.9
- other independent cafés/bars 6.6 37.6

*CAGR - Compound Annual Growth Rate

Source: Official statistics, trade associations, trade press, company research, trade interviews,
Euromonitor International (2008) estimates
 Agrawal Threat of a “me too” perception: a case of Café Coffee Day 271

About the author and correspondence

Richa Agrawal has a PhD in Marketing Management from IIT Bombay and
has been associated with leading business schools in India for more than
eight years now. Dr. Agrawal, who is a keen researcher and academician,
has more than forty publications to her credit that include research papers,
case studies, chapters in books and edited books. Several of her research
papers have been published in reputed international and national journals.
Besides being an avid researcher, Dr. Agrawal has been actively involved in
coordinating case writing workshops and writing management cases that
showcase the Indian business environment and management. Her cases
have been included in International books, journals and magazines. She is
currently working with the Mudra Institute of Communication Ahmedabad,
India, a premiere communications management institute in the country, as
an assistant professor in the area of marketing management. Her research
interests include customer relationship management, relational strategies
and communication, and customers’ relational behaviour.
Dr. Richa Agrawal, Assistant Professor, Mudra Institute of Communications
Ahmedabad, Shela, Ahmedabad, PIN - 380058, Gujarat, India.
T +91 2717 237946-51 Ext-159
F +91 2717 308349
E richa@mica.ac.in