Brand Strategy

Blazing the coffee trail

While tea leaves are an able ally for fortune telling, the coffee trail set ablaze by Amalgamated Bean Coffee Trading Company's Café Coffee Day has created discernible fortunes for the company and employees alike. Neeti Mehra demystifies its success story

Before the neologism 'Bangalored' became a global term, a small coffee shop-cum-cyber café by the name of Café Coffee Day (CCD) opened its doors in the bright garden city. This was a boon for sleep-deprived techies, playing the leading role in the neologism's addition to the lexicon. Interestingly, the promoter's intent was not to push copious amounts of caffeine consumption, but to capitalise on the Internet boom through the cyber café.

The story began in 1996, and for five years, a handful of cafes dotted the landscape, till it was organised into a pan India retail format. Today, CCD has a national presence, with 303 cafes in 68 cities, across the country. Naresh Malhotra, director, Café Coffee Day, at the helm since 2001, feels they have merely scratched the surface of the market's potential. "When we started out, industry watchers cited that 500 outlets would be too optimistic for the entire market place, but we believe that there is scope for up to 5000 outlets across the entire spectrum of the market," he says. The company poised to break the 500-café mark by mid next year.

Brewing the strategy

How did a small café outlet sieve through the sensibilities of a chai-drinking nation? CCD strove for brand distinction, carving out a niche in the market by staying true to its mission, 'To be the best cafe chain in the country, by offering a world class coffee experience at affordable prices.' In non brand-speak, a vision creating a coffee culture out of the confines of instant coffee and five-star trappings, preferred by the coffee drinking intelligentsia. Vertical integration enabled procurement costs to be free from price fluctuations, with CCD sourcing a majority of its beans from its sister concern. The strategy catered to the entire value chain of retail coffee consumption in India through different formats like kiosks, vending machines, and retail outlets; a move breeding familiarity and building the brand.

In 2001, an extensive market survey revealed that the CCD format appealed to the demographic break-up of the 15-29 market. Given that the Indian demographic landscape was skewed to this segment, they undertook an immediate revamp of the logo, look-n-feel and brand positioning. Today, creating its unique coffee cult, the café utilises on ground promotions and initiatives such as branded merchandise and consumer products, the Café Beat Magazine, live music, touch screen jukeboxes are some of the examples used to lure in the target set. Side-stepping complacency, CCD injects regular coffee shocks with menu overhauls every four months, taking customer feedback into cognisance.

Leveraging their brand communication is another favoured strategy, targeting their captive audience by tying-up with other similarly positioned brands such as Levi's and WorldSpace radio, creating visible brand connects. Co-branding agreements worked similarly in creating new audiences, for instance their arrangement with Air Deccan, created a virtual Udipi restaurant in the sky. CCD is the single point vendor, supplying a range of food and beverages, with discounts on purchase of merchandise at all outlets in airports, available to Deccan passengers.

The inroads made in metros, has been met with equal success in B and C class cities, encouraging the group to enter cities with over one lakh population. Malhotra, sees pilgrimage centres and highways as the areas of future growth, with the format appealing to travellers. The group is also contemplating 'highway cafes' and 'drive-in through cafes', along with petroleum companies.

However, the growth plan, resonant with those of all retail F&B outlets across India is limited due to the inadequate supply of land at reasonable prices to sustain the low-priced high volume format. He feels the segment in India is hampered by exorbitant real estate values, which in turn hits the revenue streams, echoing a concern shared by many within the industry. Malhotra feels it will ease with the malls mushrooming across the country. He sees the future replete with rapid expansion through franchising, a method to counter the scarcity of capital; a methodology that hasn't found favour with them, except for the Coffee Day Xpress kiosks, given that service standards of franchises are not up to the mark. "With the increasing population density, I don't see demand easing, in fact, I see every neighbourhood having at least two cafes," he avers, a revelation that the neighbourhood café will be ubiquitous as the local grocer. An experience, which does not warrant the need for wheeled transport, but a leisurely stroll.

Leaving the aroma trail

While expansion is hinged on a fully integrated approach, Malhotra reveals that after they touch the 500-outlet figure, the next step is logically the magical 1000 mark, with growth envisioned at a macro level, and that too, not within the geographical confines of India. "We will witness a 100 per cent growth rate per annum for the next four to five years, and I don't see the pace flagging," he adds. This, while their sights are firmly fixed on the European market too, with a presence in Vienna already (two outlets) and plans on expansion in Austria, while eyeing Middle East, Eastern Europe, Eurasia, Egypt and South East Asia. "We have held our own in a destination such as Vienna. It's paradoxical that our realisation is six times more in Europe, than over here," he says, a due diligence revealing that the difference in investment in overseas outlets work out, in some cases, less as compared to the cost of real estate in India .

Today, rumours are abound of the sale of its arch rival Barista, and with the proliferation of international brands, constant innovation and reinvention will be required to retain its position in the marketplace, a skill Malhotra avers is finely honed. Malhotra explains, "Competition is welcome; It creates a bigger market, and a bigger slice of the pie for each player." While java junkies can bet their last coffee bean on the changing fortunes of a ruthless coffee retail segment, only entrepreneurial and consumer focussed chains will dominate the cappuccino cartels.