Café Coffee Day has sufficient reasons to not only monitor moves of its new competitor Starbucks, but also to formulate a strategic direction for future with cognizance of rapid expansion plans of Starbucks.
If we look at growth statistics, CCD took 14 years to open its first 1,000 stores, in 2010 while Starbucks added 1,000 stores within five years of its listing on NYSE in 1992 and there is no reason to believe that they will go any slower in India. Expansion plans of a big player in the market means competition not only for consumer’s pocket but also for talented work force and real estate in high-footfall places.
There is substantial overlap in target segment and positioning of CCD and Starbucks, though both customer satisfaction and prices seem to be higher in Starbucks. So, it can be said that Starbucks is targeting a more premium segment and is not a direct competitor of CCD. Although even with this data Starbucks would remain a threat to Lounge and Square formats of CCD. The question that remains is whether Starbucks can shift consumers to a higher price band by providing better quality and service.
This survey indicates that consumers might be willing to pay for better quality and a more congruent environment. Moreover, we have seen such shifts happening for mobile phones and other gadgets, then why not for a café?
Perhaps Indian consumer is not as price sensitive as we tend to believe. Even if we argue that there is enough space in Indian coffee market to accommodate more players, as Indian per capita coffee consumption is only 20 per cent of world’s average, CCD would still have to compete to retain and lure trained workforce and acquire appropriate real estate for its expansion plan.
What can be done?
We define our strategic objective as restricting Starbucks from acquiring CCD’s customers while expanding our current customer base. Starbucks has started with opening stores in tier-1 cities but has plans to enter tier-2 cities in future. Two different approaches are required to restrict Starbucks from eating into CCD’s share of consumer pocket. In tier-1 cities real estate in areas with high footfall potential is the bottleneck, and CCD needs to quickly secure these areas to get a foothold before Starbucks can enter. Partnership with premium hospitals, educational institutes and presence in religious places, transportation hubs should be a priority. For tier-2 cities, a strong brand building campaign can get potential consumers familiar with CCD and give advantage of first contact.
3-pronged marketing strategy is suggested.
Workforce Engagement
This would involve ‘brew your own’ campaign, where on shop workers are encouraged to create recipes and provide their creation to customers off the menu. The proceeds from sale would go to the worker on a profit sharing basis. This move will not only attract talent but also give a local flavour to all CCD outlets. Workers with most selling recipes can be given awards and recognition.
Networking
CCD has advantages from its incumbent position in the Indian market. The need is to integrate outlets to provide a better customer experience. Providing digital referral coupons that can be used by a present customer to refer a friend to CCD anywhere else in nation can do the trick. Successful worker made recipes can be provided at other outlets to maintain novelty in offering.
Customer Engagement
We need a way to make customers identify with their local CCD at a personal level. For this CCD can organise board games, music sessions, karaoke and publish pictures of customers as ‘Guitar champion’ or ‘Scrabble champion’ at the local CCD outlet. Personalised offers for frequent customers can also increase number of repeat customers. CCD cannot ignore Starbucks entry and needs to closely monitor its competitor’s moves. An integrated approach to customer and workforce engagement is imperative for CCD to maintain its place in Indian coffee market. In the current situation speed of implementation of the strategy has become as important as its effectiveness.
(Ankur Banka and Meenakshi are pursuing PGP in management from IIM Ahmedabad.)