While CCD has the enviable advantage of being the first mover and has cornered most of the high street locations in India, the entry of Starbucks in India poses a significant threat to its popularity.
Starbucks in India has followed a low-pricing strategy across its outlets, a departure from its strategy in markets abroad – a cup of hot coffee here costs about Rs 80 for a small offering and Rs 165 for a large one compared to CCD which sells hot coffee at Rs 60. Therefore, while Starbucks might be positioned as a high-end premium brand, it is at best priced at a moderate premium and is a potential competitor.
Starbucks plans to open outlets in schools, hospitals, corporate campuses and even outside gyms to expand its retail footprints. Clearly, the above selection of locations hints at a key franchise that it intends to target-the youth and the corporates.
Starbucks provides a superior in-store experience which is made possible by highly trained employees adept at personalising the service, a combination that lends it a premium positioning. While the setting up of the premium coffee chain formats – CCD Lounge and Square – is a move in the right direction, their expansion is tough owing to the need for a large store size and availability of trained staff. With time, the rising discretionary spending coupled with a yearning for a superior experience that Starbucks provides might lead to a permanent shift in consumer preferences – especially for corporates and the 20-somethings in the metros. Therefore, it is important for the market leader CCD to build erosion barriers and protect its 17-35 year olds from the competition.
Format focus: CCD regular format stores must compete with the Starbucks stores located around schools and hospitals, while the premium format (Lounge, Square) around gyms, corporate campuses etc. must place themselves at premium locations.
Marketing mix: CCD must aim to own the space of ‘convenience and quality at an affordable price’. It must continue to position itself as a hangout zone as against the notion of exclusiveness and customer delight that Starbucks owns. The former will continue to appeal to the young at heart.
Brand development: A brand building exercise, both in-store and via social media to create more engagement and build a premium positioning becomes necessary when you are competing with a global marketing giant. A celebrity route to build a stronger association can also be considered. The store layout must be refurbished so as to reflect the renewed branding.
Customer loyalty: Increase penetration of the Café Moments Card to not only boost loyalty but also as a strategic tool to micro target consumers basis demographic and in-store transaction behaviour. There is no better way of reaping advantages of a being a first mover than owing customer behaviour data. This will additionally result in enhanced personalization and a deeper engagement with the customer.
(Abhishek is pursuing MBA from ISB, Hyderabad.)