Starbucks and CCD in India have two different value propositions. Starbucks plans to emphasise on its premium coffee provider personality. That is why it places itself in relatively high-end locations where customers looking for premium, high-end coffee and purchasing power parity exist. A Starbucks small cappuccino costs Rs 95 (nearly $2). Its equivalent costs Rs 61 (just over $1) at CCD.
Café Coffee Day is targeting the Indian youth in the age group of 18-35 years. The value proposition it emphasises is ‘Customer Intimacy’. With its 1000 plus stores, it positions itself as a cool and trendy hang out place. Its major target segment is repeat consumers (aged 15-35yrs) who want a cool and affordable hangout place, which can be visited multiple times in a week. Customers in the age group of 20-25 yrs are the most frequent . Also, the most commonly listed reasons for the visits are for refreshment purposes (72 per cent), friendly staff/atmosphere (63 per cent. (Snacks and Coffee combos also form a significant reason.)
CCD must recognise the entry of Starbucks as a major player in the higher premium segment of the coffee market. Although, Starbucks will not affect CCD’s sales by targeting the youth which frequent the Café Coffee Day outlets, it will definitely be a direct challenge to “Café Coffee Day Lounge”, the premium segment. It will target the segment which has the purchasing power parity to frequent high end outlets such as CCD Lounge, Barista, Costa Coffee and Gloria Jean’s.
In the long term, it seems unlikely that Starbucks will be able to shift consumers to consume premium coffee on a regular basis. This will require consumers to be less price sensitive, which is not the case for the youth segment (especially 20-25 years), who are either dependent on their family or are still have low incomes to consume premium coffee regularly.
Café Coffee Days Reaction
Café Coffee day must look to safeguard its market by further differentiating itself from Starbucks. It should emphasise more on its customer intimacy efforts and look at making CCD as a more inviting or cool place for the youth to hang out at. It must include Wi-Fi at all stores and have jukeboxes at stores to encourage trendy music. It must launch relatable combos like a couple’s/lover’s combo. This must be extended to celebration of friendship days & valentine’s days at its stores. The stores can also stock up on merchandize of CDs/DVDs of top trending music and mobile recharge options which can be a pull factor. The stores can also include board games and foosball tables for engaging the customers. By 2014, CCD plans to open 2000 stores across India. It should target to open these in locations frequented by this crowd already like malls, near schools, cinemas and gaming arenas.
With the help of these initiatives, CCD will be able to effectively ward of the threat of Starbucks and protect its market.
(Anuj Bhagat is pursuing PGP from ISB Hyderabad.)