How is CCD positioned today?
Today, CCD projects itself as a hangout destination for the teenage and college-going crowd and the occasional meeting place for corporate customers. This reflects in its menu offering, which is functional but not premium. Essentially, we only need to answer two questions in order to estimate the potential action that CCD should take as a response to the entry of Starbucks in India.
The importance of the choice of food offerings in the decision to chose a cafe. The premium attached to the ambience of a cafe.
So what does Starbucks bring that CCD should worry about? Starbucks is hitting where it hurts the most. An ambience that is superior to a CCD offering. While CCD Lounge does offer a premium experience, the brand association for CCD is essentially as an economical hangout which therefore means that the consumer segment that attaches a premium to the cafe ambience does not search out a Cafe Lounge but will instead go to a cafe that is perceived as premium. Here, Starbucks through its brand value and present set of premium outlets poses the greatest threat.
An equally important factor to consider is the menu offering of CCD against the Starbucks spread. Here, Starbucks has come out with a premium line that is marginally more expensive than CCD but that is significantly more attractive due to its uniqueness as compared to offerings from other cafes. Currently, CCD is the de facto choice of the teenage or college-going customer; however, this segment is also characterised by its extreme affinity towards brands. There are also significant network effects that characterise the behavioural habits of this segment. Starbucks with its brand image will significantly influence the tastes of this customer segment and it is likely that it will replace CCD as the cool place to hangout.
How can CCD counter this?
CCD, at this point, needs to reposition itself among its core customer segment through revisiting its menu. The argument here is that it is not sustainable in the long term to make its current cafés significantly better in terms of their ambience and counter the Starbucks threat. But, through a renewed focus on menu items that are highly attractive in taste or uniqueness ,it needs to appeal to the college going audience (especially the female populace) and build loyalty that is associated with great food.
It will therefore have to reposition itself away from being a convenient hangout location to a premium cafe that offers an attractive option set and is conveniently located in anybody’s neighbourhood. Here, the extensive footprint of CCD cafes will be useful to project the easy reach. With a repositioned brand that offers to its core customers a delightful spread of menu and the emotional appeal of a next door cafe, CCD can successfully counter the Starbucks juggernaut and continue its dominance over the Indian cafe market.
(Rituraj Dutta is pursuing PGP at ISB, Hyderabad.)