- Global Scenario
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CCD, Barista, Java Green, Café-Mocha: Location or positioning? what is more important in coffee business
Traditionally, India has been a tea loving country. We have invented several variants and name for the same like cutting, ginger, masaala, elaichi, special, ‘malai maar ke’, chaah, chaiya :) etc. every small tea shop has a distinct(yet varying) flavor to offer and the price has been kept sub 5 Rs till date.
But coffee which was relegated to the second place and was even geographically limited to certain southern states found its tracks in late 90s, thanks to the booming economy, cable TV(remember central park in friends), youth’s aspiration of global experience, expatriates, IT, BPO..all these put together helped in creating a perfect launch pad for the organized coffee retailing in India.
These favorable conditions were well utilized by entrepreneurs like V.G. Siddhartha (CCD), Amit Judge(Barista), Riyaz Amlani(Café Mocha), and today we are looking at a business with annual revenues over Rs 8 billion(According to Tecknopak advisors, they also see a potential space for nearly 3,000 coffee retail outlets in India, though players insist that even 5000 stores will be easily absorbed)
Now let’s have a look at the current state of some major players:
CCD: Siddhartha is from a family of coffee plantation owners, He saw a major opportunity and a gap between the five-star coffee shops and the street-corner local shops. Internet was also a big buzz word in those days, so he started an internet café (with actual café). The model was just evolving and changed over a period of time. One interesting thing is that the company has witnessed 2 distinct phases of growth. It took the company nearly 6 years to reach the 35 store mark and by the time Barista had become the market leader with more than 85 stores. CCD did rope in venture money (from Sequoia, Darby & JP Morgan) and executed an offensive envelopment strategy against Barista. They hunted for top retail locations, got in long duration contracts and went on a store opening spree. Today they operate nearly 700 stores in India and are also present in Vienna and Pakistan.
Barista: Unlike CCD, Barista owners did not have any coffee history or pedigree; they brought in international experts from Italy to design outlets/ambience and to train staff. Barista always had this up market, premium café image. The problem with Barista was that it started a bit ahead of its time and before it could mature it saw several changes in the ownership (Tatas -> Sterling and then Lavazza).
So while CCD moved from strength to strength, Barista lost its initial advantage due to ever changing ownership and lack of focus. Today it operates around 200 stores and seems to be back on track. The good thing about Barista is that despite all the changes in ownership it still has a strong positioning and a loyal customer group.
Java Green: Javagreen was started in 2003 as a chain of In-Store Cafés within Reliance WebWorlds. After the formation of ADAG it has expanded into other locations outside Reliance and operates over 100 cafes operating within a host of retailers, food courts and corporate campuses. Among the big guys this seems to have the weakest patronage and lacks the spark(read clear positioning, promotion or good products)
Café Mocha: Started by a Mumbai based entrepreneur Riyaz Amlani, who has a long experience in the hotels and restaurants business. This stores is strikingly different from others, they love being over-the-top and thus it’s a place that either you love it too much or find it ummm..’over the top’.
All the cafes are modeled on different themes and have a kind of strong loyalist group (MBA- Mocha bikers association, Backpackers club, film club..etc). These cafes are usually flooded with youngsters and PDA, Hookah, smoke and an overall outrageous hip environment can be expected.
Their are other players as well like Costa Coffee, Coffee world, Chai-Unchai etc.
My personal view on the industry is that the CCD has grown too big too fast. I have noticed a remarkable decline in their service levels over the time (particularly the newer store). Overall it will result in lowering the brand perception. Location orientation is again something that is beyond my understanding. To put it frankly, CCD is no Starbucks, with this kind of offerings they should not be hoping to create die hard loyalists. So though locations are going to matter in the short run but it’s the product image and positioning that will go a long way in deciding the long term fate of a café chain.
I sincerely hope that Starbucks get in the Indian market soon(they tried in 2007 but the entry was rejected by the Foreign Investment Promotion Board, now they are re-applying), it will be interesting to see their strategy and how they break the CCD's cluster location strategy. I guess having clustered presence is even worse against a strong contender.
Out of current players, Café-Mocha is my personal favorite, though there is no denying that it is relevant for only 1 out of 5 potential customers. But for those customers..’Mocha is the place to be’.
And that’s precisely the point. What is that a chain stands for? Is it Value for money? Is the place for teens? youngsters? professionals? Crazy hip hoppers? Or for coffee connoisseurs? Currently the lines are not drawn that clearly. And sadly for the major chains, the race seems to based on misplaced goals of finding those strategic real estate properties rather than finding the meaning of their brand, the connect with the customer, an identity for themselves.
But yeah rather than cribbing about what they are not, it's better to celebrate what they have achieved in this small period. Please let me know of you views on the industry or this article. For now m signing off and going to grab that cup of coffee..what about you?