Café Coffee Day— or CCD as it is more popularly known — has come a long way since its inception 19 years ago. The homegrown café chain, credited with the start of the coffeeshop culture in India, now finds itself facing a deluge of competition not just from international chains such as Starbucks, Costa Coffee or Barista but also from various domestic players and concept cafés. “From a brand standpoint, the biggest challenge is to stay relevant and fresh given the rising competition in the category. It is, however, the best time for consumers in terms of choices,” says Bidisha Nagaraj, group president, marketing, Coffee Day. BrandWagon interacted with Nagaraj on April 7, 2016, for a SWOT analysis of Brand CCD.
Consider how QSR chains like McDonald’s and Mad Over Donuts have entered the segment. The rise of tea bars such as Chai Point and Chaayos is also eating into the traditional coffee-led café segment. The chain café and tea bar market stands at `1,820 crore, growing at 20% in value, and constitutes 27% of the overall café and tea bar market at `6,750 crore (source: Indian Café and Tea Bar Market report, November 2015, Technopak). Clearly, the opportunity is huge and CCD is leaving no stone unturned to capitalise on its first mover advantage.
To make the most of each footfall, CCD is going beyond the obvious choice of expanding its food menu to increase its average transaction value. We look into how nearly a two decade-old café chain is reinventing itself to stay relevant and ahead of the pack.
Café at your doorstep
Café Coffee Day (CCD) is perhaps the market leader in terms of retail footprint with with 1,586 cafés at 220 cities, as of December 2015, including multiple formats and 600 kiosks called Value Express. But just being present at convenient locations is not enough in the hypercompetitive segment. So when CCD conducted a research to understand if consumers would accept home delivery from cafés, the response was overwhelming.
“Home delivery is very counterintuitive to our model as people come to cafés for experience. But our research shows consumers are looking for quick meal options and beverages to be consumed at office spaces and home get-togethers,” Nagaraj says.
While the insight was right, CCD discovered it needed to have a differentiated food experience for home delivery — a menu that complemented the service. So it introduced home delivery in Bengaluru with a menu different from its traditional café one — freshly assembled food including filter coffee and brewed tea flasks, hot dogs, Afghani chicken biryani, tawa pizza etc. “Initially, the home delivery menu was different from that of the cafés. But when it became a success, we thought it makes business sense if we also roll it out at our cafés,” says Nagaraj.
Currently, CCD has tied up with third party vendor Swiggy for the last mile in Bengaluru. It later plans to integrate B2B delivery players like Grab and Roadrunnr with its app for a bigger spread. It plans to leverage its vast network of cafés to expand this service to major cities. At present, CCD has mapped 50 cafés in Bengaluru to deliver orders within a three-four km radius.
However, experts believe by foraying into food delivery, Café Coffee Day might be stretching itself too much. “Home delivery is a tactical move aimed at keeping consumers engaged and loyal. I don’t see a lot of revenue coming from this,” cautions Ravindra Yadav, associate director, food services and agriculture, Technopak.
Home delivery also appears confusing for a café chain as they are considered social hubs. “For the home delivery business, you don’t need a retail outlet; you need a warehouse. Café Coffee Day should rather focus on how to get more footfalls in the outlets and increase productivity of the footfalls,” says Samit Sinha, founder and managing partner, Alchemist Brand Consulting.
CCD has introduced more food options in the area of light as well as heavy snacks and can be consumed at meal times as well. “By focussing on tailoring the food menu, CCD intends to drive consumption at different time points, including non-peak hours like early morning and lunch time, introducing smart combo options,” says Nagaraj. It recently launched its re-engineered Supermenu. It comprises sandwiches, crispy burgers and fresh soups. As of December, 2015, beverages contributed almost 57.99% of CCD sales and food contributed 33.30% while merchandise contributed around 8.72%.
A different concoction
Beyond food, the focus is on getting the experience right. CCD launched its app in February this year to track consumer behaviour, personalise offers and promotions, enable cashless transactions through built in wallets and build loyalty. The app is currently available only in Bengaluru, and once in full swing, can also be used to preorder food and beverages. After Bengaluru, it will be launched in Maharashtra and Gujarat, followed by a national rollout.
It also recently tied up with Freecharge to enable cashless transactions at the outlets. Customers can use their mobile numbers to pay and complete the transaction with an on-the-go pin reportedly in less than 10 seconds. But Harminder Sahni, founder and MD, Wazir Advisors, considers these as tactical offerings. “Today, it is app and home delivery; tomorrow, it will be something else. The challenge for players in this space is to not only adapt to the changing demands of consumers but also to not deviate too much from their core promise. And that for food retail is convenience, quality and price.”
Siddharth Singh, associate professor of marketing, Indian School of Business, is of the view that CCD is on the right track if the need of its target customer segment is served better by offering delivery services and promoting the use of the app. However, if these actions are knee-jerk reactions to competition, then they might be harmful. “Delivery services raise questions about how CCD sees itself. The use of an app can help expedite the purchase process and, thus, add value to customers in terms of time saved. But this is valuable to customers in a hurry and not much to those who come to relax,” says Singh.
To further boost experience, CCD flagged Café Concerts in February this year with a focus on live gigs in Mumbai, Delhi, Pune and Bengaluru. Café Concerts are also a platform for young and upcoming talent to showcase their skills in front of a live audience. CCD plans to take Café Concerts to more metros and mini-metros in the coming few months.
No experience is complete without an enviable location and comfortable in-store experience. At CCD, the strategy now is to get into bigger spaces with wider frontage space and if possible, relocate existing cafés to bigger and wider spaces. “When we entered the café retail industry, we primarily looked at anchoring our presence in the city and spreading the café culture. Today, we are moving to larger spaces to provide better and more luxurious experiences to consumers,” says Nagaraj.
“In a café, the average table turnover is around 1-1.5 hours, very unlike a QSR where it is 20-30 minutes. So with bigger format stores one is actually losing revenue. However, CCD has does a good job in terms of segregating formats,” says Yadav.
The average sales per day per store at CCD is `13,747 as of December 2015. It plans to open another 135 cafés this year. In terms of the number of chained café outlets, it has a market share of approximately 46% in India, with the café footprint being nearly four times larger than the cumulative footprint of the next four competitors, as of December 31, 2014 (source: Technopak, March 2015).
In terms of new locations, CCD is bullish on highways, in addition to expanding presence in high streets, shopping malls, metro stations, educational institutions and transportation hubs. All CCD cafés are company-owned and company-managed to build consistency in the brand. “We drive the brand and we drive the experience. This is very difficult if you franchise it out,” remarks Nagaraj.
The 3As
The principal factors affecting competition in the coffee retail sector include pricing, product/service quality, brand perception, taste and product variety. To differentiate itself from competition, CCD has built its retail strategy on 3As: ‘Affordability’ to cater to the value conscious youth segment; ‘Accessibility’ to ensure cafés are at an arm’s reach for high-footfalls, and ‘Acceptability’ to portray it as a non-intrusive, non-judgmental place where consumers can hang out for long hours — a third place after home and office.
Its deeper footprint on digital platforms such as Twitter, Facebook and Instagram further adds to customer engagement. It recently created its first digital content property with a character, Beano, to engage consumers.
At the end of the day, with more than 1,500 outlets, CCD is in more in the business of real estate — the biggest cost in the café business. “In India, we see a complete mismatch in the prices of merchandise and the price of real estate that this merchandise actually occupies. CCD should concentrate on maximising the value of its real estate.
Merchandise should be of high value, move quickly off the shelves and should not occupy a lot of space,” sums up Sinha of Alchemist.
ankita.rai@expressindia.com