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Home / Industry / Companies / How Caf Coffee Day is reinventing itself to take on rivals

How Caf Coffee Day is

reinventing itself to take
on rivals
With initiatives such as home delivery, multiple retail formats and a
digital presence, Caf Coffee Day is fighting off competition while
reinventing itself to stay ahead of the pack
By: Ankita Rai | Updated: May 10, 2016 9:51 AM
18

G+

Caf Coffee Day or CCD, 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 cafs. (Reuters)

Caf Coffee Day or CCD as it is more popularly known has come a long way
since its inception 19 years ago. The homegrown caf 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 cafs. 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 McDonalds 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 caf segment. The chain caf and tea bar market stands at

`1,820 crore, growing at 20% in value, and constitutes 27% of the overall caf and
tea bar market at `6,750 crore (source: Indian Caf 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 caf chain is reinventing itself to stay relevant and
ahead of the pack.
Caf at your doorstep
Caf Coffee Day (CCD) is perhaps the market leader in terms of retail footprint
with with 1,586 cafs 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 cafs, the
response was overwhelming.
Home delivery is very counterintuitive to our model as people come to cafs 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
caf 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 cafs. But when it became a success, we
thought it makes business sense if we also roll it out at our cafs, 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
cafs to expand this service to major cities. At present, CCD has mapped 50 cafs in
Bengaluru to deliver orders within a three-four km radius.
However, experts believe by foraying into food delivery, Caf Coffee Day might be
stretching itself too much. Home delivery is a tactical move aimed at keeping
consumers engaged and loyal. I dont 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 caf chain as they are considered
social hubs. For the home delivery business, you dont need a retail outlet; you

need a warehouse. Caf 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 nonpeak 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 Caf Concerts in February this year with
a focus on live gigs in Mumbai, Delhi, Pune and Bengaluru. Caf Concerts are also
a platform for young and upcoming talent to showcase their skills in front of a live
audience. CCD plans to take Caf 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 cafs to bigger and wider spaces.
When we entered the caf retail industry, we primarily looked at anchoring our
presence in the city and spreading the caf culture. Today, we are moving to larger
spaces to provide better and more luxurious experiences to consumers, says
Nagaraj.
In a caf, 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 cafs this year. In terms of the number of chained caf
outlets, it has a market share of approximately 46% in India, with the caf
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 cafs are company-owned and companymanaged 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 cafs are at an arms 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 caf 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
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