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Group 4

International Company’s India Operations

The Usual Suspects:

31 Hardik Naik
32 Kalpesh Navlakha
33 Gaurav Nayak
34 Disha Nikam
35 Shrikrishna Palekar
36 Prasad Pallewad
37 Saurabh Pandey
38 Manish Pawar
39 Shreya Poojary
40 Sneha Porwal
History of Costa Coffee
• Bruno and Sergio Costa set up their coffee roastery in
Lambeth, London in 1971, supplying local caterers and
coffee shops with their slow-roasted blend mocha Italia

• Costa branched out to retailing coffee in 1978, when


their first store opened in Vauxhall Bridge Road,
London, England

• In 1995, the business was acquired by Whitbread and is


now a subsidiary of Whitbread Company

• In 2009 Costa celebrated the opening of their 1000th


store in Cardiff, and is consequently the largest coffee
chain in the UK
• Offering the finest coffee, Costa has a wide range of
alternatives including hot chocolate, teas and infusions,
iced coffees & frescato

• Costa has its own roastery and employs the only three
Italian Master Roasters in the UK. The blend served in
retail stores is known as "Mocha Italia" and contains six
parts arabica beans and one part robusta beans

• Costa Coffee employs Gennaro Pelliccia as the official


coffee taster, who had his tongue insured for £10m with
Lloyd's of London in 2009
Its Signature Coffees Contents

Espresso A short, strong and black coffee, with no milk

Espresso Dopio A double espresso shot. For those who like it strong

Ristretto An extra short coffee, even shorter than an espresso,


with an even stronger flavour

Macchiato Espresso topped with just a dash of milk

Americano Coffee, mixing shots of espresso with hot water

Flat White A rich, full-flavoured coffee with a velvety, smooth


texture. Each Flat White is hand-finished with a
distinctive pattern
Cappucino Coffee combining espresso with steamed, frothy milk.
Chocolate on top if you have a sweet tooth
Caffe Latte Coffee made with steamed milk. Not as strong as a
cappuccino, but just as good
Mocha Espresso with hot chocolate, topped with steamed,
frothed milk
Costa Coffee International Story

Operates in 25 different countries throughout the world

Currently, has around 1175 stores in the U.K and another 440 in
Europe and Middle East

Overtook Starbucks in 2007 in terms of number of outlets in U.K

Targets upper middle class and privileged class

Age demographics :

Students and youngsters


Professionals
Families

The Brand Image of Costa Coffee is – Luxury


Competition in U.K – Costa Coffee’s home market

Source: Rodenberg and Tillman Associates


U.K
U.K’s Success Story

• Was awarded as the best coffee shop award in U.K and


Ireland by the European Coffee Shop awards in 2009

• Registered a growth of 33% in 2010 while rivals like Starbucks


saw a dip in their profits

• 35% of U.K’s adults visit Costa Coffee every year –


more than any other coffee shop (2009)

• U.K Coffee Market according to 2009, is worth 1.95 billion


pounds in terms of Sales

(Source: The guardian – U.K)


Why India?

• Organized retail coffee market is worth more


than Rs. 1000 cr.

• By next three years, it will be doubled.

• Coffee chain sectors growing at 25-30% on a


yoy basis

Source: Economic Times Aug 2010


Growth in terms of numbers
• Increase in the no. of
cafes : 1200
• 2005: 330 1000
• 2006: 520 800
• 2007: 700 600
NO. of Cafes
• 2008: 950
400
• 2009: 1200
200

0
2005 2006 2007 2008 2009

Source: Economic Times Aug 2010


Growth in terms of Sales
• Increase in Sales: (in
160
US $ million) 140
• 2005: 30 120
• 2006: 45 100
80 Sales(in US$
• 2007: 80 million)
60
• 2008: 120 40
• 2009: 150 20
0
2005 2006 2007 2008 2009

Source: Economic Times Aug 2010


Costa’s Competitors

• Café Coffee day – 970+ cafes & 10% revenue from


merchandise sales

• Barista Lavazza – 220 outlets

• Gloria Jeans (Australian Chain) – 12 outlets in Mumbai,


Bangalore and Delhi & 5% revenue from merchandise
sales

• Atleast 3 international brands along with Starbucks :


Coffee Republic(U.K), Coffee Club(Australia) and Café
Jubilee (Malta) looking to set up outlets in India

Source: Financial Chronicle Jan 2011


A Comparison between the U.K and India Coffee Tastes

Parameter India U.K

Price Sensitivity Very High Moderate

Occasion Experience Relax

Affordability Low Moderate to High

Merchandise Sales Low Moderate

Foods and other beverages Moderate Very High


Insight
• Young affluent middle class like to drink coffee

• Like to differentiate themselves from older


generation

• Estimated 40 million potential Costa customers

• Already successful local concepts, proven


consumer demand for the product
Source – Financial Times – quoted by MD
Entry Strategy

• JV – Devyani International Ltd – subsidiary of RJ corp

• Launched its first Indian outlet at – Connaught Place, New


Delhi in 2005

• Novelty : Use of Imported coffee – Venezuela & Kenya

• Different from South Indian variety known to us

• Roasted, ground & blended in London, before being served in


India
Strategies Implemented

• Took Lease Rentals at High Price. Had to shut 10-12


shops

• Plan : Focus only on Metro cities, avoiding Tier 1 & 2,


since Costa is an urban format, location plays a crucial
role

• New strategy involved:


- Changing the look & feel of outlets
- Customising menus to better suit Indian palate
- Segmenting strategy for different locations

Source – Quoted by Santhosh Unni – CEO, Costa Coffee (India)


Restructuring
• Identified 4 Key Areas:
- Airports, Malls, IT parks & High streets

• Want to penetrate South India, huge coffee drinking


population : 3 Major metro cities – Bangalore, Chennai,
Hyderabad

• Indian tastes catered :


- Paneer tikka , Chicken tikka sandwiches offered alongwith
slow-roasted Italian coffee
- Mogiano – combo of Mughlai & Italian
• New strategy attempts to balance -
Traditional international coffee & light snack offerings with
a more robust food menu, along with wine & beer for the
first time

• Launched new-avatar flagship store in New Delhi

• Introduced off-premise businesses :


- setting up of kiosks at weddings & seminar meetings

• Restructuring strategy – a success


- registered 24% growth in last quarter of 2009

Source – Financial Chronicle – Jan 10,2010 , Quoted by Santhosh Unni – CEO, Costa Coffee
(India)
Segmentation
Demographic :

Students and Youngsters


Professionals
Families

Income: High Earning Individuals

Psychographic:

Lifestyle – Trying to enhance the coffee shop experience


Target and Positioning
• Youth
• Students
• Professionals
• Families

• Positioning: Finest Coffee deserves the


Finest Food
• Moving from Luxury to Convenience
4Ps
Perception Map

High

Price

Low

High Range Low


Porter’s Five Force
Model
Threat of new
entrants
Bargaining
power of
suppliers
Low Medium
Bargaining
power of
buyers

Threat of
substitutes
The Future for Costa Coffee

• India can absorb upto 5400 cafes, according to Harish


Bijoor

• Costa Coffee can expect intense competition as major


coffee players like Starbucks plan to enter the market

• Plans to open 250-300 outlets by 2014

• Aims to grow by 15-17 % in the next few years, to cover losses


which will take place while opening new outlets

• Source – Financial Chronicle – Jan 10,2010 , Quoted by Santhosh Unni – CEO, Costa Coffee (India)
Thank You

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