Chai Point, the largest chai retailer in India, has been missing its goal of opening more retail stores by around 25%. While this may be important to investors and the company's board members, the company has developed boxC.in, a tea dispenser which is internet-based, that is foreseen to increase the company's growth rate and marketability. Should Chai Point proceed with the boxC.in plan and potential despite being a new concept for the investors?
Shikhar Ghosh, Ramana Nanda, Rachna Tahilyani
Harvard Business Review (818020-PDF-ENG)
September 04, 2017
Case questions answered:
- Prepare a (new) tactical market plan (only the 4Ps) for Chai Point incorporating the changes you would suggest.
- Evaluate the existing market plan of the company.
- For the post-lockdown period, what segment should Chai Point ideally focus on and why? How should the company position itself going forward?
- Chai Point is contemplating understanding the changes in consumer behavior induced by the pandemic in order to introduce changes in their existing model. Prepare a market research plan for Chai Point.
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Chai Point: Disrupting Chai Case Answers
This case solution includes an Excel file with calculations.
1. Prepare a (new) tactical market plan (only the 4Ps) for Chai Point, incorporating the changes you would suggest.
The lockdown period has created a disruption as most of the workers are working from home. Even post-lockdown, many offices are allowing work from home for most of the employees, which created a problem for the retail stores as it might affect the retail store growth.
On the other side, the real estate sector has also faced the heat of the pandemic, and the rent of the retail stores went down. Chai Point will be expected to reduce costs from different parameters.
Let’s evaluate the new marketing plan of Chai Point through 4Ps – Product, Price, Promotion, Place
Product
Chai Point currently has 2 product
i. a perfectly brewed cup of Chai made with fresh, natural ingredients
ii. boxC.in—an internet-enabled automatic beverage dispenser that provided high-quality
- Their cup of chai is already a successful product in corporate offices among white-collar workers, as it has enhanced its retail presence.
- High brand recall
- The company has increased brand equity through environment-friendly initiatives like using electric scooters etc.
- Chai Point’s semi-automatic dispensers/the new internet-enabled IoT-based automatic beverage dispenser is also a growing product among corporate clients in the absence of other competitive products in this segment.
- The company should continue with these products as they are successful and growing consistently.
New Suggestion
Chai Point can add some different flavored chai to attract more customers. After the pandemic, people have become more health-conscious and focused on immunity. The company should add some products like Tulsi tea to leverage the opportunity.
As people stay at home looking more at fitness products. Chai Point can bring Green Tea to capture this segment. They should focus more on Chai on call in this pandemic situation.
The company should focus on gaining bulk delivery (e.g., 1L) for employees doing work from home.
The company should analyze the opportunity to sell boxC.in as a consumer product as people working from home may be interested in that.
Price
The price of chai in normal tea stalls and other unorganized players is Rs. 10- 15 for 100ml. In comparison, the chai price of Chai Point is Rs. 15-18 for 100 ml. The company has a plan to change the chai price to Rs. 30 when it will change focus on the target customers.
Total Chai market size = 1.5 lakh crore, growing at 23% CAGR
As an expanding mass-market retail store is not highly scalable and a high price is not defensible, Chai Point should focus on premium pricing where the margin is high and the cost is low.
They should target corporate houses and white-collar young working professionals, which comprise 20% of the total market.
The company should keep the price competitive from the sales from boxC.in. A projection can be useful to look at:
Even if they keep the price per cup the same, the number of boxC.in will be increased in the future, total sales and profitability will be increased as the margin will remain and is expected to be stable.
In the case of Chai on Call and sales through its mobile app and website, the company can compete with mass-market pricing when they are selling in bulk (e.g., 1 liter or more). Also, Chai Point can assess the different…
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