Coffee Wars in India: Café Coffee Day 2013 – Case Solution

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Coffee Wars in India: Café Coffee Day 2013 Case Answers

What are the issues faced by Café Coffee Day?

The issues faced by Café Coffee Day are:

• No definite focus of the company
• The company needs to clarify where it stands in the market to allow Cafe Coffee Day to be different from the competition.
• Competition continues to grow.
• Identifying the target market.
• Lack of TV advertisements as well as social media account presence.
• Café Coffee Day has no rewards program for loyal customers.
• Lack of differentiation of products between competitors.
• It only targets consumers aged 15-29.
• Lack of brand loyalty.
• Many alternatives for consumers.

Problem Statement

As Cafe Coffee Day has a competitive advantage over the competition now, the competition is increasing, and the company needs to continue to innovate its product as well as differentiate it from the competition.

The company is doing a great job producing a premium cup of coffee for consumers at a low price. The company can sell its product at a low cost for consumers. It can also be produced at an even lower price.

As alternatives for coffee continue to grow, the company needs to think of new products to attract customers. The lack of brand loyalty may make it easier for consumers to move to competition, such as Starbucks.

Cafe Coffee Day is doing a great job attracting 15 to 29-year-olds but may want to try and make their product more appealing for other older age groups.

Internal Analysis/ SWOT Analysis

Strengths:

• Strong brand presence and consumer awareness of the brand.
• Great service.
• Ability to produce premium cups of coffee for the lowest price compared to the competition.
• Ability to target and attract 15-29-year-olds easily.
• High amount of outlets and high amount of consumers per day.

Weaknesses:

•  Many alternatives for consumers.
• No rewards program to allow higher brand loyalty to be made.
• Competition continues to grow.
• Lack of differentiation in the product sold.

Opportunities:

• Create new products at lower and higher prices.
• Expand into other cities and countries.
• Continue to expand online presence.
• Create a rewards program to enable loyalty.
• Sell merchandise to continue to have brand recognition.
• Expand into other markets, such as selling coffee beans.

Threats:

• Government regulations.
• Emerging competition such as Starbucks.
• Substitute products.
• Power of suppliers to bargain.

Key Takeaways

Cafe Coffee Day has a competitive advantage now in the highly demanding coffee industry. After running the SWOT analysis, the company will need to continue to advertise, expand, create new products, and try to ensure brand loyalty.

The company already has a vast brand presence, so they should look to capitalize on that. The company will need to do things such as create new products that are higher and lower priced to differentiate itself from the average coffee company.

Cafe Coffee Day has to look out for international competition such as Starbucks. The company will need to try and target other ages to increase revenue and sales. The company has a lot of resources available to create new products and needs to also look into selling merchandise due to how established its brand is. They may also want to think about becoming vertically integrated to eliminate the power of the supplier and not have to rely on them and be in full control of their product.

The company should continue to expand due to the recognition of their brand. Expanding into untapped smaller cities as well as larger cities will increase revenue. With a rewards program ensuring higher brand loyalty and helping to shrug off the consumers’ mindset of alternatives, Cafe Coffee Day will continue to have a competitive advantage.

Porter’s 5 Forces Analysis

Key Takeaways

The threat of new entrants is low due to many factors. The high capital costs that are incurred when starting a national coffee chain deter startup firms from entering.

According to the case text, the startup costs for the different formats that Cafe Coffee Day provides from the standard cafes, lounges, and squares range from $85,000 to $190,000, not including the supermarket products and coffee machines that are set up to incorporate/institutional settings.

Also, India has been traditionally a tea-drinking country, so introducing a new beverage might not be adopted as quickly as needed or wanted by a firm. However, there is an ever-growing presence of coffee consumption. There was an increase in coffee consumption of 6.8%, while tea only had 3.6% between the years of 2001-2011.

The threat of substitutes is high due to there being many alternatives in the industry. Some of the options could be fast food places, grocery stores, other hang-out areas staying in at home, etc. Consumers in India are slightly price-sensitive.

Having a more price-sensitive market works in favor of Cafe Coffee Day because they are positioning themselves as an affordable luxury to their customers, which is primarily youth and college students, to their most popular cafe format.

Yet there is a trend of spending more on coffee based on the status symbol and service that has been made by the brand. As stated in the case text, many go to Starbucks not just for a cup of Frappuccino but for…