Analysis: Cafe Coffee Report By V. G. Siddhartha

Great Essays
Economics case analysis report on “Cafe Coffee Report”

BY
Nikhil Gunda
Bharath R
Heena
Manjusha
Ankur kumar
Abhilash

INTRODUCTION
The case proclaims about the coffee war between café coffee day and starbucks. Cafe coffee day:
It was started by V.G.Siddhartha in 1996.
Initially it had opened 20 stores in south Indian cities like Bangalore and Chennai under the brand name of café coffee fresh and café coffee ground.
By April 2013, cafe coffee day was ranked No. 2 in food and beverage segment with 1469 cafes in India.
Siddhartha ambitions were “to take CCD to be number two or number three retail coffee brand in the world in next 20 years”.
The main target of café coffee day was young people aging between 15 to 30.
STATEMENT
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It had 1469 stores,1000 outlet across India.
• CCD took 60% of market share in Indian market share.
• In March 2013, CCD gain revenue more than US$200 million.
• CCD sourced raw material from its own 11,000 acres of plantation, more than 3000 workers are working in that plantation.CCD also operated 2 curing mills with total capacity of 70000 tons, the largest in India, and roasting and blending facility.
• CCD manufactures its own café furniture. It spends 15% to 20% of the capital cost for a store and also it manufacture its own coffee vending machine at a cost of approximately $2000 compared to $7000 for an imported machine.
• Most of the retail companies took three and half month to set up their store in empty space but CCD can able to make their own store within 50 days, which included getting licenses, electricity and water supply.
• CCD opened first coffee day lounge in 2010. It was 40% to 50% larger than cafes.
• CCD had 46 lounges and two squares across India in 2013.
• CCD short term goal was to open 200 stores across India in the coming year.(90% cafes,9% lounges, 1%square).
• Star bucks’ average bill for two members will be Rs.500-Rs.600 but in CCD it will be around
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Starbucks was a threat for CCD in the premium segment as Starbucks with their off whites and rustic brown signature provided the ambience of authentic European coffee houses, and provided them a international standard and prestige value.
 Starbucks enjoyed its brand image of a global leading coffee seller and also Tata group so it could attract customers who are brand conscious as its interior is such that it reflects a international brand.
 Until and unless Starbucks plans to cut down their prices there was a less amount of threat to CCD 's revenue but if they cut down their prices it would be great threat as CCD enjoys the pricing gap among all its competitors, because of the cost advantage .

Strengths of CCD:
• CCD greatest strength was low attrition rate of employees as they had their own residential hospitality college to train employees which costs around $900 per employee in training of cafe operations and English speaking classes.
• They used to produce their own coffee machines which cost them around 2000$ if compared to market importing would cost

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