Coffee wars in India Harvard Case Solution & Analysis


Café Coffee Day and Starbucks

Back in the year 1995 Café Coffee Day came into existence by opening around 20 stores in Bangalore and Chennai. By April 2013 Café Coffee Day has been ranked as a market leader in India by having 1,469 cafe’s (Lounger and Squares both) across 200 Indian towns. Café Coffee Day was also considered as one of the largest coffee exportersof India. Moreover they also possess some global presence by having 18 outlets in Prague, Vienna and Pakistan. Financially Café Coffee Day has been found quiet strong because by the year 2013 they had a revenue of around $200 resulting in exceptional profits.

Starbucks is globally famous brand, famous for offering delicious coffee. In January 2012, Starbucks announces its entry to India through the 50-50 joint venture with the Indian gigantic business group named TATA. In October 2012, Starbucks opened its first outlet in South of Mumbai. This outlet was quiet big, having a 4,500 square-foot area, beautiful plush wood work and leather interiors.

Internal Analysis

  • Coffee Culture and Indian Market 

During the previous decade, a vital switch in the Indian market has been witnessed. Animpressive market and demographic shift have been perceivedby the coffee market in India. Initially, this country was known as a customary or old fashioned tea drinker but it is a known fact that there are more coffee chains present in India than tea, and now consumers in massive quantity have moved more towards drinking coffee instead of Tea. As of now, the demand of coffee has been flowing towards northern cities of India as well. Talking about these younger teens and the younger age group of India, so they are now more interested in going to the café and other coffee shops rather than going in these conventional parks or pubs for gathering as it becomes a more well-known meeting place for youngsters.

During the previous decade, the coffee culture in India has been promoted to its next level and now youth of India choose coffee in comparison with tea. The term coffee culture in India can be explained as a sequence of some specific behaviors or a social dimple that extensively depend on coffee because coffee has played a role of lubricant to boost the social behavior in the Indian marketplace. With the passing years, these coffee shops and cafes specifically in India are increasing with an outstanding rate of 200 new coffee shops per year. Progressively, customers in India are flowingtowards coffee from their conventional beverages like tea or other related drinks. The coffee consumption in India is relatively more in the southern regions as compared to the northern regions. In addition to that, this trend is not only limited to the coffee shops or café but it is highly followed by the Indian households as well. Shifts in these kinds of developments leads towards globalization and urbanization. Moreover, it also helps India to enlarge its middle class and a rise in the disposable incomes of Indian individuals that in turn will lead to modification in lifestyles. Moreover, the growing trend of coffee can be judge through statistics like the annual coffee consumption has grown 6.8% at the compound annual growth rate between the years 2011 and 2013.  As far as the market growth is concerned so there are immense opportunities present in India because people here consumes 100 grams of coffee as compare to the united states where the consumption is around 4.5 kg.

  • Financial Analysis

Exhibit 1 at the bottom reflects that the market size for instant coffee has been the largest but the growth in the Indian coffee market is in the specialty coffee sector with a growth rate of 19.2% followed by 9.9% in instant coffee. The growth rate shows that the consumers are more switching towards specialty coffee. In addition to that, CCD is known to be a leader in Indian coffee market with having largest number of retail chains in India. (Please refer exhibit 2 of the case). Currently, the earnings before income and taxes EBITDA of the company is found to be $1872 that is higher than any other coffee retail chains in India (Exhibit 2). Aggressive entry made by Starbucks in India has threatened CCD because Starbucks is known to be a leader in coffee market in the world with having total 18,066 stores worldwide (Exhibit 3). Total net revenue of Starbucks is $13, 299 that is far greater than Café Coffee Day (Exhibit 4). Most of the revenue generated in the Starbucks Company is from the company’s own operated stores that accounts for 79% of the revenue. Exhibit 5at the bottom compares the sales of Café Coffee Day and Starbucks in various product types. Most of the sales in both the companies came from the beverages sectors that are 60% for CCD..................

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