A Report on ------------------------------------------------- “BARISTA CAFE” UNDER THE SUBJECT “CONSUMER BEHAVIOUR (CB) Prepared by Vivek Jethva| 10MBA032| Jitendra Patel | 10MBA064| Hardik Khara| 10MBA039| Arvind Prajapati| 10MBA081| Sarman Goraniya| 10MBA025| Sandip Kanani| 10MBA036| Kapil Prajapati| 10MBA083| Nilay Khandalkar| 10MBA037| MBA 2010-12, Semester – iii Submitted to (Dr. Govind Dave) INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM) CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT) Table of Content
Sr. No. | Particulars| Page no. | 1| About the coffee industry| 3| 2| Growth of the coffee industry in India| 5| 3| Present coffee production in india (2010)| 6| 4| About the espresso| 11| 5| About the barista| 12| 6| Case analysis| 20| 7| Learning from the case| 21| 8| Question & answer| 22| 9| Bibliography| 27| About Coffee Industry: It all began around 1000 A. D. when Arab traders began to cultivate coffee beans in large plantations. They began to boil the beans creating a drink they called ‘qahwa’ which translates to ‘that which prevents sleep’.
The drink became widely popular, and the need for coffee beans grew. The brief timeline for the growth of coffee, cafes and everything related is given below: YEAR| Journey Of Coffee Industry| 850| First known discovery of coffee berries. Legend of goat herder Kaldi of Ethiopia, who notices goats are friskier after eating red barriers of a local shrub. Experiments with the berries himself and begins to feel happier. | 1100| The first coffee trees are cultivated on the Arabian Peninsula. Coffee is first roasted and boiled by Arabs making ‘qahwa’. 1475| The world’s first coffee shop opens in Constantinople. | 1554| The first establishment in Constantinople soon becomes widely popular, and two more cafes are opened. | 1600s| Coffee enters Europe through the port of Venice. The first coffee house opens in Italy in 1654. | 1652| The first coffee house opens in England. Coffee houses were called ‘penny universities’ (a penny is charged for admission and a cup of coffee) because a person could visit a cafe to discuss current affairs and social issues. | 1672| The first Persian coffee house opens. | 1683| The first coffee house opens in Vienna. 1688| Edward Lloyd’s coffee house opens. It eventually becomes Lloyd’s of London, the world’s best-known insurance company. | 1695| The first sign of the French Revolution had its roots in Parisian cafes where the people’s movement started gathering steam. | 1822| The prototype of the first espresso machine is created in France. | 1980s| Coffee is now the world’s most popular beverage, which leads to a boom in retail and hotel cafes. The American retail cafe Starbucks in born. | 1990s| With the growth of the Internet, cyber cafes are born, providing Internet access and coffee to users. 2000s| With an increased penetration of PCs in homes, cyber cafe chains close, and re-immerge as retail coffee cafe chains. | The Coffee Cafe industry is currently one of the biggest and fastest growing sectors in business. The industry consists of a mix of individual cafes, hotel cafes and retail cafe chains. Individual Cafes: The main bulk of revenue is earned by small, individual cafes, run mostly by families and friends. It is a relatively unorganized sector. There are millions of such cafes around the world, and they provide customers with a homely, casual experience.
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The bulk of these cafes are mainly in Europe, where every little town or village has local cafes, where people gather together for a conversation over coffee, or just to be alone with their thoughts. These cafe’s have been the birthplace and sanctuary for various creative minds, revolutionaries and thinkers of our time. The most recent example is the author J. K. Rowling, who has written most of the Harry Potter series of books, sitting at her local cafe. These cafes set themselves apart from retail chain cafes and hotel cafes because they provide customers with a homely, classic appeal, which cannot be emulated.
Hotel Cafes: Ever since the popularization of coffee, hotels all over the world started opening 24-hour coffee shops where visitors to the hotel could walk in for a cup of coffee and some food at any time. These coffeehouses are extremely important, because they provide international visitors to the hotel with a universal drink- coffee. Any customer can walk into any major hotel in the world, and enter the coffeehouse, and know what to expect. These cafes are not really major players in the coffee cafe industry, but rather provide supplementary services to the hotel industry.
Retail Cafe Chains: The last, and the most organized sector in the coffee cafe industry, is the retail cafe chain. Off late, these chains have become extremely popular and are growing at an ever-increasing pace. These retail chains have work with an organized structure of man, material and money. The work on developing a recognized brand consistent to all their outlets, which customers can easily relate to, wherever they go. They provide customers with a standardized level of service and quality at each of their outlets.
The vast popularity of these retail chains is shown in the rapid international growth of brands like Starbucks. Customers can do to any Starbucks across the world and know exactly what to expect. Growth of the Cafe Industry in India: Hot beverages have always been a part of the tradition of India, especially South India. Coffee took the first seat in South India when the traditional Brahmin classes brought down the beverage from the ruling British around the 1930s. During the early years the drink was confined only to traditional rich Brahmin families who served filter coffee in a ‘davra- tumbler’.
Coffee is no more confined to the rich Brahmin class now, though the tradition of serving filter coffee in the ‘davra- tumbler’ continues to this day. In order to spread the drink, coffee houses emerged at various places in the country, which also served as the opposite places for lawyers and the educated class to hold discussions ranging from politics to cinema. It is also believed that many scripts and ideas for films evolved here. One of the oldest coffee houses in South India is the Raayars mess, Chennai, which serves first class filter coffee even today.
The mess was established in the 1940s and continues the tradition of coffee but supplements it with Tiffin also. The vintage location of the mess attracts huge crowds even today early in the mornings, Coffee however was not the only item on the menu. These places also served food and other drinks to their customers. The drink also became famous and as a result even five star hotels began cashing in on it. Several hotels all over the country started opening coffee- shops that catered to high- end customers. This showed the popularization of coffee cafes, to all sections of society.
The drink has now become more of a concept than merely a drink itself. The last decade witnesses the growth of numerous coffee pubs in the country. A number of coffee cafe owners tried to westernize the taste in contrast to the filter coffee. Now, large retail chains like Qwikys, Barista, and Cafe Coffee Day have opened up around the country. The concept of a cafe today is not merely about selling coffee, but about developing a national brand. Retail cafes now form a multi- crore industry in the country, and have huge potential for growth locally, and internationally. Present Coffee production in India (2010):
Production: The government’s Coffee Board now pegs MY 2009/10 coffee production at 289,600 tons (4. 83 million bags of 60 kg) tons, which included 94,600 tons Arabica and 195,600 Robusta, lower than the Post-Blossom estimate of 306,300 tons, due to adverse weather conditions during bean maturing and harvest stage. Furthermore, rains also reportedly caused some quality problems, particularly in the Arabica variety. Although trade sources initially contested the Coffee Board figure saying that the Board estimate of the crop loss was on the lower side, now they are in agreement with the Board estimate.
Some even believe that production could be marginally higher than the Coffee Board estimate, given the current strong export trend. Outlook for the MY 2010/11 crop presents a mixed picture. Although several coffee growing regions have received good pre-blossom and back up showers, rainfall has been poor in some parts of Coorg and Tamil Nadu. High February/March temperatures could affect Robusta production to some extent, although heavy December 2009 rains left enough soil moisture, which may help compensate for the lack of pre-blossom showers.
The Coffee Board is expected to release its Post Blossom forecast in late May or early June. Meanwhile, industry sources forecast MY 2010/11 coffee production marginally lower than the MY 2009/10 estimate at around 275,000 tons, which include 175,000 tons of Robusta and 100,000 tons of Arabica. Coffee pests such as white stem borer and berry borer, although not completely eradicated, are under control due to better agronomic practices. Higher coffee price realization during the past three to four years has prompted coffee growers to apply more farm inputs and follow better agronomic practices, supporting higher production.
Labor costs, which accounts for almost 65 percent of the coffee cost of cultivation, continue to escalate. With off-farm employment opportunities increasing, coffee planters have started experiencing shortages of skilled labor, which could become a major problem in coming years. Higher price realization for coffee is now helping growers to some extent mitigate the higher labor cost. The Indian government’s National Rural Employment Guarantee program and a highly subsidized rice and wheat distribution program have further exacerbated the labor shortage in the plantation sector.
Although limited mechanization is taking place in some coffee plantations, large-scale mechanization is difficult in India because of uneven plantings and small sized holdings. Although the coffee planting and bearing area in India has generally shown an upward trend, mostly due to some expansion of coffee cultivation in non-traditional states such as Andhra Pradesh and Orissa, coffee production, especially Arabica, has been declining due to diminishing yields (Fig 1a & 1b).
Coffee productivity in the non-traditional areas, mostly Arabica coffee, is reported to be much lower than in the traditional belt, which pulls down overall yield. To contain the white stem borer menace, there was some uprooting of infected trees and replanting with new stock in the Arabica belt supported by the Coffee Board. These replanted trees are yet to reach bearing stage. According to industry sources, India’s coffee production will stabilize at around 300,000 tons once the replanted trees come into full bearing.
A significant share of low quality domestic Robusta coffee and some imported low priced coffee (for re-exports) goes into the production of instant/soluble coffee. This segment is almost entirely branded and packaged, and is dominated by multinationals such as Nestle and Unilever, and the Indian conglomerate Tata Group. In recent years a few other Indian companies have made a foray into this segment with some success. Although instant coffee production capacity is increasing, actual production is estimated to be around 45,000 tons (120,000 tons on green coffee basis).
Organic coffee production is miniscule at around 300 tons due to lower yields and the absence of a significant premium over non-organic coffee. Out of 220,000 coffee holdings in the country, 218,000 holdings belong to small farmers having less than 10 hectares, which account for 70 percent of coffee production. Coffee cultivation is mainly confined to southern states of Karnataka (70%), Kerala (20%) and Tamil Nadu (7%). With a view to expand coffee cultivation, the Coffee Board has been implementing developmental programs for coffee development in the North Eastern Region and Non Traditional areas.
During the 11th Five Year Plan, the Coffee Board had proposed to support a coffee expansion program taken up by the Integrated Tribal Development Agency on 24,000 ha in Andhra Pradesh and on 850 ha in the North Eastern Region. Indian Coffee Marketing System Indian coffee producers have three ways to market their coffee: (a) sell directly to exporters through an exporting agent, (b) hold it in a curing factory before selling it; (c) sell it at voluntary auctions. Smallholders, who dominate the Indian coffee scenario, mostly sell their parchment coffee (or dry cherry) to exporters through exporting agents.
The agent takes the coffee beans to the curing factory, where they are checked for quality which must meet the exporters’ standards. The second method allows the coffee grower to store the coffee with the curer before selling it in order to speculate on price movements. Under the third method adopted mostly by large producers, coffee is sold at a voluntary auction, organized by the Indian Coffee Traders’ Association. In this case, the producer takes the coffee to the curing factory and stores the green beans in the auction warehouses, sending a sample for auction.
Consumption: According to the Indian Coffee Board, domestic coffee consumption is increasing 5 to 6 percent annually, partly due to expansion of the coffee cafe culture and the spread of the coffee drinking habit throughout India, even into non-traditional coffee drinking regions in the north. The concerted efforts of the Coffee Board and coffee marketers in promoting the beverage as a lifestyle drink via coffee cafes and vending machines has added more visibility to coffee.
According to a survey sponsored by the Indian Coffee Board, coffee consumption in 2008 is estimated at 94,400 tons, 73 percent in urban areas and 27 percent in rural areas (south India). Based on this, coffee consumption in 2009 is estimated by the Board at 97,000 tons and in 2010 at 100,000 tons. Trade sources are, however, skeptical about the Coffee Board’s high consumption figure. According to them, production, supply and distribution fundamentals do not support such high consumption figures.
According to them, a significant quantity of chicory is blended with coffee, particularly in the soluble coffee segments, which tends to amplify the coffee consumption figures. According to some sources the amount of chicory going into the coffee blend is as high as 25,000 tons, which tends to over-estimate actual coffee consumption. The indicative Bangalore wholesale price of Arabica Plantation “A” averaged Rs. 203 per kg in 2009 ($2 per pound), and Robusta Cherry “AB” averaged Rs. 96 per kg (98 cents per pound), compared with the 2008 average price of Rs. 146 per kg for Arabica and Rs. 110 per kg for Robusta.
The retail price of pure grind coffee (Arabica plantation) in major southern cities averaged around Rs. 270 per kilogram ($2. 75 per pound), a 17 percent increase over a year ago price. ($1= Rs. 44. 50). Farm gate price for Arabica parchment registered a 30 percent increase in CY 2009 but the increase was much lower or even negative in the case of Arabica cherry and Robusta parchment and cherry. India’s Growing Coffee Cafe’ Culture Although tea is the main drink of choice in India, now hundreds of trendy western-influenced coffee bars have emerged across India in Tier I and Tier II cities.
The bean has become big business, so large that it now competes against the once dominant tea on menus everywhere. For coffee fans, India offers a few notable coffee bar chains. The significant growth in the number of coffee retail chains in India is due to the changing lifestyle patterns of Indian middle class families and an increase in their disposable income. Although the coffee bars’ contribution to India’s total coffee consumption may not be significant, these coffee cafes have added more visibility to coffee and opened up an outlet for various value added food items.
Barista Lavazza :One of India's largest franchised chains of coffee bars, the Barista Lavazza coffee company operates around 205 outlets across India – 15 creme lounges and the rest espresso coffee bars. It plans to open 300 new stores over the next three years and has begun aggressively marketing its products outside Indian borders into neighboring countries. Considered the Starbucks of the East, Barista offers many of the same menu items like espresso, lattes, cappuccino and various pastries, in addition to basic coffee.
Despite being Indian, Barista sticks closely to its Italian roots by serving Italian coffees exclusively. (www. barista. co. in), Cafe Coffee Day A later entrant than Barista, Cafe Coffee Day (CCD) offers nearly everything coffee-related, from take-home products and equipment to fully operational stores. Since the grand opening of the first store in Bangalore in 1996, Cafe Coffee Day has grown to become India's largest coffee retailer, with exports into Europe and the Middle East. Like Barista Lavazza, CCD tends to be in every major Indian metro area. Cafe Coffee Day currently has 810 outlets in over 100 cities.
Costa Coffee The British influence isn't entirely missing from Indian cities, as the UK's largest coffee retailer has been setting up shops alongside other coffee competitors. The London-based Costa Coffee Company specializes in imported Italian coffees and made-to-order coffee concoctions like risteretto (a coffee stronger than espresso) and "Flat Whites" that feature custom barista designs in the froth. Qwiky’s Coffee Pub The coffee house offers about 101 varieties of coffee, serving drinks such as espressos, lattes, cappuccinos, mochas, americanos and friazzos. It also offers grilled sandwiches, pastries and ice creams.
Qwiky's clothing brand, greeting cards, magazines, books and coffee mugs are also available. | | Trade: Assuming a better than normal production this year, MY 2010/11 coffee exports are forecast at 200,000 tons, marginally lower than the MY 2009/10 estimate of 210,000 tons. Although export permits issued in MY 2009/10 through March 2010 were ahead of last year, the recent steep appreciation of the India rupee against the U. S. dollar is making exports less competitive. Coffee exports in MY 2008/09 were around 175,000 tons, 20 percent down from the MY 2007/08 exports of 220,000 tons because of reduced exportable surplus and igh domestic prices vis-a-vis global prices. On a calendar year basis, India’s coffee exports in CY 2009 were 189,000 tons compared with 213,000 tons in CY 2008. Italy, Russia, Germany, Belgium, Spain, and Finland account for almost 55 percent of total exports. Exports to the U. S. in CY 2009 were around 3,300 tons up from 2,500 tons in CY 2008. India imports small quantities of low-priced coffee, mostly from Indonesia, Uganda, Vietnam, and Ivory Coast, for value addition and re-exports. Such imports in IFY 2007/08 were around 27,000 tons and 29,000 tons in IFY 2008/09.
The Perfect Espresso 1. The taste of your coffee will be directly affected by the amount of coffee you dispense into the handle; Single handle: One complete pull 7g No more – no less Double handle: Two complete pulls 14g No more – no less 2. Tamp the coffee. Hold the handle in your left hand, tamp with your right hand. As you tamp give the handle a good hard twist left - to - right to ensure a solid pack. 3. Wipe the excess grounds from the rim of the handle. Note: This will ensure that you don’t have coffee grounds build up on the rubber seal in the brewing head.
Over time this build up will cause grounds to leak into the coffee drink you are preparing. 4. Brew the espresso into a demi tasse. The correct brewing time for an espresso is 20 - 25 seconds. About The Barista: Background, Market Entry ; Growth Barista coffee was established in 1999 with the aim of identifying growth opportunities in the coffee business. Increasing disposable incomes and global trends in coffee indicate immense growth potential in one particular segment. More significantly, they believe they have been quick to spot a latent need waiting to be trapped: Coffee lovers seek a complete experience.
One that combines intelligent positioning with the right product mix and carefully designed cafes. In other words, customers seek an “experiential lifestyle brand”. As of today, Barista exists in over 22 cities, and operates over 140 outlets nationally. In the last 2 years, Barista has opened over 100 outlets in the country and with a new outlet opening nationally every 14 dates; Barista is currently experiencing phenomenal growth. With outlets opening in Sri Lanka and Dubai, Barista is looking at potential growth opportunities in Asia, making it highly competitive international brand. Product Sources
Barista sources its coffee beans from around the world, but a major supplier is TATA Coffee, part of the TATA Group that owns a large stake- holding in Barista. These coffee beans are then sent to Venice, Italy where they are roasted into a blend exclusively for Barista. The food and desserts at Barista is exclusively catered to by the Taj, who ensures a high standard of quality with all its products. Barista also sells merchandise through its store, all of which is imported. The merchandise accounts for nearly 1/6th of Barista’s overall sales. Quality Sources Barista has a check on the quality of its products every 14 days.
Barista also incorporates TQM at its headquarters in Delhi. Since Delhi is the base for all its distribution, quality control measures are adopted there to avoid any poor quality products being distributed. Serving Size The serving size of a product is a measure, not only of quantity, but also of value for money. The average serving size for Barista’s main product categories is detailed in Table given below: Product Serving Size Smoothies | 240 ml/ 300 ml| Cold Coffee | 340 ml| Hot Coffee (2 kinds) | 300 ml| Granitas | 340 ml| Pricing: Barista has a ‘Skim Pricing Policy’. They began with a higher price, and skimmed the cream for the market.
With the sudden spurt of growth in number of outlets, came the benefits of economies of scale. Because of this, they have been able to gradually lower their prices, and appeal to different segments of their target market. Currently, their prices are the lowest they have ever been, and they can competitively match their prices against Cafe Coffee Day’s prices. The prices are constantly changing though, and the last 1-year has seen 3 changes (mostly reductions) in prices. This gradual price reduction meant that Barista could maintain its profit- maximization policy until it could earn large cost savings because of the benefits of high volume.
The main factors that affect their pricing are their cost of goods sold. The costs are quite high because imports a majority of its products and product- sources. Process: The order and delivery process at Barista is based on self- service, where a customer goes up to the counter to place his order, and goes back to the counter to pick his delivery once it is prepared. Positioning: Consumer Profile: According to research, over 65% of Barista’s customers are in the 15- 30 age- group. The majority of these are students and young urban professionals. Brand Image:
Barista positions itself as a brand for anyone who loves coffee. Their products, services and outlets are more like the traditional European cafes, where people would meet for the love of coffee, and for an intellectual appealing time. They position their outlets as a place “where the world meets”, and they look to appeal to anyone in the 14- 60 age group that loves good coffee and looks for a nice quiet time. * Products: Barista’s product mix constitutes a wide range of products that appeal primarily to traditional coffee lovers. Their products themselves are traditional products with traditional names.
Food items like croissant, pastas, and sandwiches are complimentary to their coffee, and project a very classic image of Barista. Their merchandising also consists of primarily coffee related products like coffee beans, coffee machines, etc. * Prices: Considering that Barista is trying to target a market whose age range is between 18 and 60 years, a pricing policy appealing to this segment is difficult. Extremely low prices act as a deterrent to some customers who might regard it as an indicator or quality, while very high prices cannot be afforded by most of the youth.
But since Barista’s current consumer profile is quite young, their prices are mostly inexpensive, brand at par with their competitors. * People: The people at Barista are characteristically trained to be Pleasant, Polite and Positive. They ensure you have a quiet, uninterrupted visit and provide an escape from the daily pressures of life. Their uniforms are in sober shades of brown and orange, and contribute to the overall laid-back feeling of the cafe. * Logo, Colors, Images: Barista, since the beginning has looked to use colors in its cafe interiors, logos and images; to project a “warm, earth glow, synonymous with coffee”.
Barista uses shades of Orange ; Brown to good effect to promote its “laid- back” atmosphere. The logo is a combination of Brown, Orange and Light Yellow; with the word “Barista” written in an upward curve, and the word “Coffee” underneath. A simple logo that perfectly expresses Barista’s brand image: A traditional cafe for coffee lovers. * Decor and Architecture: Barista’s internal decor and architecture expresses the simplicity you would normally associate with traditional cafes. The furniture is made of light shades of wood, and there are comfortable sofas in bigger cafes.
The walls are shades of orange, with various photographs of the love for coffee spread around each outlet. * Literature: The literature provided by Barista is indicative of its brand image. The menus, posters, pamphlets are all traditionally designed, with a classic and simple look. One aspect of particular note is their magazine, which is privately circulated in the cafes. The magazine encourages customers write, draw, make etc anything creative; and this is then published in the magazine. The magazine not only provides an avenue for advertising, but also an opportunity for Barista to express its brand image. * Place:
Barista looks to cater to their target market with strategically located outlets. Their outlets are generally located at High Street/ Family Entertainment Centers. Considering their generic appeal, there are Barista outlets in and around Malls, Cinemas, Colleges, and Offices etc. this endorses their brand image of a cafe that appeals to coffee lovers of all ages. * Promotions: Barista currently carries out mass promotion campaigns. This is mainly in the form of promotions in the Press, TV and Radio Medias. At present, they do not rely heavily on advertising, but rely more on sponsorships and strategic alliances with other corporations.
Barista also takes part in various sales promotion activities to help increase sales at their outlets. * Sponsorships: Barista sponsors various events and festivals, which provides them valuable promotion directed at strategic markets. The sponsorships are mainly in kind, although major events are sponsored in cash also. * Collaborations: Barista has entered into special collaborations and alliances with various partners for co- marketing brands. For example, Barista entered into a deal with Leo Mattel toys to provide the popular board game Scrabble at every Barista outlet across the country.
This is an ideal alliance for both the organizations, because it provides Leo Mattel with an important avenue for promoting their product, and it provides Barista’s customers an added attraction for spending more time at Barista outlets. Barista has also entered into partnerships with various movies, for promotions through Barista, and recently, they tied up with Star World for its “Absolutely Everybody” campaign. * Sales Promotion: Barista uses a special “Barista Coffee Card” for its sales promotion activities. The Barista Coffee Card entitles you to one complimentary hot beverage when you are done sipping seven.
It is available to all Barista coffee regulars. No membership fees, no references required. Fill out the card and you are a member. As a Coffee Card holder, you earn one stamp on the card every time you purchase a beverage. Simply present the card to the cashier when you place your order at any of their outlets. Once you have collected seven stamps, you can hand over the card to receive your complimentary hot beverage. Barista hopes this card can help drive sales growth, and increase customer retention. * Distribution: Distribution of outlets Every Barista outlet is owned by the company, and not franchised out to anyone.
Barista can thus control and make quick changes to its entire retail chain. Barista currently operates in over 120 outlets all over the country, and at their current rate, they are opening a new outlet approximately every 10 days. They have a market presence in over 20 cities. Mumbai alone has over 30 outlets, and the number of outlets in the city is increasing at a phenomenal pace. Barista has a thumb rule for selecting cities and locations for the distribution of outlets. Location: This is a prime factor in determining the success of a retail chain.
However, Barista Coffee has adopted a top down approach, wherein they first identify the cities and then decide on precise locations within its limits. Selecting a city: Barista has devoted substantial management time and effort in zeroing in on the cities where they are now situated. The selection of the cities was based on the following criteria. * Sizeable population of executives, students and families in SEC A ; Barista category; * High disposable income with people looking for new vistas in leisure and lifestyle oriented concepts; * High level or organized retail activity; Rapid socio- economic development; * Level of commercial importance (Industrial cities, state capitals etc. ) * Number of educational establishments and opportunities available for employment. On the basis of the above criteria, they had initially targeted cities like Delhi, Mumbai, Bangalore, Chennai and Hyderabad. Chandigarh and Ludhiana were later added due to tie- ups with ‘Planet M’ and ‘Ebony’ to set up store-in- stores at their outlets. They are also pursuing an equally aggressive international business expansion strategy. They have over 50 overseas locations presently under their consideration.
They have already done their groundwork in terms of getting brand and name registrations in over 30 of these locations. To facilitate their global expansion, they plan to work with strategic partners, who share the same vision of expanding and promoting the brand worldwide. Currently they have opened new outlets in Sri Lanka and Dubai as a part of their international strategy. Barista acquired by Lavazza: Lavazza Group signed an agreement with Sterling Infotech Group to acquire Barista Coffee Company Limited and Fresh ; Honest Cafe Limited.
Barista is the second-largest Indian coffee shop chain in terms of outlets, with 150 coffee shops of which 132 in India mainly located in the capital city of New Delhi, in Mumbai and Bangalore. The transaction was carried out based on a precise development strategy that will lead to the opening of 400 outlets by 2010. This target will be achieved leveraging on the excellent premium positioning and importance currently reached by Barista on the Indian market. Fresh ; Honest Cafe focuses on the vending business, specifically on office coffee service, and is the leading company in the bean-to-cup segment (high quality bean product).
With an extensive footprint in over 22 Indian cities, Fresh ; Honest Cafe supplies an average of 300,000 cups of coffee per day, equal to about 800 tons of coffee per year. The company is expanding rapidly and has a production site in the southern region of India. Among its customers, it counts the most prestigious hotel chains in India. “The acquisition is part of our strategy aimed at expanding our operations in markets with a high development rate and a high growth potential, through a careful policy of acquisitions and alliances,” stated Alberto Lavazza, Vice President and CEO of the Group. This ambitious policy has a strong economic impact due to the importance of this transaction, but it also has a significant impact in terms of international expansion and development of our brand”. Through this transaction, signed by Lavazza, assisted by Lazard, Lavazza Group becomes one of the leading players in India in the premium coffee sector, thus strengthening also its position as a worldwide player. The total investment for the acquisition and commercial development of the two companies in India is estimated to be approximately €100 million over the next three years. We are delighted to enter the rapidly growing Indian market through Barista and FHCL. The Agreement fits in well with our strategy to grow in markets with high development potential. In this respect we are proud to enter India with such a significant acquisition, which allows us to take a leading position in coffee shops and in the away from home market in line with Lavazza culture, we will take forward our values; which are attention to consumer needs and a passion for high quality coffee. ” added Alberto Lavazza.
Besides investing in the very interesting Indian coffee market, Lavazza is also monitoring other emerging markets for potential future investments. Distribution of Stock The distribution of stock at Barista begins from the coffee beans being sent abroad for roasting. The roasting takes place in Venice, and the beans are then supplied to the main warehouse in Delhi. Stock is then distributed to the various Regional Warehouses, and then to the local Warehouses. The outlets get their stock from the Local Warehouses. Barista uses a Re-Order Level system for the distribution of their stock.
Barista out sources its transportation needs from external organizations, and currently uses trucks as the preferred means of distribution. Case analysis of barista coffee: Swot analysis of the company: * Strength: * Good customer relation * Faster delivery * HR are key assets * Wide choice for coffee * Weakness: * Expensive brand perception * Very few stores * Opportunity: * Can introduce cheaper coffee. * Can go to smaller town and cities. * Can diversify into tea segment * Threat: * Competition from the existing coffee chains and outlets. Effects of Govt. commodity price. * Identify problem(case analysis) 1) Strategy of company was not proper for that reason company making loss and 10 non-performing outlet was close in 2005. 2) Price of coffee was very lower as compare to providing their service and cost of product * Establish the problem 1) Barista wanted to tread cautiously this time. It had faced several problem later on as a fall out of it’s the earlier strategy that hinged on achieving rapid growth and driving first mover advantage by opening as many outlets as possible in key cities.
It opened 75 outlets within the first two years of operation, where as its competitors, CCD acted much cautiously initially and had set only 18 cafes in its first five years. In 2005, barista was forced to close 10 non- performing outlets. This outlets was not able generate enough profit. Strategy for expansion of barista was not proper for that reason company was making loss and also faced many problem in this business like closing the outlets. 2) They are targeting upper middle class and upper class people and they are also providing best service and product but pricing policy was not good nough as per services and product quality. Upper class people also ready to pay higher price for coffee due to services and quality. Company need to increase price of coffee so, company can overcome from losses. * Generate alternative 1) Make proper strategy and avoid rapid growth. 2) Increase the price of product. * Evaluate the Alternative 1) For the rapid expansion of business they were not focusing on strategy and weaknesses of company. Company was opened many outlets in first two year but this outlet was not able to generate enough profit. So, company need to make proper strategy and avoid rapid growth. ) Price of company is very lower as compare to services and product. So company wants to increase the price of coffee. * Priorities Alternatives 1) Make proper strategy and avoid rapid growth. 2) Increase the price of product. * Learning from the case * We learn from this case is how to expand business and how to run business. We are know somewhat about the company and we also learn about the company’s various strategy. Company had also know the consumer behavior for its product so we are atleast understand something about the consumer behavior.
We are knew from the case that how consumer behavior affect to the company’s product. * We had also learn about various models for consumer behavior and how that affect to the consumer behavior. Barista Coffee case QUESTIONS – ANSWERS 1. Was the current pricing and product mix strategy right one? Ans-The pricing strategy for Barista was somewhat different than others. The high pricing strategy was adopted by Barista by high product quality. The product price generally depends on the quality of the product. The eight steps followed in the procedure of making Barista Coffee by the brew masters.
The people who involved in the procedure to make the coffee are known as brew masters. So the main aspect to see the pricing strategy is to compare the quality of products of Barista and the services provided by the company. So let we see some of the key factors which influence to the high prices of Barista Products. * The product of Barista i. e. coffee is passing through eight processes in which the customers get the extra- ordinary quality as well as services by the Barista outlets in each and every places. The customers which targeted by Barista was the high class people but the number of prospected customers was very less. Because of this reason we can say that the pricing of the product was the excellent due to which the customers remains same and price do not affect a lot. * Competition in the market was high but the services and the product quality was the uniqueness of the company. So they cannot give the franchise to the other owners of the places instead of putting the outlets. So, the pricing strategy of the Barista was right one according to segmentation adopted by them and services provided to the customers.
Product mix strategy was the one of different strategy adopted by Barista to serve the customers by providing different kind of coffee making system and high pricing strategy. The products of the barista are as under: * El Salvador: A sweet tasting Rain Fores bean sourced from the Las Zerro Ranas plantation. We developed this brew at the request of a leading investment bank that was looking for the ultimate coffee, where it won out in a blind taste test over the “big name “brands. This may be our best coffee yet! Costa Rican Tarrazu: This coffee comes from the Tarrazu region south of San Jose. It is prized for its high acidity, excellent body, and full complex flavor. * Guatemalan: Certified Organic: Grown at high altitudes without pesticides or manufactured fertilizers. If offers a distinctively sweet, smoky personality which distinguishes it from other prized coffees from Central America. Our CEO’s favorite! Sumatra Mandheling: Of the world’s finest coffees this is arguably the most admired. Gentle, with a long finish, its richness and complexity makes it the ideal coffee to take with cream.
From the central part of northern Sumatra, one of the Indonesian islands, this wonderful, very intense coffee is highly desirable. In the cup this coffee possesses a heavy, full body, concentrated spicy, earthy and robust taste with an herbal aroma, all with little acidity. * Swiss Water Decaffeinated Colombian (X11) High grade “European prepped” Colombian coffees are put through a patented Swiss Water wash to remove 98% of the caffeine, while leaving all the taste and aroma you expect from a fine cup of coffee. 42/2oz bags per case. * Mocha Java: A blend of Ethiopian and Indonesian Java coffees, often referred to as the Original Blend.
Full bodied, with spicy overtones, roasted medium dark for a truly distinctive character. * Kenyan Blend: Known for their intense aroma of lush, ripe blackberries these larger than average beans produce a full bodied coffee; dry and winey, rich and lively. We blend them in a 2:1 ratio with fine Colombian Excelso to produce an excellent blend that is brightly acidic with no bitterness. 42/2oz bags per case. * Kenya AA: Probably Africa’s finest; has a full body, delicate acidity, smooth winey flavor and aroma with a dry winey aftertaste. Very popular with coffee aficionados. Kona Style: A distinctive blend of Arabica coffees that captures the light body, sweetness and balanced flavor that Hawaiian Kona is famous for. * French Roast: A fine blend of high grown Arabica coffees brought to a high roast. its computer controlled roasting process is able to achieve a smooth bold taste without crossing the fine line to burnt. * Three Bean Reserve: The perfect balance of three distinctive estate grown coffees whose tastes complement each other when blended. The lush, winey Kenyan, spicy Guatemalan and the full bodied Colombian Supermom provide the ultimate cup of coffee.
These are some of the examples of the coffee product of the company. The prices were charge almost double then the competitors and the services and the products also given with the high quality than others. So in that way we can say the pricing product mix strategy was quiet good and right one. 2. Should it go for premium prices or should it focus on affordability? The existing products provided by Barista to the customers and the pricing state that the people who are interested in this type of coffee product are the found of it.
The eight step quality model also used by the company and it has not given any franchise yet to focus on the service and products which was special for the customers. Moreover the profit of the company was in negative term i. e. it made loss so the by going affordable prices the company may occur more loss. The uniqueness of the company was the high service with high quality products with the experienced memory and for the customers. It may happen that in future the growth of the people with respect to standard of living increases so the no. of prospected customers will go up.
In this way the company need to focus on go for premium prices instead of affordability prices. 3. What should be the best way to drive the expansion? Ans-Currently company is making loss as stated in the case itself. So the main area to focus on is the price and the targeted people of the products of Barista. Already barista has the second largest maximum number of outclasses across the globe. But the competitor like CCD and Starbucks entering in to the market and taking share of the market so the possibility of expansion is very less but it need to focus on existing one. The company need to focus on the following ways for expansion. The focus must be give the priority to the existing outlets * It need to focus on the coffee products rather than the service because 70% of the revenue generated by Barista coffee products. * So it not need to expand the outlets but it can expand the existing product portfolio in the uncovered region where the opportunity exist in the market. 4. Should it go for expansion through company owned outlets or should adopt the franchise rout? Ans-The total number of outlets are 106 which already owned by the company and the coffee preparation and the services provided by the company is arvelous. In the increasing completion and the quality, services and considering all other aspects like infrastructure, coffee makers, places and preferences of the customers it need not to expand through franchise instead of expansion by outlets. Thus focus on the existing and maintaining the quality with learning experience enjoying to having coffee by the customers are basic focus area of need to expand the markets. 5. Should Barista enter overseas markets? Ans-Barista need not go for overseas market because of some reasons as stated below: * Competition of foreign markets Rapid growth in the living standard of the Indian people. * Existence of the current outlets in India * Product mix and the pricing are difficult to maintain in going to the overseas markets is very difficult. Moreover if company wants to enter in to the overseas market then it is possible that the company need to give franchisee and decentralization. So it will lose the quality and service of experience learning of the customers. In this way the treat can be come up with the difficulty for to manage the outlets across the globe. Bibliograohy 1) www. indiacoffee. org/advertisement/rainfall-21-2-08. html 2) www. offeeday. com 3) www. barista. co. in 4) www. iipmthinktank. com/functions/marketing/compartive. pdf 5) http://www. superbrandsindia. com/images/brand_pdf/consumer_3rd_edition/Barista%20Lavazza. pdf 6) http://www. edynamic. net/upload/pdf/Barista%20PR. pdf 7) http://www. indiaprwire. com/pressrelease/food/2011082495762. pdf 8) http://www. barista. lk/media/image/corporate_profile. pdf 9) http://cms. colorstv. in/files/media-center/ff_150909. pdf 10) http://www. pinelabs. com/images/March_Newsletter. pdf 11) http://www. worldbaristachampionship. com/documents/WBC_Event_Hosting_Guideline
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