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"Our business model depends on walk ins; we do not aim at high profit margins " : Cafe Coffee Day marketing head Sudipata Sen Gupta

Cafe culture is the latest trend to take the nation by storm. It joined the race simultaneous with the satellite culture. Although not as big, the culture has nonetheless caught on the consumer fancy and has spawned quite a few coffee chains. Amongst the big guns is Amalgamated Bean Coffee Trading company's Cafe Coffee Day.

Cafe's marketing head Sudipta Sen Gupta is understandably quite excited about the cafe's prospectus. While the company is poised at launching 49 more cafes in the country, it is also looking at opening cafe chains worldwide- all before the financial year end.

Sen Gupta started off her career with Compaq and Pepsi before she joined Cafe Coffee Day three years ago. She has been one of the core team members, who worked on the look and the approach of the cafe before it launched in a big way. She spoke to indiantelevision.com's Trupti Ghag about the company, how it functions and in which direction is it looking now.



Excerpts:

 

What is the business structure of Cafe Coffee Day? What are the other revenue models besides the cafe?

At the cafe, we sell coffee, food, merchandise and a certain amount of music. A large chunk of revenue that our parent company Amalgamated Bean Coffee Trading generates comes from exports, followed by profit margins from the cafes as well as coffee powder retail followed by vending division and kiosk division Express coffee.

 

How would you chart the growth for past couple years since you launched?

We launched in 1996 in Mangalore, we were the first chain in the country.

We have seen a meteoric growth post 1999; coincidentally many other players came into the market then. It could be owing to the cost effect syndrome, but the coffee culture took then. In 2001 we had 14 outlets in five cities and now in 2004 we have 151. We have planned to launch 49 more outlets by the end of this year, which will make a total of 200 outlets.

In addition to that we are also going abroad. We will open 50 outlets overseas in 10 cities.

 

What is the strategy behind opening up café's abroad? Hasn't the cafe culture been prevalent abroad for some time now? Aren't there enough cafe's already there?

Apparently, as our studies show, they can take many more. We have been studying the central overseas market in the last quarter and we found that there is scope. Especially for cafes like ours, which is about world class coffee experience at affordable prices.

 

Who is your target consumer?

A typical Cafe Coffee Day consumer, demographically, would be male or female between 15-29 years of age, belonging to middle or upper middle class. About 40 per cent or more are female.

But according to us, the typical consumers at our cafe is young or young at heart. Any body who is youthful, be it in terms of age or outlook, would like to hangout at a Café Coffee Day because of kind of ambiance that we offer. We are about juke boxes, good and affordable coffee and food and an informal atmosphere. The brand fit is with youth or young at heart.

 

Is that the reason why you associate with on-ground events? How does it really help the business growth?

No. It doesn't directly impact growth. On ground events are more to do with marketing our brand. Although, electronic media is one of the options, we don't really think that it is required. We are focused on more targeted activities in the cities where our café is located. It would help us get across whatever we wanted to tell our target audience better.

Growth comes from how well the café chain is doing and how well the market is doing. As of now, the market is growing. It has barely scratched the surface. It can take many more cafés, many more players and many more types of coffee chains targeting a spectrum of consumers.

 


"Our brand fit is with youth or young at heart "
 

Who do you regard as your closest competitor?

If you are talking about Cafe Coffee Day as meeting place then the park bench is our competitor, if you are talking about in terms of food and chain then McDonalds is a competitor and so are other coffee chains. We straddle various competing sectors and at the end of the day I think we are competing with the next big thing.

 

Which is?

I don't know! Right now coffee culture is happening.

 

What about competitor within the coffee chains?

We don't have any competition because we are not competing with the others. In fact we are aiding each other in creating and growing the coffee culture. All of us have a distinct identity. We sure do!

We are not trying to be some one else. We are not trying to be an upper class coffee shop where you can walk in only if you have certain amount of money in your pocket. These are the upper end coffee shops that have hookahs and the works.

We are about an every day hang out. We are about being the third most frequented place after home and workplace or college. So we are like the coffee chains overseas but we are about affordable fun. I think we have a distinct identity; we are about coffee and about hanging out and about nice time spend.

 

What is your best selling item on the menu? Isn't Cafe Coffee Day more better know for its cold coffees?

The best selling item in summer is frappe, which is coffee and ice cream blended together. It is favored by the young people. In winter it is cappuccino. Especially in the northern states, the best sellers are hot coffee. But yes, cold coffees are very popular. If you look at average sales per year, cold coffee sales are higher than the hot coffees. But that is because of a weather that you face. Is it really that chilly across the country?

Also, cold coffees are favored because they are unique. Frappe is a universal formulation, but at the same time we have a range of ice-blended coffees that are unique. We have a cardamom flavoured coffee, chocolate flavoured coffee, coconut flavoured coffee, even a mint flavoured coffee and a coffee garnished with bitter coffee beans. I think it is because of the exciting recipes that people go for them. But there are real coffee connoisseurs who will have their cup of cappuccino and nothing else.

 

How do you decide on the menu? It has to be noted here that all your products have a decided Indian taste to it - be it food or coffee.

It was the consumers' choice. We do a series of taste test before the product is launched. We also adopt changes after a series of feedback either via feedback back form or by studies. Since our cafés are own by us, we can do these dipstick studies at any time. And we have got some specific feedback's. Like for example, when we were launching a spinach sandwich, consumers said that they would prefer a spinach-cottage cheese combo.

 


"We are about being the third most frequented place after home and workplace or college"
 

How do you go about scouting location for your cafe's? Do you own the premises or do you get it on lease?

We have a department-the business development team- who are in touch with a lot of property owners. These days a lot of property owners are contacting us.

We normally take up places on long lease.

 

When you launched, one got to hear about a rumour that your coffee has a chicory blend? Comment.

No! Our coffee's do not have chicory.

 

How has the government support been?

We should not look up to government, unless for policy issues like VAT. I think we have the support of our customers and that is enough. It is not right to always depend on government to do everything for you. We are pretty much ok.

What government probably can do, and entire coffee community will appreciate, is to help the needy coffee farmer. Everybody who has anything coffee industry will benefit from it.

 

What is the core strength of the company?

We are looking at being all aspects of coffee, right from the estates to the cup of coffee that we serve. We are getting into new areas; we have got into coffee vending very seriously. We are looking at Coffee Day take away and coffee kiosk divisions very seriously.

It helps if your linkages are strong with coffee, as a product, in all its aspects. We are a true coffee conglomerate.

 

Where does the coffee chains move ahead from here? You have already started merchandising. Are you looking at building it up?

Not really, merchandise started more as a sentimental thing than as a revenue stream. We wanted to reward coffee lovers and we started selling mugs. People wanted to wear something that reminded them of the cafe so we designed T-shirts and we sold thousands of those.

But, yes it has become a serious business now. We are looking at 5 per cent of our revenue coming from the merchandising. We are also into selling bags, pens and filters. But there will always be a linkage with youth and coffee. We will always keep our focus; we will not become a retail store.

 


"If we get a good deal from any other media, we will definitely go in for a marketing deal. But as a advertisement option or as a marketing spend, we are not looking at mass media"
 

Currently, what is the revenue pie of the company like?

I cannot share this information with you. We are a privately held company.

 

What is the group turnover of the company?

The group turnover is expected to touch about Rs three billion now. It was Rs two and half billion last year.

 

How do you go about advertising on the television channel? What about ticket sales?

Last November-December 2003, we were approached for a ground contest around a very popular programme on Zee English called Friends. All the six lead characters are shown often visiting a coffee shop and a lot of youth like watching the programme. That is why we had a contest running where you could win Friends' merchandise. The linkage was that it was that it is a youth based programme and it had a coffee house.

Latest, we have tied up with Channel [V]'s Get Gorgeous contest. The reason being that a lot of our young consumers are interested in careers. Modeling is a career that a lot of youngsters are interested in and this was an excellent platform. We have also done promotion for History Channel, where we have run promotion for Hollywood Heroes. We had asked a few question and a lucky winner won a trip to Hollywood.

We are involved in ticket sales in quite a few events, Enrique being one of them. We were involved in WWE, Elton John ticket sales. These acts are very much appreciated by our consumers.



Besides that we also tie up lot of the youth brands. Our promise to the customer is that a lot can happen over a coffee. So every time we try to ensure something good happens to our customer. So we have a contest going on with Levis, another one with Scooty, and latest contest with Liril.

 

What is it that you get out of these ticket sales?

It is the organisers' benefit, really. They need to tell people where the tickets are available and single Café Coffee Day logo says it all. You don't have to print 10 addresses.

From our point of view, we always ask for a certain amount of tickets around which we have a contest. Couples can win ticket for free. This in turn raises the awareness level as cafe staff approaches the consumers to inform them about the contest. There is not a better publicity mechanism then the guy who is serving you telling you about the same.

 

What about promoting your fare through in-serial or in film promotions?

We still don't believe in mass media promotions. But we want to be involved in all the areas of serious consumer passion. We are doing it with music. About 80 per cent of our cafés have a juke box and a few of our cafes are now book cafes.

Next big consumer passion is Bollywood, so we decided to associated with movies. But the way it happened was quite accidental. A few movies, whose target audience matched that of the consumers at Cafe Coffee Day, started shooting a few scenes in the cafe. So we had a Hindi movie Bas Yun Hi and a couple of Telugu and Tamil films with prominent Cafe Coffee Day brand placement. Later we took a conscious decision of being seen in certain movies like Khakee and Main Hoon Na.

As part of this effort, the brand has been placed smartly in two forthcoming Bollywood ventures, the Amitabh Bachchan, Aishwarya Rai, Vivek Oberoi starrer Kyun Ho Gaya Na and Sajid Nadiadwala's Salman Khan, Priyanka Chopra starrer Mujhse Shaadi Karoge.

Another placement area that happened accidentally was with HDFC. They wanted to promote their debit card and they choose us. So all the 21 cafes had debit card machines, just during that month. The ad was shot in a Cafe Coffee Day premises.

A lot of serials are shot in Cafe Coffee Day. Recently, Kahaani Ghar Ghar Kii was shot but we have no prominent tie ups.

What we are offering is just a location to shoot in. We do charge a very small amount, which is the direct revenue loss for that period.

We have done ads but all through barter deals. If we get a good deal from any other media, we will definitely go in for a marketing deal. But as a advertisement option or as a marketing spend, we are not looking at mass media.

 

Earlier, you mentioned that there was a sales boost during the contests....

Eventually, when there are contest we have very high walk-ins. Ours is a business model that depends on walk-ins. We do not

aim at high profit margins. Walk-in's pushes our sales in the bargain.

Conversion rate is 100 per cent because no customer sits in a Coffee Day without consuming anything.

 


"We tied up with Zee English for 'Friends' contest because it is a youth based programme and it had a coffee house. So the linkage was to reach out to the youth that watch it"
 

What kind of interaction is encouraged between the consumer and the staff?

I think our staff now has got it. Earlier, they used to look at themselves as waiters. Now we have finally managed to convey it to them that you are doing a job and you are at par socially with many consumers, so your attitude and your communications should be up to the mark.

It is not sufficient that they clean the table well, but they have to be able to communicate with the consumer on one on one basis. It is a cultural shift; it is a huge responsibility as, in India you do not look at the people serving at your table as your peer.

We want somebody who can be a friend to the customer but at the same time will know about the international standards of hygiene and cleanliness and personal grooming.

 

How often do you conduct quality checks in your cafes?

All the time and in several aspects. The operational in-charge will go around checking business, record keeping, service and check the feedback forms. The food in-charge will look at the way food is being stored, coffee is being made, what is the time take to extract the coffee and so on. Marketing person will go about checking displays, how the merchandise are displayed.

 

Is there are staunch Cafe Coffee Day person or your consumer group is often switching between other cafes?

I wouldn't be in a position to speak about any other chain. But yes, we have a staunch Café Coffee Day person. There are people who visit the café at least four times a day. My data base consists of 1,35,000 e-mails of customers. About 60 per cent of the consumers are regulars, which mean they come to the café twice a week or more.

 

Where are you aiming at going ahead from here? Would you ever start an high end product?

We really don't know. Every division employs about 1800 employees. I don't think that we will ever go for a high end product, there is enough scope for a product like ours.

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