When it set out, Barista looked like an ice cream parlour. The first thing that we did after it was launched was to alter the look and feel of the brand," recalls Alok Nanda, chief executive officer of the ad agency Alok Nanda & Co (ANC), chuckling at those early memories. The agency has been working on the account ever since, though the chain's name has since been altered - following an ownership change - to Barista Lavazza.
That 'early memory' of February 2000 is, in fact, only eight years old and yet it seems to belong to another time - imagine Indian city life without the ubiquitous coffee shop: hard, isn't it?
Barista's first outlet was in Delhi's Basant Lok, the birth of this bean-based urban, cultural revolution actually began softly in 1996 on Brigade Road, Bangalore (now Bengaluru) when Café Coffee Day set up its first outlet there. Café Coffee Day (CCD) is owned and operated by Amalgamated Bean Coffee Trading Company Ltd (ABCTCL).
This wave of coffee and froth is today made up of about 1,500 cafes that do business of over Rs 1,000 crore annually across the length and breadth of India. In other words, a new coffee shop has been opened every third day since the first CCD outlet came up in 1996. The pace of opening is, of course, much faster than that now as the business gathers momentum. CCD is by far the biggest player with 715 outlets across 110 cities and towns. Barista comes next with 200 while Costa Coffee claims third place with 50 cafes.
-How did the category get this far without advertising?
-How do the brands differentiate themselves without using mass communication?
-And can the business get closer to its estimated nationwide potential of 5,000 cafés without using mass media?
From Barista and Café Coffee Day (CCD), the category has swelled to accommodate newer players like Costa Coffee, The Coffee Bean and Tea Leaf Co (CBTL) and Gloria Jean's Coffee. US-based Starbucks, the big daddy of them all, was looking at entering India through a tie-up with Kishore Biyani's Future Group, but the deal fell through. Otherwise, ready-to-drink (RTD) packets of Starbucks coffee were being sold by PVR at some of their multiplexes, which doesn't happen anymore. However, one occasionally still comes across a few retail outlets here and there that stock bottles of Starbucks.
UK-based Coffee Republic and Caffe Nero and Germany's Cup&Cino are some of the other brands that are eyeing the market.
What are the forces driving this incredible growth year after year? Vishal Kapoor, head, marketing, for Barista Lavazza puts it down to growing incomes and a greater propensity to spend, coupled with an increasing amount of time being spent out of home, among other things. The larger number of financially independent women who are willing to spend has been a big boost - as have international lifestyle aspirations, driven by growing media consumption.
Although their fares may appear similar, coffee retail chains seem to be drawing different kinds of consumers. CCD's core target group covers a demographic span between 15-29 years, and consumers who are young, and young at heart. Free-spirited, this set of people wish to have collective fun, believes the company. For this lot, CCD is a social hub where they like to engage in meetings, discussions and celebrations, all over a cup of coffee.
One peep through Costa Coffee, and you know that it caters to the premium end: this coffee chain seats mostly corporates and business people, above 25 years of age.
The typical Barista customer seems like somewhere between the two other types. The chain is frequented by the young adults, aged between 19 and 35 years, both young men and women, who have global lifestyles. These people also spend a lot of time out of home.
In any case, says Nagaraj, "Café Coffee Day is India's largest youth aggregator. We aggregate, on an average, 500 consumers per day per café, leading to a whopping 10 million consumers in a month across the country. I doubt there is any other medium that can promise this type of targeted reach for a brand like us."
Although none of the other brands have the heft that CCD has, their logic of staying away from mass media is similar. Anil Laroia, chief operating officer, Costa Coffee India, says that coffee chains have traditionally relied on word-of-mouth publicity, customer loyalty and the presence in appropriate locations. "Also, while people like to experiment with food - which is why quick service restaurants need to advertise - they tend to stick to their favourite cuppa."
If a coffee retail chain does not advertise, how does it communicate with customers, both existing and potential? The main vehicle of communication is the outlet itself which acts as a live, three-dimensional hoarding. That is why the coffee chains worry themselves silly about the nuance of every shade they use and the lighting employed at their outlets.
When ANC set out to create Barista's look, the strong orange colour of the logo, portraying an intense visual identity, was teamed with a deep brown signifying coffee. A triangular dollop was used as a symbol or seal. To emphasise the logo, ANC broke it up and emphasised its parts across the outlets. The orange colour was used on the walls. A sketch of a cup of coffee has been used on its menu cards. And all these elements have obviously, become a symbolic representation of the brand.
Similarly, CCD, with its bright red and purple colours, stands for the buoyancy and youthful spirit of the brand. Couches have red and purple cushions. The bright red also finds place on the walls.
Costa's deep brown colour, and dimly lit ambience is a perfect place for executives - the kind of place where you are likely to spot one whole bunch of open laptops. A mix of brown pastels is what stands out starkly in Costa. Furniture and floor tiles in light brown, dark brown sofas, deep brown walls, with neatly stacked newspapers, is a must-visit for every corporate executive.
All coffee retail players exist in more than one format across the country, and the kind of formats that each of these run vary from one coffee retail chain to another. CCD, for instance, runs residential, highway, airport, educational institute, flagship, lounge, mall, hospital, and 24x7 cafes. Barista Lavazza, on the other hand, has divided all of its outlets into just two broad categories - Espresso Bars and Barista Crèmes.
Kapoor of Barista Lavazza says that there are three ways to distinguish the brand experience:
Constantly refresh the look of the store - every couple of years change the signage, the wall colours, furniture and graphics.
Regular activity to refresh the store experience: celebrate events and activity that is relevant to the target audience.
Innovate on food and beverages using an understanding of the consumer (Barista Lavazza launches a new line of F&B every quarter). These F&B launches are supported with marketing collaterals.
A B2C business without marketing communications in mass media is a most unusual situation. Even more so is Café Coffee Day's view, in which marketing is an earner as well as a spender. Owing to its huge youth aggregation, CCD targets brands or companies that want to reach young affluent consumers, using the retail chain's platform. This has become a steady source of income for CCD.
Mass communication hasn't been used thus far in the category because, reasons Nanda of ANC, "While advertising is a powerful communication weapon to build brand awareness, and also to build top-of-mind recall for an impulse purchase, it's rather weak when it comes to building loyalty compared to other means of communication - such as experience design."
All right, but if he had to take a guess at the first major campaign that might break for the category, in what medium would it be? "I would certainly leverage the web," thinks Nanda.
Nagaraj of CCD dismisses mainline advertising to help her build her brand but says that "we may look at a few vehicles such as radio for increasing footfalls for specific activities." While on the subject of looking at the future, Raj Kurup, head of Creativeland Asia, CCD's creative agency, reckons that for a chain that has already brought its positioning alive through the experience offered to the customer on-ground, there could be two possible routes: "Either a brand-led promotion to strengthen affinity and loyalty towards the brand or a proposition-led theme whereby a specific offer is communicated to build walk-in."
Sundararajan Rajagopal, president and director on the Board of Citymax Hospitality India, the master franchisee for Gloria Jean's Coffees, reveals that Gloria Jean's does utilise TV advertising in the various markets it is present in (apart from India). "Once Gloria Jean's has a pan-India presence, we would take the same route," he says. As of now the brand is present only in Mumbai and Bengaluru.
It is clear why café chains have taken the experience-based route to grow the business. But though advertising as a weapon seems to have been ignored for now, it could be used in the future to create buzz. Also, if the category is looking at a potential of 5,000 coffee shops, can the players achieve that, continuing the way they have so far? Maybe, maybe not. As of now, it's the waft of aroma - rather than the lure of advertising - that's inviting the consumer to take a sip.
The Networking Factor
Daniel Goleman in his book, Emotional Intelligence, says that people's social abilities are getting worse because of increasing work pressure, distance and less communication between friends. But I see social media as a solution to this problem.
The rise of social media networking websites has given a platform for friends to keep in touch and stay connected without spending much of their precious time. The whole process has become so much fun and 'in', that almost every netizen has an account on two or more of the social networking sites in India. The virtual social interaction is increasing now and friends who had lost touch 10-12 years back can search for each other and keep communicating with each other on a real time basis.
This new boom in social interaction has also led to an increase of visitors at the coffee shops at the corner of the roads. The more friends you connect to, the more you meet, the more places you need to meet and therefore more traffic at coffee shops.
It has become very simple for people to 'Ask', 'Schedule' and 'Meet' via these websites. The crowd on these social media networking websites also differs as they differ at the coffee shops. For example, you will find the 'MySpace' kind of artsy/hipster crowd more at 'Mochas' whereas 'Barista/Costa Coffee' attracts more of 'Facebook' types that are business professionals, book club members and students.
Also, what's interesting is the way these coffee shops are using social media to help their businesses grow. Every coffee shop has a community or two by its name on these websites. These communities are either user-built or set up by an evangelist.
- Manish Vij, Co-Founder, and Business Head, Quasar Media