Sumita Vaid Dixit

Barista made a commodity like coffee into a culture in India. Give us that credit.

With the Sterling Group recently buying out the entire 65.45 per cent stake that Turner Morrison had in Barista (Tata Tea continues to hold a 34.1 per cent stake in the company), market watchers are weighing its impact and implications on the coffee chain’s growth. Brotin Banerjee, head, marketing and strategy, Barista Coffee Company Limited, clarifies that there is a clear distinction between the ownership and the management of the company, and that Barista would continue to tread the growth path – only with renewed aggression. A big reason for Banerjee’s enthusiasm is the fact that Barista is currently doing some 13 lakh footfalls a month. In an interview with Sumita Vaid Dixit of agencyfaqs!, Banerjee speaks about how the company, in its four of years of existence, has been able to etch out the ‘coffee experience’ in consumer mindspace and build loyalty that cuts across age groups…

Edited Excerpts

How is the Sterling Group’s acquisition of Turner Morrison’s 65.45 per cent stake in Barista likely to impact the business strategy of the homegrown coffee chain? In what ways would the change in ownership add to brand value and the company’s growth?

The Sterling Group bought out the entire 65.45 per cent stake that Turner Morrison had in Barista a week-and-a-half back. However, this development is not going to impact the business strategy of Barista. There is a clear differentiation between the ownership of the company and the management of the company. And the business plans or strategy will continue to be the same, the only difference being that we are going to be more aggressive. The reason why an investor would want to invest is because he approves and believes in the brand. We do around 13 lakh consumer footfalls a month, and the footfalls have gone up by 20 per cent in the last six month.

Barista is an aspiration brand, and there is huge flexibility to be leveraged further. As far as tinkering with the brand proposition or the brand value is concerned, there is not going be any change. In fact, in the last six months, we went through a process of consolidation. Fine-tuning backend processes and IT was one area that needed attention for scaling up rapidly.

So what is the consumer proposition?

Barista’s consumer proposition is to offer the best coffee in town, delectable food at reasonable prices with unlimited helpings of the Barista ambience.

In a media interview, TV Krishnamurthy (director, strategy, Sterling Group) had mentioned that the thrust of the marketing strategy at Barista is going to be on food, with special focus on franchising. What was the marketing strategy till now and what is rational behind the current thinking?

We are known for our coffee. We believe in spreading the joy of coffee. We have clear leadership in coffee. While providing the ‘coffee experience’ remains our motto, to improve the experience of food is also an on-going affair. We have strengthened our food menu – which only had nick-knacks or small bites as part of its offering – with serious foods. We have introduced ‘fusion meals’ – Italian dishes Indianized by adding Indian spices – in some Barista outlets, and they have been a huge success. We launched three kinds of pastas and rolls.

The special focus on Indian food is because, typically, a consumer who walks into a Barista spends 30 to 45 minutes. Naturally, the consumer would like to have something along with her coffee. Simultaneously, we continue to sustain the beverage experience through promotions, offerings to include non-coffee lovers through ice tea, tea, smoothies et cetera. We have re-launched ice-cream sodas on consumer demand. Alongside, we fortifying our coffee experience with a whole new addition of cold coffees. The thing is, Barista believes in the democratization of the coffee drinking culture. While it is an aspiration brand, it can be scaled up where is there is something for everybody.

We have launched a coffee item that is priced at Rs 25. This product provides the highest value for that kind of quality. There is no competition today that can offer you the same kind of quality for that kind of price.

But won’t focusing on food put Barista in direct competition with established foods chains? How does this de-niching make business sense.

Well, it is a cause of greater concern to the food chains than it is for us… Our food consumption has gone up drastically. Today, food accounts for nearly 35 per cent of the overall sales. Which is, indeed, a large amount. We are not worried about competition because we have been the pioneers in whatever we have done. We have a lot of loyalists.

For the last two years, we have been focusing on two categories: sandwiches and desserts. Today, they are clearly an equity in themselves. Now we have included more items. And focusing on meals is not going to decrease beverage consumption. That is simply because food and coffee complement each other. Today, if Barista is known for its nick-knacks, desserts and sandwiches, soon we would also be known for serious meals. Today, you can have meal for Rs 50 at Barista.

But as you said, Barista has always stood for the ‘coffee experience’. With the focus shifting from coffee to food, won’t the brand essence of Barista get diluted in the minds of existing and prospective consumers?

Just because we have multiple offerings, it does not mean that our focus is shifting from coffee to food. Our focus on food is not at the expense of the ‘coffee experience’.

More than anything, it is what Indian consumers want. And this we have found out through an extensive consumer survey. People have suggested that we bring in food that is more suitable to the Indian palate. Which is why we have a paneer roll or a tangy chicken pasta… They do such huge numbers. The focus at Barista is to provide all-time eats.

After acquiring Barista shares, Chennai-based businessman C Sivasankaran has been quoted saying “I will make Barista the Starbucks of India… I want to expand the number of Barista outlets from 100-odd currently to over 3,000 in the next 36 months.” How is Barista geared to launch such an ambitious expansion plan when it is still in the process fine-tuning its retail strategy? Recently, outlets in Indore and Nagpur were closed down… Isn’t there an inherent dichotomy in all this?

That such a respected man as C Sivasankaran has faith in the Barista brand is in itself something that we are proud of. And what he mentioned about the expansion plan we will certainly try to implement.

With regard to the second part of the question, well it is no longer a dichotomy because, when we close down an outlet, it is the media that hypes it. But that is part and parcel of retail life. Footfalls migrate, consumer shift happens...

What are the marketing lessons Barista has learnt from such experiences?

The marketing lesson is essentially the extent to which you can get flexible. If you can keep your fixed cost low, and if your outlet has enjoyed a really good run for four years, then closing down an outlet is not such a big deal. And, for example, if a kilometre down the road a huge shopping store opens, footfalls would obviously migrate there. For the five to seven outlets that we have closed, we have opened many more. But the media hype of Barista closing down its outlets and all that hoopla is certainly misleading. This happens in every company in the world, be it even Starbucks. The point is, Barista would have to be where the footfalls happen.

Do the Barista outlets in the metros do better than their counterpart in smaller towns and mini metros? The point is, is Barista essentially a metro phenomenon?

No, that is not true. This is because the youth in mini-metros today mirror the hopes and aspirations of their counterparts in the metros. There is a huge business potential in the mini-metros. We have done market feasibility studies and we have found out that smaller markets do equally well. For instance, our outlets in Pune, Chandigarh and Ahmedabad are doing roaring business.

Is there is difference in what is offered in outlets in the mini-metros and those in the metros? And what about the pricing – is it on par?

First, let me correct this thing about our products being highly priced. This is again a myth perpetuated by the press. The fact of matter is that Barista is a very honest brand – the price is inclusive of taxes. We do not give certain prices in the menu and charge extra at the time of billing. Coming to your question, the range of the drinks available may be not be as extensive, but the hot-sellers are there.

Things have started looking up at Barista and footfalls have increased by 20 per cent. Was this purely a consequence of slashing the price by 15 per cent or are there other reasons as well? In fact, prior to slashing prices, Barista actually upped prices, if I am not mistaken. This led to a fall in sales, forcing the company to drop prices. So what is the rationale for increasing prices, and what made Barista subsequently drop prices?

Prices were increased two years ago… That was because of the raw materials and the kind of products we had then. Also, we did not have scale, and given the real estate cost that goes in the retail business, the rent-to-revenue ratio is always a concern – not just for Barista but for any retail brand.

We dropped prices in April-May 2003. That, solely, has not led to the higher footfalls, but yes, it has contributed to it. The bigger reason is that we have always tried to know our consumer. Right from launching well-researched products, better ambience, a cumulative experience of the music, books and games, to giving a value-added proposition which is not only around price, this has been our constant endeavour. In fact, there would always be one or the other promotion going on at Barista. The point is, as long as you continue to invest in your value-add proposition, consumer will come in. And we have definitely strengthened that. So, value-adds, coupled with a decrease in price, has certainly increased footfalls. But let me point out that the decrease in price cannot sustain one forever. What will sustain Barista is channeling our value proposition, which is something that we continue to do.

What type of consumers has the brand managed targeting?

What we are trying do is offer a diverse range of products that will attract anybody from a student to a working professional. And whatever product we have will be of excellent quality. In the four years of its existence, Barista has been successful in drawing people from different target groups who find value in the brand. It is definitely an achievement for us, because there are very few who have been able to do so. We have been able to get consumers from college students to working professionals. To traverse such a broad area for an experiential brand is, indeed, a challenge. Typically, an experiential brand tends to be niche and premium. We have not fallen into that trap. Barista is a young brand. It will continue to attract youthful people – people who are young at heart.

You did have the advantage of starting with the Toyota account. Which means that it wasn't another starting-from-scratch experience for you?

That is not really true. Arvind Sharma was very clear that he wanted to develop a second agency and I don't think it came on a platter. Arvind is the kind of person who continuously wants to try new things. I think it was an intelligent move on his part to start with a significantly large business. It did come easy, but it was not by chance. It was part of a larger design. That account gave us the ability to springboard and become a very fast-growing second agency among other second agency networks in the country.

How long will the scheme be on?

It will be on till the end of July subsequent to which we will determine whether the Government intends maintaining the duty reduction of 5 per cent.

Rival Café Coffee Day appears to have tapped into a wider section of consumers as far as appeal goes. It also enjoys a more ‘inclusive’ image (whereas Barista has a strong ‘youngsters’ image) in the minds of many older consumers. Has Barista painted itself into a corner by talking only to the youth?

That is not true. We have always had an eclectic mix of consumers. See, we were the first ones to come with the ‘coffee experience’ concept. Tell me how many people knew Cappuccino before Barista started the coffee revolution? How many people knew a latte, or caramel or mocha before we launched Barista? Barista made a commodity like coffee into a culture in India. Give us that credit. It does take time for the market to evolve. In the four years of our existence, we have been able to create a strong brand with 13 lakh people coming in, of which 60 per cent are loyalists. It is that not a testimony of the fact the Barista is doing very well?

To what extent are on-ground initiatives central to your brand building?

To a large extent. Our tie-up with (Delhi-based afternoon paper) Today is one example. Then we are coming out with Sound of Barista, which is a retail-formatted customized property. It is like television programming, where the music will be played according to the kind of customers who come into the outlet.

Yet another recent initiative is the launch of the Barista Brew rewards programme. This is basically a smart card, rather a loyalty card, where students can claim a higher percentage of discount as opposed to working professionals. This loyalty programme has really caught on. In the last two weeks we have done something like 2,000 cards. Soon we will be launching the same programme across all outlets. This is an innovation not to found any where in an F&B company.

While you have been absent from mainline advertising, as your competition gets more aggressive, is your communication strategy likely to change in favour of mass-media advertising, especially with food becoming the future focus area?

We do not need mass media communication as of now. But yes, in the future we might use it.

In the absence of a true differentiator where, fundamentally, there is no difference in the offerings of Barista and Cafe Coffee Day, how you inculcate brand loyalty? What are the challenges you face in winning loyalty?

The differentiator is in everything that we do. The differentiator is clearly in the fact that despite being in existence for four years, nobody has been able to copy the Barista ambience. Coffee chains are tripping over each other to come into the Indian market, but what is stopping them? Why have the existing players not been to offer the coffee that we serve here? We offer 100 per cent Arabica coffee, and I do not know how many consumers are aware of the fact that Arabica coffee is at premium in the coffee market. Most of the coffee chains here in the country offer a mix of Arabica and Robusta, a cheaper variety of coffee. How many coffee shops actually provide you the flavour and aroma of Barista coffee?

Barista, despite enjoying the first-mover advantage, has not been able to establish a strong presence in the south. Why is that so?

We started out in Delhi, and we have leadership position in the North and the West. In fact, all our outlets in the southern market are doing very well. You will be surprised to know that the outlet at Barton Centre in Bangalore is the highest grossing sales outlet in India. Yes, we do have a lesser number of stores in the south, but wherever there is competition, we certainly do better than them. A large percentage of the outlets that we are planning to open in the next 10-12 month will be in the south. In total, we are looking at launching 60-100 outlets. We will be looking at the southern market very aggressively, for there is huge potential.