Costa Coffe vs Strbkcs

EXECUTIVE SUMMARY One of the biggest and fastest growing industries today is the coffee industry. This industry basically includes individual cafes, hotel cafes and retail chains. In this study, we shall be focusing on the Retail Chains that belongs to the organized sector. The retail outlets share a particular brand and have similar kind of management, with standardized business procedures and practices. The major players today covering market share all over the world are Starbucks Coffee, Barista Coffee, Café Coffee Day, Costa Coffee, etc. For this study, the two retailers - Starbucks Coffee and Costa Coffee are chosen because of their identical pattern of functioning and growth. They are the two major players in the coffee café industry, and their customers consider them both as interchangeable brands. That is why it is important to study how these brands differentiate themselves from each other, and attempt to improve brand loyalty amongst the customers.

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CHAPTER 1 INTRODUCTION TO FOOD AND BEVERAGE INDUSTRY The food processing industry in India has a total turnover of around USD 65 billion which includes value added products of around USD 20.6 billion. Coca cola, Pepsi, and Nestle are the leading beverage brands that have been ruling the Indian beverage market since past few decades. Among all the beverages, tea and coffee are manufactured as well as exported heavily in the international markets succumbing to the individual demands around the world. The beverage industry in India constitutes of around USD 230 million among the USD 65 billion food processing industry. The major sectors in beverage industry in India are tea and coffee which are not only sold heavily in the domestic market but are also exported to a range of leading overseas markets. Half of the tea and coffee products are available in unpacked or loose form. Among the hot beverages manufactured in India, tea is the most dominant beverage that is ruling both the domestic and international market even today. The supply of tea and coffee is insurmountable

in

the

Indian

beverage

industry.

The taste factor in tea varies according to the taste of individuals in different countries and the beverage companies in India manufacture the products in accordance with the taste of the individuals. For example, the inhabitants in the southern parts of India prefer dust tea whereas the inhabitants in the western part of India prefer loose tea. The Southern India also prefers coffee a lot. The production capacity of the total packaged coffee market is 19,600 tonnes which is approximately a USD 87 million market. The soft drink market such as carbonated beverages and juices constitutes around USD 1 billion producing 284 million crates per year. In the peak season, the consumption capacity reaches 25 million creates per month and during off season the same goes down to 15 million crates in a month. Pepsi and Coca cola are the two leading brands in the Indian market. The mineral water market in India is a USD 50 million industry and produces 65 million crates. Around 4.9 million crates is usually consumed each month but it rises to

5.2

million

crates

in

2

the

peak

season.

CHAPTER 2 RESEARCH METHODOLOGY

1. OBJECTIVE OF STUDY: By conducting a comparative study of Starbucks Coffee and Costa Coffee, we shall study why one retailer is more successful than the other, and how the performance of these retailers can be improved. Studying the characteristics, history, performance and marketing strategies adopted by both the companies, and the customer's perception about the two is the center point of this research. The objectives of the study can be summarized as below: 

To compare and study the 4P's, namely Product, Price, Promotion and Place, of Starbucks Coffee and Costa Coffee.



To understand how these cafés have positioned them in order to differentiate them in the market.



To find out the customers perceptions and preferences about both these cafes and what motivates the customer to visit these coffee houses.



To identify the areas where both organizations are performing well and areas where they need to improve.

2. SCOPE OF STUDY: This study has a wider scope, as after analyzing it we will get to know the benefits consumers will get from Starbucks and Costa coffee according to customer’s preference.

3. DATA COLLECTION METHOD: Data has been collected through secondary sources like

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

Company website

4. LIMITATIONS OF THE STUDY Primary data collection sources could not be used due to scarcity of time and required resources. Adequate methods of data collection, arrangement, processing and interpretation, analysis and conclusion could not be used.

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CHAPTER 3 (A) 1) COMPANY FUNCTIONS AND OVERVIEW OF STARBUCKS

STARBUCKS VS. COSTA COFFEE: Comparative Analysis INTRODUCTION In the last ten years, the coffee brewing industry has seen so much activity in terms of massive changes in the landscape of coffee brewing companies. These changes range from mergers and acquisitions to changing consumer tastes and finally, to different branding strategies. These activities are expected to continue over the course of the next five years.

HISTORY STARBUCKS Three friends, Jerry Baldwin, Zev Siegl and Gordon Bowker, who all had a passion for fresh coffee, opened a small shop and began selling fresh roasted, gourmet coffee beans and brewing and roasting accessories. The company did well, but things began to change in the 80s.

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Leading retailer, roaster and brand of specialty coffee in the world Sells drip brewed coffee, espresso-based hot drinks, snacks, mugs and coffee beans Company started in 1971 in Seattle in Washington, U.S.

OUR MISSION To inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time.

OUR VISION Establish Starbucks as the premier provider of the finest coffee in the world while maintaining our uncompromising principles while we grow.

OUR OBJECTIVES Objective of Starbucks Corporation: 

To tap huge emerging market of India



Help increase its profitability due to its declining market and over dependence on US market.



To have access to the high quality Arabica coffee.

OUR VALUES With our partners, our coffee and our customers at our core, we live these values: 

Creating a culture of warmth and belonging, where everyone is welcome.



Acting with courage, challenging the status quo and finding new ways to grow our company and each other.



Being present, connecting with transparency, dignity and respect.

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

Delivering our very best in all we do, holding ourselves accountable for results.

We are performance driven, through the lens of humanity.

CHAPTER 3 (A) 2) COMPANY FUNCTIONS AND OVERVIEW OF COSTA COFFEE HISTORY COSTA COFFEE Bruno & Sergio Costa set up their famous coffee roastery in Lambeth, London in 1971, supplying local caterers and Italian coffee shops with an exciting coffee, slow-roasted the Italian way. People couldn’t get enough of it and by 1978 the first Costa espresso bar opened in Vauxhall Bridge Road in London.Today it is the second largest coffeehouse chain in the world behind Starbucks.

To this day they still use the same method of slow-roasting our coffee beans, serving the brothers’ authentic blend of 6 Arabica beans to 1 Robusta in 500 coffee shops all over the world.

OUR MISSION: “To serve the best coffee in the true Italian style.”

OUR VISION 7

Our vision is to be the best hospitality company that there is - a family of related hotel, restaurant and leisure club brands recognized by our people, guests and investors as leaders in each market in which we operate.

OUR OBJECTIVES:   

Growing the profitability, scale and market share in the Indian market; Developing new products that have the potential to reach significant scale; Ensuring that brand is a leader in its field for customer service;

CHAPTER 3 (B) 1) PRODUCTS OF STARBUCKS

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1. DRINKS  Espresso Beverages (Hot or Iced) Cappuccino Caffè Latte Iced Caffè Latte Caffè Americano Iced Caffè Americano Espresso Caffè Mocha Iced Caffè Mocha Caramel Macchiato Iced Caramel Macchiato Vanilla Latte Iced Vanilla Latte

 Frappuccino® Blended Beverages Espresso Frappuccino® Blended Beverage Caramel Frappuccino® Blended Beverage Mocha Frappuccino® Blended Beverage Java Chip Frappuccino® Blended Beverage

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Green Tea Frappuccino® Blended Beverage

 Non-Coffee Beverages English breakfast Tata®Tazo® Tea Earl Grey Tata®Tazo® Tea China Green Tips Tata®Tazo® Tea Green Tea Latte Tata® Tazo® Iced Hibiscus Lemon Tea Tata® Tazo® Iced Green Lemon Tea Tata® Tazo® Iced Black Lemon Tea

2. FOOD Basil Tomato & Mozzarella Cheese Sandwich Chocolate Raspberry Crunch Cake Blueberry Muffin Double Chocolate Muffin

CHAPTER 3 (B) 2) PRODUCTS OF COSTA COFFEE 1. FOOD 10

 COFFEE COOLER Mocha Classic Vanilla Hazelnut

   FRUIT COOLER Strawberry Red berry Passion fruit

   CREAMY COOLER Caramel Belgian Chocolate White Chocolate

   ICED COFFEE Latte Mocha Cappucino Espresso Americano

   ICED TEA Peach Raspberry Costa

2. SAVORIES Croissant 11

Chocolate twister Spicy paneer calzone Corn and Pepper salad Smocked chicken in herb focaccia Mushroom and cheese Panini’s Chilli and mushroom Danish

CHAPTER 4 (A) 1) STRATEGIES ADOPTED BY STARBUCKS   MARKETING MIX

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PRODUCT Product in the Marketing mix of Starbucks In order to hold its market position Starbucks provides premium product to its customers with an unforgettable experience. They position themselves in the market by continuously innovating their products and delivering high quality coffee. Understanding the perishable nature of coffee, Schultz made sure to monitor every step involved in the production of coffee. Hence, they bought whole bean and dark roast coffee from places such as Kenya, Sumatra, Costa Rica and Ethiopia. They roasted these coffees in their own plant and sold them through their stores.

PRICE Price in the Marketing mix of Starbucks Price is used to find out the value of a product. The company has always put in their best to offer high value products to the customers. They buy the best quality coffee beans and make sure that their staff is efficiently and effectively trained. This is reflected in their price, because a Starbucks coffee is not cheap and it uses premium pricing because of the experience that it offers. However, to have a competitive edge, Starbucks started with a $1 bottomless cup of coffee, which was not only 50 cents cheaper from their other coffees but the customer could also refill it any number of times they wanted. Starbucks is expanding by opening stores in different parts of the world and so they have included various other value added services such as breakfast pairings for $3.95. This combo was launched especially for the price conscious customers and provided them with breakfast along with a cup of coffee. Starbucks focused on relative pricing by offering premium items. They sold whole bean coffee in various grocery stores in addition to other low-cost coffee items, such as drip coffees and Seattle’s Best line. Even though Starbucks offer low cost products with high price items, they justify the higher price through comparison. Starbucks works on a simple idea – if the consumers get premium products they wouldn’t mind paying a little more. So for them quality is the key. The never compromise on the quality of the

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products and implements strict and stringent quality control measures along with great customer service to justify its price. For profit maximization they increase the price of certain drinks and sizes instead of the whole lot. By doing so, they are able to seizure consumer surplus from the regulars who find more value in these upgraded coffees. This makes it possible for the company to enjoy a higher margin from the customers who are ready to pay more for larger cups of coffee.

PLACE Place in the Marketing mix of Starbucks Starbucks have a clear vision, which is to have a direct and personal relationship with its consumers and thus have direct supply chain from the producers to the consumers. They have their chains all over the world. In the USA, Starbucks is a household name and you can find its store in almost all neighborhoods. They cater to the consumer traffic by opening coffee bars. They are trying to localize themselves by opening stealth outlets, which is street names rather than Starbucks. They invested a lot in the training of their staff to make sure that their customers have an enjoyable coffee experience. Starbucks uses more than one channel of distribution. They sell their products through company owned stores or a direct retail system. They import coffee beans from the finest garden the processes it and sells it under their brand name. Also, they have agreements with hotels, airlines and office coffee suppliers. This helps them cater to the wider market. In today’s date Starbucks have their teas and coffees available in more than 40,000 grocery stores, 33000 of which are in the USA. Starbucks also launched itself in India in the year 2012.

PROMOTION Promotions in the Marketing mix of Starbucks Starbucks did not invest a lot of money on advertisement. While McDonalds spent around 727.7 million dollars on advertisement in 2007, Starbucks only invested 16.6 million dollars. Starbucks used their extra cash on finding and acquiring the best places for their outlets. They organized a 14

huge event in the places where they could open new stores. They also had many other promotional activities, which included printing information on tee shirts and mugs. Apart from this they also came up with the concept of smart partnerships. This meant appointing local representatives as their ambassadors to endorse their brand. Starbucks had gift cards for their customers. This idea promoted their product not only to their loyal customers but attracted new customers as it helped them with free advertisement. They also provided coffee to various offices without any size restrictions. Even thought they do not have an official slogan they do have an official mission, which is “To inspire and nurture the human spirit–one person, one cup and one neighborhood at a time.” Starbucks have relied heavily on word of mouth, which provided beneficial for them as it increased their brand awareness and brand loyalty. Today, Starbucks have above 27 millions of fans on Facebook and more than 2 million followers on twitter. With its trendiness and creativity freshness, Starbucks has established itself all over the world.

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CHAPTER 4 (A) 2) STRATEGIES ADOPTED BY COSTA COFFEE   MARKETING MIX PRODUCT Product in the marketing mix of Costa coffee – The main product of the firm is Coffee. But Costa coffee also has many other varieties of products which are loved by people. Hot chocolate, Special drinks, tea, Cold drinks like cold coffee and ice blends, sandwiches and other supplementary foods are some of the variety of Costa coffee. The product is the most important factor in the marketing mix of Costa coffee, because the complete marketing strategy of the firm dependent on customers liking and loving their products. Thus Costa coffee is more interested in a pull strategy rather than a push strategy.

PRICE Price in the marketing mix of Costa coffee – Costa coffee believes in Premium pricing because of its product varieties and its quality. Costa coffee relies on its commitment to give the best coffee taste and the best supplementary food to its customer. Thus, Costa coffee does not think that price is important. What it thinks is that it needs to deliver the best value to its customers

PLACE Place in the marketing mix of Costa coffee – Costa coffee has a fantastic presence in Great Britain with over 1000 stores. However the presence in India is very much limited. Costa coffee can be found in malls, airport and other 16

premium places. However it is present only in the top urban cities which add to the positioning of Costa coffee.

PROMOTION Promotions in the marketing mix of Costa coffee – Promotions are almost absent in the case of Costa coffee. At least there are no ATL promotions seen. However Costa coffee uses a number of BTL promotions like advertising on buses and out of door media. However promotions us low key also because Costa coffee wants to rely more on word of mouth publicity

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CHAPTER 4 (B) 1. SEGMENTATION, TARGET MARKET AND POSITIONING OF STARBUCKS  SEGMENTATION Starbucks uses demographic segmentation (markets by age, gender, income, ethnic background, and family life cycle) as well as geographic segmentation (markets by region of a country or the world, market size, market density, or climate)

DEMOGRAPHIC SEGMENTATION 

Starbucks main target market is men and women between the ages of 25-44, which



accounts for almost half (49%) of its total business. Young adults, aged 18-24, are the next large group that Starbucks targets. They bring in about 40% of Starbucks' sales.

GEOGRAPHIC SEGMENTATION  

Starbucks also uses geographic segmentation. Starbucks is located all around, specifically in upscale locations, near offices, and near many college campuses.

  TARGET MARKET

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TARGETING STARBUCKS: • Age: Young adults Nice place to relax, chat, chilly music Trendy coffees which present their lifestyle • Age: Middle age Place to calm down, relax, chat, read a book Possibility for a small (healthy) snack with a great coffee • Psychographic: Coffee lovers Trendy, fresh, high quality, new developed coffee (some: fairtrade) • Psychographic: Atmosphere lovers A great third place

  POSITIONING MARKET POSITIONING 



Starbucks has positioned them as a highly respected brand. The Starbucks Company has positioned itself in a way that it can distinguish their products from competition, which gives them an advantage.

POSITIONING STRATEGY 

Their positioning strategy is customer based, which allows them to give the best customer



service. Starbucks hold onto their sustainable competitive advantage in terms of their customer satisfaction as well as their employee satisfaction.

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CHAPTER 4 (B) 2)SEGMENTATION, TARGET MARKET AND POSITIONING OF COSTA COFFEE   SEGMENTATION DEMOGRAPHIC SEGMENTATION 

Three main demographic factors that Costa Coffee used are age group, social class, and professional level. By dividing the potential customers into age groups, Costa Coffee can adjust the flavor and choices of coffee accordingly.



For instance, teenagers might prefer hot chocolate rather than espresso, as they normally have a preference of sweet-tasting beverages. On the other hand, adults might prefer drinks with more caffeine since caffeine acts as stimulant and keeps them alert at work.

BEHAVIOURAL SEGMENTATION 

Costa Coffee can segment the market based on people's different coffee preferences. According to the Costa Coffee's marketing director, Jim Slater, he found out that there are "people who find latte too weak and cappuccinos too frothy, and do not want the strong flavour of an espresso or black Americano." Furthermore, Costa Coffee has identified what made the customers buy the coffee, some might look for a place to relax and others might want to 'grab and go'. In this way, Costa Coffee can try to satisfy the customers' needs (e.g. by improving the interior design of the shop) 20

   TARGET MARKET TARGETING COSTA COFFEE: 

While evaluating their consumer market the conclusion was that the ideal consumer’s economic profile will be – Upper Middle Class – Privileged Class



While the age demographics will be: – Students and Youngsters – Professionals – Families – Mature Consumers



Gender and Ethnic/Religious Background was researched to have minimal or no effect on thechoices concerning coffee made by consumers and their patronage of coffee houses.

  POSITIONING

MARKET POSITIONING: 

The positioning strategy to be employed by Costa is in keeping with their global



positioning- i.e. they are the ITALIAN COFFEE MASTERS The quality of their coffee is better than the competitors- it tastes better; it is more hygienic and totally unique. The image of Costa is that it has the BEST and most



UNIQUE coffee. The secondary or underlying positions of Costa- globally and for the upcoming market in India are the Highest Standard of Luxury, The Best Service and a Reputation For Excellence

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CHAPTER 5 GENERAL ANALYSIS 1) SWOT ANALYSIS OF STARBUCKS

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CHAPTER 5 GENERAL ANALYSIS 2) SWOT ANALYSIS OF COSTA COFFEE

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CHAPTER 6 CASE STUDY 1) STARBUCKS CASE STUDY 24

CASE TITLE: Starbucks' Foray into Tea-Drinking India "We have studied and evaluated the market carefully to ensure we are entering India the most respectful way. We believe the size of the economy, the rising spending power and the growth of café culture hold strong potential for our growth and we are thrilled to be here and extend our high-quality coffee, handcrafted beverages, locally relevant food, legendary service, and the unique

Starbucks

Experience

to

customers

here."

"I don't think we're late to the game. We are very optimistic and very bullish on the opportunity that exists in India." - John Culver, President, Starbucks Coffee China and Asia Pacific. On October 19, 2012, Starbucks Corporation (Starbucks) opened its first store in India and soon followed it up with 8 more stores. Starbucks Corporation and Tata Global Beverages Limited had set up a 50-50 joint venture company, Tata Starbucks Limited, to establish the Starbucks coffee outlets. Though India was predominantly a tea drinking nation, Starbucks had tasted success in China (also a tea drinking nation) and this had encouraged the company to enter into the Indian café market. Starbucks, based in Seattle, Washington, US, was the largest coffee house company in the world. It had expanded its presence all over the world including North America, South America, Europe, Australia, and Asia. Since 2006, the company had been trying to enter into the Indian market. However, with FDI restrictions (then limited up to 51%) preventing it from entering the country, it had to postpone its entry. However, in 2011, the company signed an MoU with India's Tata Group (Tata) to explore the possibilities of making its entry into the country. In January 2012, the company entered into a 50-50 joint venture with Tata and in October 2012, it set up its first outlet in India. By March 2013, the store numbers in the country had grown to nine. While the initial consumer response to its stores was good, Starbucks faced a few challenges in the Indian market such as competition from organized and unorganized coffee (and tea) shops, finding the proper locations and talent pool, pricing, and competitive branding and positioning from its competitors. In the words of Howard Schultz, Chairman and CEO, Starbucks, "The 25

coffee market here is ferocious in terms of competition. There are so many players trying to do what we think we can do better."

CHAPTER 6 CASE STUDY 2) COSTA COFFEE CASE STUDY

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CASE TITLE: Costa Coffee in India Abstract: In September 2005, British coffee retail chain Costa Coffee, as part of its international expansion, launched its outlet in New Delhi, India. Costa became the first international coffee chain to start operations in India. Costa Coffee also plans to enter the wholesale coffee business in India and aims to open 300 outlets, through its franchises by 2007. The changing lifestyle patterns of the Indian middle class families and an increase in their disposable income has also attracted other foreign players such as Barnie, Starbucks and Gloria Jean. Costa Coffee is also expected to face stiff competition from domestic players including Cafe Coffee Day and Barista, who are embarking on a rapid expansion plan across the country.

Pedagogical Objectives: 

To understand the competitive landscape in which coffee retail chains in India operate



To discuss the rationale behind Costa Coffee’s entry into India and the strategies adopted by it to strengthen its presence in the Indian coffee chain market.

Keywords : Costa Coffee; Starbucks; Market entry strategy; Competitive strategy; Market Entry Strategies Case Study; Coffee retail chains; Cafe coffee day; Barista; Gloria Jean; Asia; Barnie; Call centres in India; Coffee consumption in India; Whitbread plc; Nestle; Tata Coffee

Contents: Pre-requisites for Partnership with Costa India’s Coffee Production, Consumption and Exports The Jaipuria Group Coffee Market in Ireland Facts and Figures about Costa Coffee

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CHAPTER 7 QUESTIONAIRE STARBUCKS v/s COSTA COFFEE 28

How would you rate the following on the scale of 1 to 10? SR.NO

VARIABLES

1

Coffee

2

Drinks

3

Food

4

Quality

5

Ambience

6

Quantity

7

Value for Money

8

Brand Loyalty

9

Customer Service

10

Membership Schemes

STARBUCKS

29

COSTA COFFEE

11

Availability of outlets

12

Delivery Process

13

Cleanliness and Hygiene

14

Order taking process

30

CONCLUSION Costa Coffee and Starbucks Coffee, enjoys equal customer preference. Although price and promotional schemes influence the decision of the people, but the taste of coffee is a very important factor in deciding the store to visit. Costa coffee has a unique taste which attracts the customers. Moreover, people love to sit in the excellent ambience provided by Costa coffee. The visitors in Starbucks' outlets are basically executives and elite class, whereas Costa Coffee is preferred by youth. As far the prices were concerned, our research led us to the conclusion that the Costa Coffee offered low prices as compared to Starbucks Coffee and Starbucks can invite more crowd if they reduce their prices, along with providing offers.

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BIBLIOGRAPHY http://www.starbucks.in/ http://www.slideshare.net/shreyanshkejriwal/starbucks-40380786?related=1 http://www.icmrindia.org/casestudies/catalogue/Business %20Strategy/Starbucks_Foray-Case.htm http://www.ibscdc.org/Case_Studies/Strategy/Market%20Entry %20Strategies/MES0039.htm http://www.starbucks.com/about-us/company-information/mission-statement

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