Starbucks effect? CCD, Barista souping up

It’s difficult for rival coffee retailers not to be worried about the extremely long queues outside Starbucks.
They graciously say the market’s big enough for one more chain.

But behind the stoicism lies hectic marketing activities.

Industry sources said all cafe chains are cranking out plans to revamp menu and offer better experience to consumers.

To wit, Barista has introduced new items on the menu, changed the store interiors, and roped in a new brand ambassador in the last one month.

The chain has also tied up with publishing house Penguin for book launches.

Cafe Coffee Day (CCD), the market leader in India, is also believed to be going through a similar exercise. Sources said it will soon have a new menu and is stepping up advertising and marketing campaign.

CCD, which is positioned in the affordable segment, is now also changing interiors in an attempt to cater to the premium segment, which is where Starbucks is positioned.

The Bangalore-based chain also plans to add 592 stores and hit the 2,000 mark by the end of 2014.

Another person in the know said similar activities are ongoing at Aussie chain Gloria Jeans, too.

All of them, to top it, are betting big on brand merchandising – a strength that only Starbucks can boast of in the coffee market in India right now.

Barista and CCD officials refused to call it the Starbucks effect and preferred to say they are in any case in expansion mode.

Harminder Sahni of Wazir Advisors, a hospitality consultancy, said all cafe chains are now beginning to focus on brand building.

“With something like Starbucks here — which has a magnetic brand pull —  others can’t afford to sit idle. Earlier, the focus was only on expansion and more store openings. Now they are changing the focus on brand building activities in order to compete. And the marketing activities are on back of that,” he adds.

Analysts believe the long queues at Starbucks are, well, too long to be sustainable.

“That’s what rivals are banking on,” said Saloni Nangia of Technopak Advisors.

“Once the euphoria and curiosity ebbs, Starbucks would want to be in a position to cater to a larger customer base,” she said.

Technopak estimates the cafe market in India at $230 million and expects it to maintain an annual growth rate of 13-14% for the next five years. India, however, remains a pre-dominantly tea-drinking market.

Not surprisingly, experts suggest the coffee chains would soon be slugging out for a larger share of that brew.

This at a time when even Starbucks has acquired Teavana, and is changing its positioning from being a coffee chain primarily.