Equipment

Café CoffeeDay leads India’s consumption shift in the single-serve market

K Ramakrishnan, Café CoffeeDay’s (CCD) President of Marketing, isn’t fooling himself as to the current dismal levels of coffee consumption in India. Average consumption sits at around 82 grams a year, giving India a three-figure ranking among the world’s coffee consuming countries.  “The coffee drinking households are largely restricted to southern parts of India,” Ramakrishnan tells GCR. “Whatever marginal consumption [that exists] at home is for social occasions in the form of instant coffee.” It’s an interesting statement of facts coming from the company that just launched India’s most affordable capsule machine, designed specifically for at-home consumption. Priced at around US$80 for the machine, with capsules costing just 20 cents each, CCD’s new WakeCup system is possibly one of the first coffee capsule machines priced for a developing market, with the nearest comparable machines starting at US$200 each, and 60 cents per capsule. India’s low consumption figures are to be expected from a country that is still primarily a tea-drinking nation. As such, Ramakrishnan says CCD’s move into the at-home coffee market is less about meeting an existing market demand and more about driving market trends. “Our attempts at enhancing in-home consumption are our fresh and ground outlets and now, WakeCup,” he says. “We believe this is ideally suited for such parts of the country where in-home consumption is negligible.” Ramakrishnan says that the WakeCup will work to “demystify” what Indians perceive as a complex process of making café-style coffee at home, in providing consumers the ability to make coffee at the touch of a button. CCD’s commercial aspirations are likely fuelled from the astounding success of single-serve machines abroad. American market-leaders, Green Mountain Coffee Roasters (GMCR), announced early this year net sales of over US$1.1 billion in their first quarter results for fiscal year 2012, largely led by sales of their Keurig Single Cup Brewing system. On the European end, Nespresso continues its success, with Nestlé  announcing sales of US$3.2 billion in 2011. Sara Lee has recently increased its stake in the single-serve market, paying Philips US$222 million for a partnership in Senseo coffee systems, having already sold 33 million of the appliances worldwide when the deal was struck early this year. While these results show that the technology has a strong place in these respective markets, CCD’s challenge will be in promoting single-serve systems to a non-coffee consuming public. This, however, won’t be the first time the company has successfully directed consumption trends. The confidence in which CCD takes up this endeavour follows on from its historical success in the coffee drinking arena. Today, CCD takes credit for introducing the ‘coffee shop’ concept to the Indian market, now operating a network of 1270 cafés in 185 cities. CCD’s roots are with the Amalgamated Bean Coffee Trading Company (ABCTCL), with its Chairman V G Siddhartha coming from a family of coffee plantation owners. After the deregulation of the coffee business in India, ABCTCL started selling coffee directly to the international market. It was at this point, Ramakrishnan recounts, that Siddhartha saw potential in building a coffee brand for the Indian market. The company released CCD’s first sub-brand ‘Coffee Day – Fresh n’ Ground’ to the domestic market. “Until around the late 1990s… coffee drinking was limited to the South Indian traditionalist, the intellectual and the five-star coffee shop visitor,” Ramakrishnan says. Coffee may have been hard to find in India, but CCD noticed that neighbouring markets in South East Asia were seeing a rising popular culture of consumers visiting cafés for experiential purposes, usually enjoying a glass of beer. These cafés were promoting a cyber culture, offering internet access, and providing a perfect hangout and meeting space. It was these trends that inspired CCD to introduce the first cybercafé-cum-coffee shop, although the company replaced beer with coffee. “This was arguably India’s first commercial cybercafé,” says Ramakrishnan. From its early beginnings, he says, these cafés have always been most popular among the ‘young’ and ‘young at heart’. “There wasn’t a place that resonated the pulse of the youth in India who, by the late 1990s, weren’t so different from its counterparts in the rest of the world,” he says. “The youth needed a place to meet, socialise or plan and simply relax with a cosmopolitan feel. CCD provided just that.” In finding its niche market in this demographic, CCD also found an impressively large consumer base. India has perhaps the largest youth population, with around half of its residents under 25 years old. India’s culture of hanging out in a town or village square, and collectively enjoying a beverage, has historically been a part of the national identity, Ramakrishnan says.
The country’s strong growth post liberalisation, and increased exposure to media from around the world, meant that these young Indians began having the means and desire to be in a more cosmopolitan environment “The brand has always either reflected like a mirror what its young audiences are looking to have at their favourite café or has acted as a ‘lighthouse’ in showing the way forward,” says Ramakrishnan. Throughout the company’s transformation, it has continued to maintain a vertically integrated business model in producing the coffee it sells. As the internet has become more widely available, CCD has moved away from the cybercafé environment with the greatest focus on coffee. “Over time, we see that conversation is the centre of attraction and it is buttressed by coffee and other beverages,” he says. “We have coffee in our genes, and that reflects in our keenness in keeping the interest in coffee alive.” CCD is now hoping to translate this introduction of drinking coffee in public into the home. As other markets have learned, the key to the product’s success will largely lie in the quality of coffee available. In this end, CCD has adopted MaxEx technology, developed and patented by TuTTOespresso from Italy. The coffee is laser scanned to test for quality. The machines deliver more than 15 bars of pressure through the capsules to create an espresso coffee. The question now will be if enough of India’s almost 1.2 billion people will take on coffee drinking as part of their domestic routine. In this, Ramakrishnan is highly optimistic.
“WakeCup is our effort at expanding the in-home coffee consuming market. We are committed to building the same,” he says. “We believe in the long run, there is huge potential in this.” 

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