Wake up and smell the Starbucks

Sep 30 2013, 11:52 IST
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SummaryBangalore’s homegrown Café Coffee Day now faces real competition

Bangalore’s homegrown Café Coffee Day now faces real competition

Bangalore is eagerly awaiting the battle of the coffee chains. And it is going to be as epic a battle as the city has ever seen. On the one side is the namma Bengaluru homegrown chain, Café Coffee Day. On the other is the world’s biggest coffee company and café chain, Starbucks.

As Starbucks prepares to surge into Café Coffee Day’s home ground, Bangalore, in the coming months with an explosion of cafés, Café Coffee Day already has the ground well covered. Nevertheless, it is preparing to counter with a slew of cafés at upscale locations. Both are said to be fighting pitched battles over prime real estate locations in the city.

It is not exactly a David versus Goliath fight, not even a decaf version. The Seattle, Washington-based American coffee company and chain has 20,891 stores in 62 countries. It has less than two dozen cafés in the country currently, but Starbucks’s CEO is famously on the record that he expects India to be among the chain’s top five markets. But it was Café Coffee Day that was the first off the starting block here (the first CCD opened in Bangalore’s Brigade Road in 1996 as a cybercafe), and it now has over 1,500 cafés in India and some two dozen overseas, including in Prague and Vienna. It will add another 100 cafés by the year’s end. It is refurbishing its menu by adding more variety and making it international, even if it isn’t openly admitting that it is doing so to counter Starbucks.

Café Coffee Day’s founder, V.G. Siddhartha, 54, hails from a planter family in the Chikmagalur hills, the site where the first coffee bush was grown in India. Siddhartha is an entrepreneur and venture capitalist whose investments have included software firms like Infosys and MindTree. His café chain initiated Indians to the difference between a mocha and a macchiato and controls nearly two-thirds of the café market in the country. It is the friendly neighbourhood café where students gather to gossip, office workers grab a break and homemakers meet. Many of its cafés serve as “meeting rooms” for one-man businesses and freelance professionals. In Bangalore, some Café Coffee Days are known as startup hubs, where up and coming entrepreneurs converge.

Starbucks has the heft of the Tata Group behind it, after the two signed a joint venture to form Tata Starbucks in India. It is choosing its locations with care and Indianising its menu to just the right degree. Starbucks’s first store in India is in the historic Elphinstone Building at Horniman Circle in Mumbai. The chain quickly followed it up with several more stores in the city, including one located in the annexe of the celebrated Taj at Gateway of India. When the first Starbucks opened in Mumbai, the snaking lines indicated that its 90-rupees-or-more coffee was a must-try for Mumbaikars.

Café Coffee Day’s most premium store is the Café Coffee Day “Square” located in the ground floor of its own coffee bean-shaped headquarters, round the corner from the hip UB City Mall and next door to the newly-opened Marriott Hotel. There, tea is conspicuously absent from the menu. Café Coffee Day has several hundred stores dotting its base city, including stores within a kilometre of each other in the premium Lavelle Road, M.G. Road and Residency Road locations. It even has a café next to the M.G. Road metro station.

Both chains have their coffee bean sources sewn up, too. Starbucks sources mostly from the Tata plantations, while Siddhartha owns thousands of acres of coffee estates in southern India.

Starbucks’ range of coffees, which includes the espresso, americano and macchiato, priced at over Rs 100 per cup, and its Indianised menu, including its elaichi mawa croissant and its murg tikka panini, are affordable only for the top 10 per cent of India. In India, Starbucks is café snobbery at its peak. On the other hand, Café Coffee Day’s more modestly priced coffees and menu items like its egg wrap and blueberry frappe are within the reach of the top 30 per cent Indians. Where Starbucks beats Café Coffee Day is in its premium positioning, its coffee quality and its service standards. The last is definitely a challenge for Café Coffee Day, which is growing at breakneck speed.

The two chains’ customer bases may not overlap too much, but that has not stopped the café wars from hotting up. Nothing describes their combat more aptly than Café Coffee Day’s tagline: A lot can happen over coffee.


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