Cafe Coffee Day vs Starbucks (advice to Howard Schultz)

People who know me are aware that I don’t drink alcohol, be it wine, beer or hard liquor. I do love my coffee though. In fact, am something of a “specialty coffee” junky (as the marketing types call it.) Starbucks will soon be opening locations across India, expanding into a country and culture that I know relatively well. I am rooting for Starbucks to change the India specialty coffee market, but not for the reasons you might expect.

My favorite coffee stop is at Peets, which are few and far between on the East Coast (or in most of the other places where I travel.) Starbucks may or may not be the best coffee available, but it is fairly consistent from location to location. I was reminded how much I value that consistency when I was drinking some very mediocre coffee at a Peets in the Philadelphia airport recently.

The biggest player in the Indian specialty coffee market is called Cafe Coffee Day. They have 1407 locations across India (as of January 2013.) While they are not quite as pervasive as Starbucks, I was surprised during my recent travels around India at how many CCDs I saw in the smaller towns and along the major highways.

Cafe Coffee Day was started in 1996 by V.G. Siddhartha as a way to create demand for the coffee beans he was growing on his 10,000 acres of Indian coffee plantations. They also now source coffee from 11,000 small growers. It was a smart strategy that has resulted in Cafe Coffee Day’s very successful growth along with the growth of prosperity in India, especially among the middle classes.

Though there have been a couple of other competitors entering the Indian market for what is often called “specialty coffee,” none of those companies have put much of a dent in the Cafe Coffee Day business. Here is to hoping that Starbucks will succeed where the likes of “Barista Lavazza” and “The Coffee Bean & Tea Leaf” have failed. If you spend any time in any Indian specialty coffee cafes, be it Cafe Coffee Day, Starbucks or Costa, you will immediately realize that the customers are NOT shopping based on price. They are buying an experience as much as a cup of coffee (or tea.)

So what is wrong with the typical Cafe Coffee Day and what should the folks at Starbucks pay attention to? In no particular order, based on many months of note-taking:

At almost every CCD location I have visited they have far too many staff at the cash counter taking my money and never enough people making the food / coffee that I just paid for and I am expecting to have soon.

At most of those same CCD outlets I have the same experience over and over, where three people are behind the counter discussing something (usually involving large wads of bills) with all three of them ignoring the customer.

Now contrast that with MOST but not all Starbucks outlets where the staff generally are attentive to the customer. I will be the first to admit that plenty of SB outlets have surly workers, with airports usually being the absolute worst. (But that is often because the airport is the employer not Starbucks and that same airport probably doesn’t make their employees lives particularly pleasant.)

Every other visit I make to a CCD involves an employee making change out of his or her wallet. In Mysore recently, the same staff member who had to raid his wallet to make change for me told me the shop was open 24 hours. But when we arrived there at 6 am, it was closed and the sole employee “working” was in fact sleeping in the booths where the customers would normally be sitting.

The toilets are disgusting in 90% of the CCDs. That said, the toilets are disgusting in 90% of all Indian business establishments. The key to SB’s success in India will be to make their offering so it will please any audience, which will obviously please the Indian audience as well. Indians tolerate lots of bad service, dirty toilets and crappy customer service, so my advice to SB is to surprise the Indian customers.

While I would encourage SB to adapt to the local culture in the way they do in Singapore or Europe, that only applies in terms of food and drinks. In a word, Starbucks do NOT listen to your Indian advisers. Localized food is fine but localized service standards are not. The advisers will tell you that what I have described is “the way things go in India.” That is simply not true and for SB to really shake up the Indian market they need to keep that in mind.

So, am I really rooting for Starbucks to decimate the Indian specialty coffee market? Not by a long shot. I am hoping Cafe Coffee Day will step up their game and become a much better company because of the competition that Starbucks will bring to the market. The Indian market is so large that both brands, Starbucks and Cafe Coffee Day (as well as probably a few others, could happily divide up the market and all make plenty of money while serving up good coffee.)

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