DOMINANT PLAYERS IN THE FAST FOOD MARKET – A COMPARATIVE STUDY Introduction Fast food is the term given to food that can be prepared and served very quickly. While any meal with low preparation time can be considered to be fast food, typically the term refers to food sold in a restaurant or store with low quality preparation and served to the customer in a packaged form for take-out/take-away. Outlets may be stands or kiosks, which may provide no shelter or seating, or fast food restaurants (also known as quick service restaurants). Franchise operations which are part of restaurant chains have standardized foodstuffs shipped to each restaurant from central locations. The capital requirements involved in opening up a fast food restaurant are relatively low. Restaurants with much higher sit-in ratios, where customers tend to sit and have their orders brought to them in a seemingly more upscale atmosphere may be known in some areas as fast casual restaurants. History
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DOMINANT PLAYERS IN THE
FAST FOOD MARKET – A
COMPARATIVE STUDY
Introduction
Fast food is the term given to food that can be prepared and served very quickly. While any
meal with low preparation time can be considered to be fast food, typically the term refers to
food sold in a restaurant or store with low quality preparation and served to the customer in a
packaged form for take-out/take-away.
Outlets may be stands or kiosks, which may provide no shelter or seating, or fast food
restaurants (also known as quick service restaurants). Franchise operations which are part of
restaurant chains have standardized foodstuffs shipped to each restaurant from central
locations.
The capital requirements involved in opening up a fast food restaurant are relatively low.
Restaurants with much higher sit-in ratios, where customers tend to sit and have their orders
brought to them in a seemingly more upscale atmosphere may be known in some areas as fast
casual restaurants.
History
The concept of ready-cooked food for sale is closely connected with urban development. In
Ancient Rome cities had street stands that sold bread and wine. A fixture of East Asian cities
is the noodle shop. Flatbread and falafel are today ubiquitous in the Middle East. Popular
Indian fast food dishes include vada pav, panipuri and dahi vada. In the French-speaking
nations of West Africa, roadside stands in and around the larger cities continue to sell—as
they have done for generations—a range of ready-to-eat, char-grilled meat sticks known
The secret recipe has long been a source of advertising, and allowed KFC to set itself apart.
Also, KFC was the first chain to enter the fast-food industry, just before McDonald's, which
opened its first store a year later, and the "secret recipe" was the initial home replacement
strategy.
2. Name recognition and reputation.
KFC's early entrance into the fast-food industry in 1954 allowed KFC to develop strong
brand name recognition and a strong foothold in the industry. The Colonel is KFC's original
owner and a very recognizable figure, both in the U.S. and internationally, in their new logo.
In fact, in the fourth annual LogoValue Survey, done by The Schecter Group, the KFC logo
was the only one which significantly enhance the brand's image .
3. PepsiCo's success with the management of fast food chains. PepsiCo acquired Pizza
Hut in 1977, and Taco Bell in 1978. PepsiCo used many of the same promotional strategies
that it has used to market soft drinks and snack food. By the time PepsiCo bought KFC in
1986, the company already dominated two of the four largest and fastest-growing segments
of the fast food industry.
4. Traditional employee loyalty.
"KFC's culture was built largely on Colonel Sanders' laid back approach to management"
(Wright, p.433). Before the acquisition of KFC by PepsiCo, employees at KFC enjoyed good
benefits, a pension, and could receive help with other non-income needs. This kind of
"personal" human resources management makes for a loyal workforce.
5. Improving operating efficiencies by reducing overhead and other operating costs can
directly affect operating profit.
Due to the strong competition in the US, the fast-food chains are reluctant to raise prices to
increase profit. Many of the chains are turning to operating efficiencies to increase profit. For
many companies, operating efficiencies are achieved through improvements in customer
service, cleaner restaurants, faster and friendlier service, and continued high-quality products.
Weaknesses
Weaknesses are also found internally like strengths. Weaknesses, however, can limit a
company’s potential. The weaknesses for KFC are identified as follows:
1. The many sales of KFC lead to a confusing corporate direction.
Between 1971 and 1986, KFC was sold three times. The first two sales, to Heublein, Inc and
to R.J. Reynolds, left the company largely autonomous. It wasn't until the sale to PepsiCo in
1986 that changes in top management started to take place. These changes happened almost
immediately after the sale.
2. KFC has a long time to market with new products.
Because of the nature of the chicken segment of the fast food industry, innovation was never
a primary strategy for KFC. However, during the late 1980's, other fast food chains, such as
McDonald's, began to offer chicken as a
Menu option. During this time, McDonald's had already introduced the McChicken while
KFC was still testing its own chicken sandwich. This delay significantly increased the cost of
developing consumer awareness for the KFC sandwich.
3. Conflicting cultures of KFC and Pepsi Co.
While KFC's culture was largely based on the Colonel's laid back approach to management,
while PepsiCo's culture is more of a "fast track" attitude. Employees do not have the same
level of job security that they enjoyed before the PepsiCo acquisition
Problems
Through an analysis of the strengths, weaknesses, opportunities, and threats of KFC, the
following potential problem areas were identified:
1. No defined target market.
The advertising campaign of KFC does not specifically appeal to any segment. It does not
appear to have a consistent long-term approach. The U.S. has enormous changes in its
demographics. Single-person households have increased from 12% in 1970 to 25% in 1995.
With this kind of dramatic change, KFC does not have a proper approach to its target market.
2. Health Conscious Consumers.
There has been a trend toward an increasingly healthy diet in America. This put KFC at an
extreme disadvantage due to its fried product offering.
3. Increased Start Up Costs.
Prime locations have increased in cost due to limited room for expansion. New technology
has increased efficiencies, but resulted in greater increased start up costs. Restaurant and
equipment packages range from $500,000 to $1,000,000.
Achievements:
KFC is one of the most renowned world gastronomic brand names. Kentucky Fried Chicken
products are currently offered in 80 countries worldwide and in more than 11,000 restaurants
which are visited on a daily basis by almost 8 million customers. Globally, KFC employs
approximately 290,000 people, Worldwide, a new KFC restaurant is opened almost every
day.
In 2004 the “KFC Excellent” range - three types of salad (Caesar, Garden and Mandarin)
obtained the prize for “Worldwide Best Practice Award 2004” in the category of best product
and best marketing campaign and its implementation in the restaurants. This prize is
distributed each year by YUM Restaurants International.According to the ratings for “Most
expensive world brands 2004” conducted by the American weekly ‘Business Week’, KFC
was positioned 54th place; currently valued at 5.1 billion USD.
DOMINO’S
SIZE OF THE MARKET
Domino's Pizza is one of the biggest and fastest growing international food joints in South
Asia. The very first Domino's Pizza outlet in India opened in Jan, 1996 at New Delhi. Today,
Domino's Pizza India has become a wide network of Pizza delivery and food chain. There are
close to 220 outlets in 42 cities of India and the brand is the top most among the food
delivery business. Domino’s Pizza outlets can be seen at major locations of Delhi and NCR.
Their home delivery is free with a guarantee of “Thirty Minutes Nahi to Free”. Although
they are expert in delivering Pizzas on time, their eating joints and outlets are also good. We
plan to have a total of 500 stores in 75-80 cities by 2010 to 2011. It would entail an
investment of Rs 200 million during the period
MARKET GROWTH
During last four months, dominoes have opened outlets in Jammu, Panipat, Surat, Baroda,
Nashik, Trivandum, Meerut and Patiala. While earlier, 70 percent of our business used to be
in metros and mini-metros, now the ratio is 50:50 between big cities and smaller Tier II and
III cities. Domino’s Pizza is expanding its base in India by opening 500 outlets to add to its
current tally of 156 outlets, across 50 cities in India by 2011 with an investment of Rs.1, 000
crore.
MARKET STRATEGIES
Promotional and Advertisement Campaigns(Coupons and discounts)
The '30 Minutes' Promise
Use of Technology(Digital interactive Television, Internet on the PC, Mobile
telephony)
Premium Pricing Strategy
Indian fast food industry and entry of multinational players
Distribution strategies of fast food chains in India
MARKET SHARE
The organized pizza market in India is worth Rs.500 crore and Domino’s has a substantial
45% market share, and registered a healthy growth of 60% over last year. The main target for
new outlets shall be metro cities though Tier II cities would also receive a fair amount of
attention. Currently Domino’s sells around 35,000 pizza every day, of which around 1% are
given free on account of its “30 minutes or free” model. 65 percent of its revenue comes from
home delivery service; around 35 percent is from sales in premise.
COMPETITORS
Fast food is one of the world's fastest growing food types. It now accounts for roughly half of
all restaurant revenues in the developed countries and continues to expand there and in many
other industrial countries in the coming years. But some of the most rapid growth is occurring
in the developing world; where it's radically changing the way people eat. People buy fast
food because it's cheap, easy to prepare, and heavily promoted. This paper aims at providing
information about fast food industry, its trend, reason for its emergence and several other
factors that are responsible for its growth. India is a developing country with 2 percent of organized
and 98 percent of unorganized sector. So most of the fast foods came into Indian market as
India has a high growth in every sector. Some of the competitors of domino’s are
McDonald's
Pizza Hut
Barista
Coffee Day
INTRODUCTION
Pizza Hut is one of the flagship brands of Yum! Restaurant Int. which also has KFC, Taco Bell, A&W and Long John Silver’s under its umbrella. It is the world’s largest pizza chain with over 12,500 restaurants across 91 countries.
Pizza Hut was started in 1958, by two brothers Frank and Dan Carney in Wichita, Kansas. They had the idea to open a pizza parlor. They borrowed $600 from their mother, and opened the very first Pizza Hut. In 1959, the first franchise unit opened in Topeka, Kansas. Almost ten years later, Pizza Hut was serving one million customers a week in their 310 locations. In 1970, Pizza Hut was put on the New York Stock Exchange under the ticker symbol PIZ.
In 1986, Pizza Hut introduced delivery service, something no other restaurant was doing. By the 1990's Pizza Hut sales had reached $4 billion worldwide. In 1998, Pizza Hut celebrated their 40th anniversary, and launched their famous campaign "The Best Pizzas Under One Roof." In 1996, Pizza Hut sales in the United States were over $5 million.
The first Indian outlet was opened in June 1996 in Bangalore. In India, Pizza Hut has 139 restaurants across 36 cities. Pizza Hut has been voted the “best family restaurant” for the second year running at the 2007 Tommy’s Parent Friendly Awards. "Pizza Hut is known for quality, innovation and category leadership.
PIZZA HUT INDIA
Background
Pizza Hut entered India in 1996, and opened its first restaurant in Bangalore. Since then it has captured a dominant and significant share of the pizza market and has maintained an impressive growth rate of over 40 per cent per annum. Pizza Hut now has 95 outlets across 24 cities in India; and employed nearly 4,000 people by end of 2004. Yum! has invested about US$ 25 million in India so far; this is over and above investments made by franchisees.
Yum! Brands Inc is the owner of the Pizza Hut chain worldwide. A Fortune 300 company, Yum! Brands owns Kentucky Fried Chicken, Pizza Hut, Taco Bell, A&W and Long John Silver’s restaurants worldwide. Yum! generated more than US$ 25.9 billion in worldwide sales in the year 2003, and has more than 33,000 restaurants in over 100 countries.
Pizza Hut is believed to have close to 50 per cent market share of the organized pizza-retailing segment in India.According to an article in Financial Express, the market size of the pizza segment is around US$ 87 million and currently growing at the rate of 15 per cent to 17 per cent per annum. According to Pizza Hut sources, most of their outlets are financially successful, encouraging further expansion. In India, the average investment for each outlet is US$ 275,000-335,000 and is borne by the franchisee.
RETAIL ENVIRONMENT
Out of all the existing pizza chains such as Domino's, Smokin Joe’s, Papa John’s, Pizza Corner, U.S Pizza, Pizza Hut has a dominating market share of 48% of the total market share. However, this forced competitors to look for new methods of increasing their customer bases. They all try to come up with some newer, bigger, better pizza for a low price. But Pizza Hut has always had the first mover advantage. Their marketing strategy in the past has always been to be the first. One of their main strategies, that they still follow today is the diversification of the products they offer.
The market has become greatly competitive and the customer has become more discerning and adventurous. This however has not affected Pizza Hut's comfortable reign over the Indian pizza industry and the ever increasing number of loyal customers who have made it possible for Pizza Hut to aggressively extend its presence.
Pizza Hut is always adding something new to their menu, trying to reach new markets. For example, in 1992 the famous buffet was launched in Pizza Hut restaurants worldwide. They were trying to offer many different food items for customers who didn't necessarily want pizza. Another strategy they used in the past and are still using is the diversification of their pizzas. Pizza Hut is always trying to make a pizza into something slightly different so that customers will think it’s a whole new product. E.g., in 1983, Pizza Hut introduced Pan Pizza, which had a guarantee of being ready to eat in 5 minutes when dining at Pizza Hut restaurants. In 1993, they introduced the "BigFoot," which was two square feet of pizza cut into 21 slices. In 1995, they introduced "Stuffed Crust Pizza," where the crust would be filled with cheese. Currently, they are marketing "The Big New Yorker," trying to bring the famous New York style pizza to the whole country.
POSITIONING
Pizza Hut was among the first multinational brands to enter the food retail sector in India. When the first Pizza Hut restaurant opened in Bangalore the quick service industry was at a nascent stage and the pizza category was dominated by a sole regional player who had a marginal presence. Pizza Hut went on to play a significant role in pioneering and developing this category in India.
Worldwide and in India, Pizza Hut has come to become synonymous with the 'best pizzas under one roof'. This is because at Pizza Hut the belief is that every pizza has its own magic, thus making it a destination product – which everyone seeks. It is this belief that has ignited the passion to create, innovate and serve the finest product the industry has to offer, while setting standards for others to strive to replicate. Pizza Hut is committed to providing uncompromising product quality, offering customers the highest value for money and giving service that is warm, friendly and personal.
A critical factor in Pizza Hut's success has been its unique dining experience. Crewmembers at Pizza Hut strive each day to provide 'customer mania' - the kind of service that ensures that every visit of the customer is a memorable one.
Pizza Hut's constant endeavor to provide extra value – whether it is pizzas which are available to suit every price range, new promotions or the introduction of innovative product ranges - that puts a 'Yum' on every customer's face - has allowed it to increase its presence in India to the current 139 restaurants across 36 cities.
MARKETING STRATEGY
Pizza Hut’s marketing strategy is very simple: “we want to satisfy our customer by offering them the best.” Pizza Hut has always valued customer service and satisfaction. In 1995, Pizza Hut began two customer satisfaction programs: a 1-800 number customer hotline, and a customer call-back program. These were implemented to make sure their customers were happy, and always wanted to return.
Another big strength and even a competitive advantage is the fact that they have a full service restaurant as well as delivery services. Most of Pizza Hut's competitors do not have restaurants. Because of the restaurant, Pizza Hut can market to different segments that other pizza chains cannot. For example, Pizza Hut can market to families much easier than Domino's or Little Caesar's. Pizza Hut offers a sit-down, conversational type restaurant where families can take their children for birthday parties for example. Pizza Hut's broad selection of products also makes it easier for them to market to different market segments.
The other two strategies followed by Pizza Hut is C.H.A.M.P.S (Cleanliness, Hospitality, Accuracy, Maintenance, Product quality and Speed) and 3F’s (Fun, Friendly and Familiar). These two strategies have really helped Pizza hut to evolve out as a market leader with a competitive advantage.
CONSUMER PULL FACTORS
A critical factor in Pizza Hut's success has been a menu that has constantly evolved and expanded to cater to the changing needs and specific preferences of customers in different parts of the world. In having understood the pulse of the customers in India, Pizza Hut has clearly established itself as a brand with an Indian heart.
Besides offering an extensive range of vegetarian pizzas, it was the first pizza chain to open a 100% vegetarian restaurant in India in Surat and later in Ahmedabad and Chowpatty, where it offers a Jain menu sans all root-based ingredients.
Over the years Pizza Hut has also developed and successfully introduced a range of products especially suited to the Indian palate. These products like Chicken Tikka, Spicy Korma, Spicy Paneer and the Masala and Tandoori pizzas have been a tremendous success. What has also given Pizza Hut a competitive edge is that in addition to an extensive range of internationally renowned pizzas like The Italian, the proprietary Pan Pizza and Stuffed Crust, in India the menu offers the option of a complete meal. It includes appetizers, a Salad Bar - where the customers can make their own fresh salads, a range of soups, pastas and desserts.
Pizza Hut has a unique tradition. A bell hangs at each Pizza Hut restaurant, which is rung by customers who as they leave wish to thank the servers for yet another memorable visit.
LONG TERM PROGNOSIS
With competition being so strong in this industry the threat of imitation products will surely be a problem to be dealt with. Pizza Hut will however have the first mover advantage with this product. With the entry of imitation products into the market, Pizza Hut will have to adjust its mixes to accommodate change. The promotions may have to be bigger and better than the competition, or the product may need to be altered to give it that little bit of an edge over the competition. For example stuffing the crust with cheese or giving a free topping with the purchase would help give Pizza Hut an edge over the competition.
Pizza Hut is moving beyond big cities. While consolidating its presence in the metropolitans, this aggressive expansion will involve Pizza Hut entering smaller cities like Cochi, Nasik, Bhubaneswar, Lucknow and Madurai . It is strengthening its roots in the Indian market by tying up with local and popular brands such as Reliance Communication. Apart from this it is also developing local supply chain.
Basically, Pizza Hut will need to remain flexible in the maturity stages of the product life cycle in an attempt to continue to be the market leader. Overall, this is a product that is not much unlike any of the other new pizza's that Pizza Hut has introduced. What makes this new product so exciting is the marketing plan that is directing the product at a new segment. We are taking a large pizza with a lot of toppings and marketing it as an "Extreme Pizza" to a generation of younger adults that are consumed by this marketing tool. This is what will make this a success. The mix of promotion and advertising we will be using will target a very profitable
Factors for Success
Offering value food
Employing economies of scale, Pizza Hut has made its offerings more affordable. Its delivery offer of US$ 4.4 for four personal pan pizzas has been very successful, helping it grow the business by 25 per cent. They have recently introduced a range of vegetarian personal pan pizzas for US$ 1.1. Most Pizza Hut restaurants are located in the metros and smaller metros. In taking long strides across the country, Pizza Hut is consolidating its position by opening more restaurants in the metros where it already has a presence as well as opening outlets in new markets.
Aggressive marketing and tie-ups with local and popular brands
Pizza Hut has increased its visibility by launching a well-received TV campaign aimed at the young crowd. It has formed partnerships with recognised brands such as Nestle and Pepsi. It also holds regular promotional campaigns targeted at children and uses these alliances to offer packages during these campaigns.
Developing the local supply chain
The local supply chain for Pizza Hut was developed by Yum! and currently 95 per cent of the ingredients they use are locally produced. They now import very few specialty items like pepperoni.
Leveraging the India Advantage : International brand with an Indian heart
Pizza Hut is one of the first international pizza chains with purely vegetarian dine-ins at Chowpatty (Mumbai), Ahmedabad and Surat, which also serve Jain menus. Pizza Hut has even opened two all-vegetarian restaurants in the western state of Gujarat to cater to the Jain religious community, whose members prefer not to eat at places where meat is served.
Offering more than the international menu
International food chains typically offer only a few localized products in other parts of the world. However, Pizza Hut’s local menu is as large as the international one. According to Pizza Hut, the Indian food heritage is very rich, and hence Indians like local flavors. The Tandoori range of pizzas, which was developed locally, has a menu mix of over 20 per cent.
Indigenous sourcing of raw materials
Pizza Hut has reduced costs through indigenous sourcing of raw material. It has tied up with a local company Dynamix Dairy Industries Ltd (DDIL) for sourcing mozzarella cheese. The landed cost of imported mozzarella comes to US$ 3.3 - 3.5 per kilogram. The domestic price, however, works out to US$ 2.99 - 3.1 per kilogram. Pizza Hut is adding to the bottom line by localizing equipment as well as by paying attention to inventory replenishment, which has been reduced from 60 to 30 days.
MC Donald’s
McDonald's is the leading global foodservice retailer with more than 31,000 local restaurants
serving more than 58 million people in 118 countries each day. More than 75% of
McDonald's restaurants worldwide are owned and operated by independent local men and
women.
The strong foundation that he built continues today with McDonald's vision and the
commitment of our talented executives to keep the shine on McDonald's Arches for years to
come. To read more about McDonald's history, vision and executives, click on their links in
the left menu.
We drive our business momentum by focusing on what matters most to customers. Our
owner/operators, suppliers and employees work together to meet customer needs in uniquely
McDonald's ways. The powerful combination of entrepreneurial spirit and System wide
alignment around our Plan to Win enables us to execute the best ideas with both large-scale
efficiency and local flair.
Business Model Franchise Model – Only 15% of the total number of restaurants are owned by the
Company. The remaining 85% is operated by franchises. The company follows a
comprehensive framework of training and monitoring of its franchises to ensure that
they adhere to the Quality, Service, Cleanliness and Value propositions offered by
the company to its customers.
Product Consistency – By developing a sophisticated supplier networked operation
and distribution system, the company has been able to achieve consistent product taste
and quality across geographies.
Act like a retailer and think like a brand – McDonald’s focuses not only on
delivering sales for the immediate present, but also protecting its long term brand
reputation.
Challenges in Entering Indian Markets
Re-engineering the menu - McDonald’s has continually adapted to the customer’s
tastes, value systems, lifestyle, language and perception. Globally McDonald’s was
known for its hamburgers, beef and pork burgers. Most Indians are barred by religion
not to consume beef or pork. To survive, the company had to be responsive to the
Indian sensitivities. So McDonald’s came up with chicken, lamb and fish burgers to
suite the Indian palate.
The vegetarian customer – India has a huge population of vegetarians. To cater to
this customer segment, the company came up with a completely new line of
vegetarian items like McVeggie burger and McAlooTikki. The separation of
vegetarian and non-vegetarian sections is maintained throughout the various stages.
McDonalds Marketing Mix (5 P’s)After segmenting the market, finding the target segment and positioning itself, each company
needs to come up with an offer. The 5 P’s used by McDonalds are:
1. Product
2. Place
3. Price
4. Promotion
5. People
Product: How should the company design, manufacture the product so that it enhances
the customer experience?
Product is the physical product or service offered to the consumer. Product includes certain
aspects such as packaging, guarantee, looks etc. This includes both the tangible and the non-
tangible aspects of the product and service.
McDonalds has intentionally kept its product depth and product width limited. McDonalds
studied the behaviour of the Indian customer and provided a totally different menu as
compared to its International offering. It dropped ham, beef and mutton burgers from the
menu. India is the only country where McDonalds serve vegetarian menu. Even the sauces
and cheese used in India are 100% vegetarian. McDonalds continuously innovates its
products according to the changing preferences and tastes of its customers. The recent
example is the introduction of the Chicken Maharaja Mac.
McDonalds bring with it a globally reputed brand, world class food quality and excellent
customer specific product features.
Place: Where should be the product be available and the role of distribution channels?
The place mainly consists of the distribution channels. It is important so that the product is
available to the customer at the right place, at the right time and in the right quantity.
Nearly 50% of U.S.A is within a 3 minute drive from a McDonald’s outlet.
There is a certain degree of fun and happiness that a customer feels each time he dines at
McDonalds. There are certain value propositions that McDonalds offer to its customers
based on their needs. McDonalds offers hygienic environment, good ambience and great
service. Now McDonalds have also started giving internet facility at their centres and they
have been playing music through radio instead of the normal music. There are certain
dedicated areas for children where they can play while their parents can have some quality
time together.
Price: What should be the pricing strategy?
Pricing includes the list price, the discount functions available, the financing options
available etc. It should also take into the consideration the probable reaction from the
competitor to the pricing strategy. This is the most important part of the marketing mix as this
is the only part which generates revenue. All the other three are expenses incurred. The price
must take into consideration the appropriate demand-supply equation.
McDonald’s came up with a very catchy punch line “Aap ke zamane mein ,baap ke
zamane ke daam”. This was to attract the middle and lower class consumers and the effect
can clearly be seen in the consumer base McDonalds has now.
McDonalds has certain value pricing and bundling strategies such as happy meal, combo
meal, family meal etc to increase overall sales volumes.
Promotion: What is the suitable strategy and channels for promotion of the product?
The various promotion channels being used by McDonald’s to effectively communicate the
product information are given above. A clear understanding of the customer value helps
decide whether the cost of promotion is worth spending.
There are three main objectives of advertising for McDonald’s are to make people aware of
an item, feel positive about it and remember it. The right message has to be
communicated to the right audience through the right media. McDonald’s does its
promotion through television, hoardings and bus shelters. They use print ads and the
television programmes are also an important marketing medium for promotion.
Some of the most famous marketing campaigns of McDonald’s are:
“You Deserve a break today, so get up and get away- To McDonald’s”
“Aap ke zamane mein ,baap ke zamane ke daam”.
“Food, Folks, and Fun”
“I’m loving it”.
People: How to converge the benefits of internal and external marketing?
McDonald’s understands the value of both its employees and its customers. It understands the
fact that a happy employee can serve well and result in a happy customer.
McDonald continuously does Internal Marketing. This is important as it must precede
external marketing. This includes hiring, training and motivating able employees. This way
they serve customers well and the final result is a happy customer.
The level of importance has changed to be in the following order (the more important people
are at the top):
1. Customers
2. Front line employees
3. Middle level managers
4. Front line managers
The punch line “I’m loving it” is an attempt to show that the employees are loving their work
at McDonalds and will love to serve the customers.
Products
McDonald's predominantly sells hamburgers, various types of chicken sandwiches and
products, French fries, soft drinks, breakfast items, and desserts. In most markets,
McDonald's offers salads and vegetarian items, wraps and other localized fare. Portugal is
the only country with McDonald's restaurants serving soup. This local deviation from the
standard menu is a characteristic for which the chain is particularly known, and one which is
employed either to abide by regional food taboos (such as the religious prohibition of beef
consumption in India) or to make available foods with which the regional market is more
familiar (such as the sale of McRice in Indonesia).
Advertising
McDonald's has for decades maintained an extensive advertising campaign. In addition to the
usual media (television, radio, and newspaper), the company makes significant use of
billboards and signage, sponsors sporting events ranging from Little League to the Olympic
Games, and makes coolers of orange drink with their logo available for local events of all
kinds. Nonetheless, television has always played a central role in the company's advertising
Established in February 2000, Barista Lavazza is noted as a pioneer of Indian café
culture. The Barista Lavazza chain of espresso bars delivers a truly Italian coffee
experience in warm, friendly and relaxed environment. It aims to provide a
comfortable place for people to unwind over interesting conversations and a cup of
coffee. Barista Lavazza consist of young adults, who are exposed to global lifestyles
and appreciate the authentic flavours and tastes of coffee. At last count, the Barista
Coffee Company Limited has over 200 Barista Lavazza Espresso Bars and Barista
Lavazza Crèmes in over 30 cities across India.
Besides the Indian sub-continent, Barista Lavazza also has cafes in locations across
Sri Lanka, Oman and the UAE. Barista is owned by Lavazza, Italy's largest coffee
company. Lavazza, the sixth largest coffee roaster in the world, has a 46.5% share
in the Italian retail market (value, source: Nielsen) and operates in over 80 countries
in the Home and Away-from-Home sectors (Foodservice, Vending and Cafes).
HISTORY
C850 : First known discovery of coffee berries
1600 : Coffee enters to Europe through the port of Venice
1654 : The first coffee house opens in Italy
1750 : One of Europe’s first Coffee house
1822 : Prototype of 1st espresso machine is created in France
1908 : Invention of the world’s 1st drip coffee maker
Feb, 2000: First Barista Lavazza at Basant Lok, New Delhi
At Barista Lavazza our objective is to provide an authentic Italian coffee drinking
experience in a warm, friendly, no pressure environment. We began operations in
the year 2000 as we felt the time was right for the Indian consumer to experience a
café that provided a third space, away from work and home, where the guest could
relax and unwind.
Lavazza traces its origins back to 1895, when Luigi Lavazza purchased a little
grocery store, Paissa Olivero, in the old commercial section of Turin for 26,000
Italian Lire, about US$ 20. In the early 1900's, he invented the concept of the blend
- a complex art of mixing together coffee of different origins to obtain a distinctive
taste and harmonious flavour in the cup. Before the turn of the century, the name
Lavazza evolved into an international powerhouse and the unofficial ambassador of
Italy, being synonymous with all things Italian - creativity, art, passion and of
course, espresso.
OUR PHILOSOPHY
At Barista Lavazza, we do all we can to make every guest feel comfortable and
welcome. We serve nothing but the finest Arabica coffees and cuisine at great value
prices. We have friendly and efficient brew masters who believe in service with a
smile. And provide a cheerful, interactive ambience that makes guests wish their
coffee breaks lasted just a little bit longer.
To share our cup of joy, we have always stuck to our Italian roots, guarding them
zealously to ensure that our espresso bars reflect the warmth and character of
traditional Italian coffee houses. And in the process, make Barista Lavazza the place
‘where the world meets’.
Our aim is to passionately deliver the highest levels of experiential services.
Maintain consistency in serving the highest quality products and become a globally
competitive organization – one that is driven by an insatiable thirst for excellence.
AWARDS
Barista Lavazza’s pioneering efforts at providing a truly Italian coffee house
experience has received a number of accolades and recognitions.
Times Food Guide 2008 - Best Coffee Bar Award
The Times Food Guide is a guide for food lovers across the country. It
comprehensively covers food joints in the various metros rating them according to
popularity, ambience, food etc. The award is in recognition of Barista Lavazza’s
popularity among its customers.
IMAGES Retail Award 2007 - 'Most admired retailer of the year: Catering
Outlets’
The Images Retail Awards (IRA) judges companies in the business of retail in
concepts, innovations, designs and consumer recall. Barista Lavazza has been
encouraged by the record number of consumer votes received in its favor during the
selection process.
Super Brand 2006-2007
Super Brands India is a part of the globally recognized Super Brands UK, which
promotes the discipline of brand management and pays tribute to exceptional
brands. Barista Lavazza has been awarded Super bands for the second consecutive
year. And we’re even more chuffed about it this time because the new survey also
included the opinion of our consumers, along with the panel of judges. And it’s
always great to know our patrons appreciate our efforts to delight them.
INNOVATION
Research
Our research is the backbone of our quarterly menu refreshment process. We leverage Consumer Trends to launch products with higher acceptance and thus launch Guest Centric Product Development. Our R&D and Product teams spend 4 hours each month at stores / behind the Counter & Product ideation is thus based on observation and guest feedback. We track F&B studies across the world & understanding Indian trends and fitment. Our research helps us to identify key global trends & refresh our product line accordingly.
Innovation
Barista Lavazza is a 3 dimensional brand experience. Our focus has always been to provide a differentiated offering. We do this by using a guest touch point model that focus on the product innovation, refreshing ambience and warm service.
At Barista Lavazza, we launch a new line of food and beverage - every quarter. The launches are based on international trends, guest feedback and internal research. We will continue to innovate along these lines and launch products that delight our guests.
Our target audience has a global lifestyle and a truly international outlook. Our guests appreciate the truly international line of beverages served at Barista Lavazza and our warm environment. Our focus will be on innovation and continuously providing guest relevant experiences within the Barista Lavazza store.
Barista –Marketing Mix
Barista continued to maintain its focus on quality by sourcing only Arabica beans and using
the best international espresso machines, supplied by the Italy-based LaCimbali.
Barista was, working towards becoming the number one in terms of parameters likes brand-
imagery, brand-dominance, customer-loyalty and turnover. The strategy for fulfilling its
mission over the next decade would be by leveraging its strong position in the Indian market
to grow further in an Asian context.
I) Product
Barista cafes also have a good number of product mixes. The menu ranges from variety of
coffees and pastries. Barista also sells other items like mugs, Coffee beans, T-Shirts, Coffee
Kettles.
Core Product :BEVERAGES
Hot beverages
a) Hot coffee
b) Hot chocholates
c) Steamers
d) Tea
Cold beverages
a) Coffee on Ice
b) Ice cream blended coffee
c) Fruit smoothies
d) Ice tea
Indulgence
a) Indulgencce cold coffee and shakes like Barista cookie crunch and Barista blast.
Lavazza’s like Cappuccino aroma and Marocchino
OTHER FOOD ITEMS OFFERED:
Sandwiches
Snacks like Veg .Puff
Desserts like Choco chip Muffin, Blueberry Muffin
SUPORTING PRODUCTS:
Coffee Mugs
T-Shirts
Coffee makers
Visting cards holders
Steel key chains
Coffee and Coffee beans are also considered as the core product for Barista. The company
has also tested marketed coffee beans through its outlets in Mumbai and Delhi. Barista claims
that they sell a best coffee bean.
Barista has started with a new concept by the name Barista Merchandise. Barista
Merchandise is available at selected Barista espresso bars in Delhi, Mumbai, Kolkata,
Chennai, Hyderabad and Bangalore. The Barista merchandise are the different types of beans
that customer can take home and have the coffee of his own taste. Some of the Barista
Merchandise includes
The French Press
Barista House Blend
Barista is also diversifying its hot beverages menu and introducing several specialty teas. The
reasoning undoubtedly is based on the fact that apart from South India, all other parts of the
country are mainly tea-consuming areas, and this step is expected to help the company
expand its client base in the smaller towns of these regions.
II) Price
Barista holds the perception of being an expensive cafe. However, Barista was the first
organization to start the concept of the organized cafes in India. Initially Barista started with
Skimmed pricing policy. Barista segmented the market according to the income and age.
Due to the entrance of new players, Barista was finding difficult to maintain the market share.
First and foremost, Barista re-defined the target market customer. They even planned to
change their tagline. "Where the world meets” And so when company looked at this
positioning and they looked at the pricing - the strategy being that if we lower the pricing.
Apart from this, Barista has also introduced new low-priced beverages. The officials say
these price cuts have resulted in 15-per cent walk-ins at Barista's outlets during the last few
months. Barista decided to alter their strategy in order to retain their market. After studying
the market, Barista found that competitors were fighting against them against the pricing.
They decided to reduce their pricing. It was not done from a perspective of acquisition. With
reduction in the prices, there had been a 47 per cent increase in footfalls over the
subsequent three months. December 2003 had, seen Barista experiencing a 21 per cent per-
store increase in footfalls over the previous December, with the number of footfalls for the
year totalling 14 million.
III)
Place
Barista started its first outlet at Bangalore and from there it has started spreading its wings
especially after price reduction. Now they are even planning to focus on raising the bar of
coffee experience. Barista already has presence in all the metros and has a presence in all the
highly populated regions like Mumbai, Delhi, Bangalore and many more places.
Barista is seeking to expand through the franchisee route model and plans to enter B-class
towns in the country and middle-class localities in the metros such as North and East Delhi.
By 2005-06, Barista plans to have over 300 outlets across the country up from 153.
IV) Promotion
Barista did not initially believed in any kind of promotion but in order to keep their customers
interested they started building the brand by communication both within the store as well as
outside the store through mass media. It under takes various promotion activities during the
festival or during occasions like Valentines Day. Barista has done advertising in almost all
national newspapers. Barista has launched summer campaign through summer chillers, and
was advertised through different channels.
SWOT Analysis
Strength:
Claim to sell the best coffee
Large Number of outlet
In house sourcing of coffee beans
Espresso-Highest selling coffee
Weakness:
Expensive coffee
Self service for the customers
Quality of food- Stale breads
Opportunity:
Large Untapped Market
Tie-ups with other companies for promotion
Threat:
Entry of Foreign players like Georgia, Starbucks etc
Large unorganized market
CAFÉ COFFEE DAY
Café Coffee Day is a chain of coffee shops in India having its headquarters in
Chikkamagaluru, Karnataka. A division of Amalgamated Bean Coffee Trading Company
Ltd. (ABCTCL), it is commonly known as Coffee Day or CCD. It opened its first cafe in
1996 on Brigade Road in Bangalore, and today has the largest cafe retail chain in India – with
over 800 cafes in 112 cities.
Large number of coffee day cafes are located in Bangalore. The cafe chain has had much
success riding, and to some extent creating, the cafe culture wave that swept across
metropolitan India following strong economic growth resulting in an increase in youth
spending power. It has even tied up with World Space and Micro sense to enable its cafes
with satellite radio and Wi-Fi, respectively. Its first Wi-Fi cafe was opened on Lavelle Road,
Bangalore.
Café Coffee Day sources coffee from 5000 acres of coffee estates, the second largest in Asia,
that is owned by a sister concern and from 11,000 small growers. It is one of India’s leading
coffee exporters, with clients across the USA, Middle East, Europe and Japan.
With its roots in Chikmagalur, the home to some of the best Indian coffees, Coffee Day has
its business spanning the entire value chain of coffee consumption in India. Its different
divisions include: Coffee Day Fresh 'n' Ground (which owns 450 coffee bean and powder
retail outlets), Coffee Day Xpress (which owns 730 Coffee Day kiosks), Coffee Day
Takeaway (which owns 9000 vending machines), Coffee Day Exports and Coffee Day
Perfect (FMCG Packaged Coffee) division. It is entering the European market by opening
two Cafés in Austria as well, making forays into Pakistan and Germany to set up cafes
abroad. The strategy CCD has adapted is to place a cafe in every possible location where
some business can be generated. So in Bangalore, in the main shopping district, there are six
outlets in a 2 km radius and overall 120 cafes in Bangalore alone.
INDIA:
Café Coffee Day currently owns and operates 169 cafes in all major cities in India. It is a part
of India's largest coffee company named Coffee Day, ISO 9002 certified company. Coffee
Day's most unique aspect is that it grows the coffee it serves in its cafes. Cafe Coffee Day's
vending machines have a special niche in the market compared to competitors because Cafe
Coffee Day machines offer filter coffee unlike the instant coffee offered by competitors'
brands. Growing from a coffee exporter to a coffee parlour, café coffee day has certainly
come a long way in this segment.
Key Features:
Pioneers of the Café Concept in India with its first Café at Brigade Road, Bangalore in
1996. This Café was opened as a Cyber Café (first of its kind) but later, with the burst
of cyber cafes it reverted to its core competency….Coffee
Essentially a youth oriented brand with majority of its customers falling in the 15-29
year age bracket
Each café, depending upon its size attracts between 400 and 800 customers daily
At present it operates 169 cafes across 43 cities
Plans to operate 200 cafes by December 2004
It is a place where customers come to rejuvenate themselves and be themselves
D) Marketing Mix
Every company goes through different phases in the business. The phase is very similar to
that of the product lifecycle. In order to sustain in the market and to maintain its market share
it is essential for the company to have a right marketing mix. The company has to have a mix
of proper product that is relevant to the target audience, proper price, proper reach i.e. the
place and relevant promotion that keeps the target audience interested in the company.
I) Product
Café Coffee Day’s menu ranges from hot and cold coffees to several other items. However,
the core product is the coffee. The management believes that trend is changing towards
coffee. So taking this opportunity, the company also sells coffee powder. Café Coffee Day
also believes in selling other merchandised products.
CORE PRODUCT – BEVERAGES
Hot Cofee
Cold coffee
Hot Tea
Frost Teas
Fruiteasers
OTHER FOOD PRODUCTS OFFERED:
Small eats like hotdogs,brownies,cookies
Big eats like Burgers and sandwiches
Sweet eats
Sundaes
SUPPORTIVE PRODUCTS:
Mugs
Caps
T-shirts
Bags
New Introductions:
Reglon Sleeves T-Shirts
Marquis pens
Shoulder Bags
Coffee Mints
II) Price
Cafe Coffee Day has positioned as “Value for Money”. The major target customers are the
youngsters. Pricing is a very sensitive issue for the Indian consumers.
Café Coffee Day believes in mass marketing.
However there are some outlets where the students are given special discounts. CCD even
set up their outlets in the college campus.
CCD is looking for expansion to more interior places. Here prices become more complex as
the consumer are very conservative in spending. The decor, ambience and the experience
will play a major role in pulling the crowds in small cities.
The price of the product has to be kept uniform in order to maintain the uniformity in all the
outlets.
CCD target audience is youngsters. Majority of them are dependent on their family for their
expense. This is one of the most important reasons for low pricing compared to other cafes.
They believe it in making their product at an affordable price. Pricing is one of the important
weapons for them to fight against their competitor.
III) Place
Café Coffee Day outlets are spread across India. However, there are more number of outlets
in the metros and towns. For e.g. In Mumbai CCD have 37 outlets. In the past 12 months,
Café Coffee Day has also been on an aggressive drive to expand the number of cafés in the
smaller towns across the country based on research and invitations received from these places
to open more such cafes there. There will be an increased focus in cities having populations
from as low as Five Lakh upwards. However, the focus has not been on just opening more
cafés wherever there has been an opportunity. Café Coffee Day is already the largest and
most wide spread retail chain of cafes in India with a current count of 169 cafés in 43 cites.
IV) Promotion
In order to stay with the competition and to keep the audience interested, they undertake lot
of promotion activities. CCD jointly organizes large number of promotions with the other
companies serving the similar target audience. These cafes have emerged as a new media
vehicle for reaching the right type of the customer. CCD gets in physical touch with
audiences, target loyalty club members, or advertises in their newsletters
Cafe Coffee Day competitors include but are not limited to
Barista
Cafe Mocha
Costa Coffee
SWOT Analysis
Strength:
Large Number of outlet.
In house sourcing of coffee beans.
Tie Ups with good companies.
Weakness:
Limited Target Audience.
Follow the competitor strategy.
Quality of food- Stale breads.
Loud and Hard Music.
Improper sitting arrangement.
Opportunity:
Large Untapped Market
Tie-ups with other companies for promotion.
Threat:
Entry of Foreign players like Georgia, Starbucks etc.