Dissertation Writing Help on Coffee Industry in India-Suggesting a Marketing Strategy
Competitive Landscape of Coffee Industry in India
·
Hindustan Unilever and Nestlé
India are the dominant national players in coffee, with both companies together
accounting for more than two thirds of off-trade value sales. Fresh coffee is
mostly consumed in South India and is dominated by regional players, which
control small pockets of the region based on the taste preferences and brand
loyalties of the residents. Instant coffee is dominated by the two main
national players with their respective Nescafé and Bru brand portfolios. In
2008, Nestlé India commanded a share of 37% of coffee off-trade value sales
with Nescafé Classic and Sunrise, while Hindustan Unilever followed closely
with a share of 32% with Bru. While Bru Roast & Ground is the leader in
fresh coffee, Nescafé is the clear winner in instant coffee. Hindustan Unilever
derives a higher proportion of coffee sales from South India, whereas Nestlé
India is stronger in the rest of the country.
·
Growth in instant coffee drove
the off-trade value sales of coffee in 2008 as instant coffee value sales saw a
10 percentage point higher growth in 2008 than fresh ground coffee. This
benefited Nestlé India which controls 61% of off-trade instant coffee sales and
allowed it to increase its share of coffee in India. Its increase in share was
slightly higher than the increase in share Hindustan Unilever achieved. With
the premix coffee format being rather unsuccessful, Nestlé India concentrated
on ground level promotions such as sampling in order to increase the
penetration of its regular coffee brands instead of introducing new coffee
formats such as premixes and flavoured coffee.
·
Although Nescafé, the leading
coffee brand in India held a 37% share of off-trade value sales in 2008, coffee
in India is dominated by domestic brands such as Bru and Coorg and various
other regional brands. Other international brands such as Illy have
super-premium prices and have a minute presence in select urban off-trade
outlets.
·
There were no notable new
product launches in coffee in 2008. With rising prices and the failure of
premix products to take off, companies concentrated on increasing the
penetration of their existing brands.
·
Nestlé India and Hindustan
Unilever were both active in terms of TV commercials for Nescafé and Bru. Both continued to use similar
taglines and themes as 2007 with Bru continuing with “Bru se hoti he khushiyaan
shuru” (Bru is the initiation point of happiness) tagline and Nescafé using its trademark playback music.
·
Coffee is predominantly sold in
pouches with some brands available in plastic or glass jars. In the latter part
of the review period, companies dealt with sharp increases in coffee prices and
high inflation rates by promoting smaller pack sizes such as 50g and 100g,
which are more affordable than 200g or 500g packs. Hindustan Unilever’s Bru is
being promoted in affordable sachets in rural areas.
·
Premium brands, Bru Cappuccino
are differentiated from standard brands Nescafé Classic and economy brands
Nescafé Sunrise based on their higher price points. Economy brands such as
Nescafé Sunrise are also considered cheaper economy brands as they are mixes of
coffee and chicory. Key brands such as Nescafé and Bru widely use points of
sale displays to attract consumers in supermarkets/hypermarkets.
·
There are no private label
products in coffee in India
Prospects of Coffe Industry in India
·
As coffee penetration is very
low in India, there is high potential for expansion of the coffee consumer
base. The aggressive expansion of chained coffee specialists is expected to
create a taste for coffee among Indian consumers who are predominantly tea
drinkers. The new generation of urban Indians is expected to develop a taste
for speciality coffees such as cappuccino and mocha during the forecast period
and this will expand the currently niche coffee premix consumer base.
·
A 4% CAGR off-trade volume
sales is expected in the forecast period. This is slightly slower than the
review period CAGR of 5%. The penetration of coffee has expanded over the
review period and year-on-year growth is expected to slow in the forecast
period because of this expanded consumer base.
·
The growth of coffee in the
future could be threatened by consumers shifting to juices as a healthy alternative
for at-home consumption and to soft drinks such as juice drinks and bottled
water for on-the-go consumption. With consumers experimenting with various
alcoholic and non-alcoholic drinks coffee companies are faced with the
challenge of retaining interest in coffee once the hype around chained coffee
specialists fades.
·
Instant standard coffee is
expected to see higher volume growth rates as busy lifestyles and the
increasing proportion of working women will favour instant coffee over fresh
ground coffee that takes time and skill to prepare. Moreover, coffee volume
growth is being driven by the expansion of its consumer base in north, west and
East India where unlike South India, the consumption of fresh ground coffee is
not traditional and the taste of instant coffee is preferred.
·
On-trade coffee sales which are
growing from a much smaller base are expected to see higher growth rates than
off-trade sales. With their established status as hip hangouts for the youth,
the number of specialist coffee shops is expected to witness a high CAGR of
22%. The expansion of chained coffee specialists is expected to establish
on-trade coffee consumption as a leisure and entertainment activity for a
larger proportion of Indian youth.
·
Unit prices are expected to
rise over the forecast period as high input costs and inflationary pressures
are expected to squeeze company margins. Outside of South India, coffee
consumption is not an essential part of daily routines as is tea and coffee and
is not expected to erode tea consumption during the forecast period. As coffee
remains a discretional purchase, companies are expected to continue offering
small affordable pack sizes and freebies to generate trials and increase coffee
consumption from a seasonal to regular habit.
·
Hindustan Unilever and Nestlé
India are expected to concentrate on above-the-line communication and point of
sale sampling and displays to increase the penetration of instant coffee in
north and West India. These players are not likely to face any competition from
regional companies which are predominantly in the fresh ground coffee category.
Retail chains such as Subhiksha and Food Bazaar, which are already carrying
private label tea are expected to launch private label coffee to offer
affordable alternatives to branded coffees.
·
Coffee premixes are expected to
expand their consumer base during the forecast period as the appreciation for
convenience of preparation grows with increasingly busy lifestyles in the
cities. Increased exposure to Italian variants such as mocha and cappuccino in
on-trade outlets is also expected to drive sales of speciality 3-in-1 premix
coffees in off-trade outlets.
·
Future prospects for coffee
pods/machines are fairly dim in India as consumers are content to prepare
coffee on the stove. The high prices of coffee pods/machines will limit their
growth prospects during the forecast period.
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