Undeterred by the entry of iconic US-based coffee chain Starbucks at competitive prices, entrenched players such as CCD, Barista and Costa Coffee are unlikely to go in for price war, and plan to continue with differentiated pricing strategy. Starbucks, which debuted here over the weekend, said it will follow low pricing strategy across all its forthcoming outlets, including the next one at the premium Taj Hotel.
Starbucks, with Tatas as partner, has opted for competitive pricing that is nearly half the coffee chain’s charges elsewhere in the world — with a cup of coffee costing about Rs 80 for a small offering and Rs 165 for a large one. Asked if the company will have same prices at its all stores, including the one to be launched at the Taj this week, Starbucks Coffee Company Chairman, President and Chief Executive Howard Schultz replied in the affirmative. “The pricing will be same across all outlets despite Starbucks having the reputation of being a high-end premium brand. We try to have value proposition of all kinds equal to society, especially, when we open in mid-market,” Schultz told PTI after the launch of flagship store here on Friday. When contacted, Cafe Coffee Day (CCD), which runs 1,350 stores, said it will continue to follow a different pricing strategy which includes the rental. “It is different for different outlets. Our pricing depends on consumer potential and what are the input costs that go into running that store, including rentals. We would have different pricing across different retail points,” CCD Marketing President Ramakrishnan K said.
Asked if CCD will revise its price now in view of the entry of Starbucks, Ramakrishnan replied in the negative saying, “Our pricing is not determined by competition but by customers. We have no intention of changing that on the basis of somebody else’s pricing.” A hot coffee at Starbucks will range from Rs 80 to Rs 165, while a cold coffee will cost anywhere between Rs 120 and Rs 200. The CCD sells hot coffee at about Rs 80 and cold coffee at about Rs 150. Italian chain Lavazza-run Barista Lavazza declined to comment on Starbucks pricing, however, its director for South Asia R Shivashankar said, “Our pricing varies across formats and does not depend on rentals. We don’t open outlets in five star hotels.”
Barista is the No 2 player with over 300 outlets. Costa Coffee said it welcomes Starbucks to the country, but believes the England-based company has an edge as it entered the market earlier. “While we welcome the entry of Starbucks here, I believe we have a good understanding of the cafe consumer here which has been detailed into our business strategy including pricing. So, we will continue with what we are doing. “Yes, our prices vary with rentals and demographics,” Costa Coffee India chief executive Santosh Unni said. The US-based coffee chain had in this January entered in an equal joint venture with Tata Global Beverages and had agreed to together invest Rs 400 crore initially.
The company had said they would open 50 stores by the end of 2012. However, it has scaled down the number due to difficulties in getting the properties at the right locations. Starbucks will be opening two more stores in the city this week–one at the iconic Taj hotel by the Gateway of India and the Oberoi Mall in the northern suburb. The first Delhi store will be after the new year, Schultz had said.
News source: Deccan Chronicle