Why Coke wants Coffee...

A budding second generation Entrepreneur started an Internet café in Bangalore’s iconic Brigade Road in the mid-90s with the unprecedented boom in consumers using the World Wide Web to communicate with each other besides knowing a bit more about the world on the other side. Those days, an hour of browsing the Internet would cost ₹100 and a cup of coffee, perhaps ₹10 or so. It’s no surprise the costs have reversed today. 

 

Cut to 2019, the same Entrepreneur is expecting a valuation of $1 billion for his coveted asset, Café Coffee Day which he has patiently and painstakingly built over the past 20 years. The café has over 1,700 cafes across India now including a few outlets abroad. I was privileged to work in this team a decade back for 2 years where my team and I went ahead to set up over 140 cafes across Airports, Metros, inside large Retail formats such as Wal-Mart, Shoppers Stop, Odyssey, at Hospitals, University campuses, Cinemas and even at Cricket Stadiums at Chennai and Kolkata during IPL Matches. The bidder for CCD this time is none other than Coca Cola Company, world leader in carbonated beverages who has also been in India for 2.5 decades.

Why does Coke want coffee? Because they see an untapped opportunity to reach out to the millenials in India who are among the largest of their ilk worldwide. Pepsi, on the other hand has a majority of its business coming from snacks and food while Coca Cola Company with its wide portfolio dominates the carbonated beverages market which has seen a shy growth in India, thanks to alternative beverages, let alone a few healthier options. CCD cafes interact with over an estimated 3,50,000 patrons a day with an estimated 100,000 bills daily (assuming an average 3 persons per bill). That’s over 1.2 billion times of engagement annually, something that Coca Cola Co. can do perhaps only online with constant advertising. 

A recent report published by Euromonitor states that the Indian Coffee Market was pegged at ₹2,500 crores as of 2018 and could double in the next 5 years. With cafes becoming the third and most preferred alternative place to hang around after home and work place, Indians are embracing coffee cafes and tea bars like never before. In the immediate past half decade, chains like Chaayos and Chai Point have gained much attention from Consumers as well as deep pocketed Investors. World’s biggest café chain Starbucks entered India a decade back in a JV with Tatas and has grown to over 150 cafes till now while others like CBTL and Café Pascucci left the market even as the homegrown Barista and British chain Costa have found a small niche for themselves. Interestingly, Coca Cola Co. bought Costa Coffee last year for $5 Bn while Nestle bough the distribution rights of Starbucks across Europe for over $7 billion in 2018.

Interesting times ahead for discerning Indian consumers. Would we see us drinking Coke and Fanta along with a Cappuccino at the neighborhood café or the Mall down the road? I don’t know yet. Interestingly, Sidhartha of CCD has refrained all along from selling carbonated beverages ever since the beginning. But the brand’s future could be different. We are now seeing Spicejet logo on the erstwhile Jet Airways’ crafts. Time will tell how this story spins out. And although it’s not in my plan today, I am already fixing my Auditor’s meeting at a CCD. For the love of the brand and their coffee.

Self-Checkout or Assisted

Earlier, I wrote in my article for The Economic Times about how Self-Checkout or even an assisted one would make a cut in the Indian scenario even as Indians are embracing E-Commerce like no other and the Indian E-Commerce business is expected to cross over USD 50 Billion by 2025 by various estimates. Meanwhile, the Retail Industry in India is pegged at USD 500 Billion with just about 10% being Organised or even semi-Organised (meaning those shopkeepers who use some form of PoS for Billing & Accounting). Almost half of the semi-organised Retailers do not have an end to-end PoS solution and this is the latest trending opportunity in the realm of Retail Entrepreneurship with a number of existing players upping their ante while a whole lot of new technology is being tested and introduced by new Start-Ups. Interesting days ahead indeed.

Meanwhile, I visited the Apple Store on Orchard Road at Singapore during my recent vacation to the Country. It’s been 11 years since I travelled abroad and was yearning to see the Temple of Technology to seek the blessings of the Almighty Apple (sic). I have owned every Apple product ever made by the Company in it’s recent history, starting from the iconic iPod in 2007, iPhone (several of them!), iPad (two of them), MacBook, Apple Tv, Apple Watch and Airpods. I felt like a little kid inside Disneyland when I entered the Apple Store, that I was walking all along the counters and seeing the whole retail theatre with glee.  I wanted to interact with the staff and hence gave a request for a query on iCloud Management. I was given an appointment and was asked to wait for about 40 mins which I agreed with utter happiness so I can spend time there seeing how Apple consumers interact with the Apple Store. On the first floor was the Genius Groove – apparently the Genius Bar has now become a fledgling hub where atleast 100+ customers & staff can be seen seated together and interact on various service issues. I picked up my iPad and started browsing with the free internet provided by the Apple Store – a whopping 110 mbps even as so many of them were sharing the same internet. Finally, my turn came and I was assisted ably by Justin who clarified some basic as well as a few complicated queries on iCloud. He was extremely polite and knowledgeable and sent me back happy. 

I returned a day later to buy the new iPod which was launched on Thursday 30^thMay 2019. I saw about it on their website and ended up at the store to pick it up. The staff themselves were surprised that it was ready for Sales! I placed an order on the mobile PoS which the staff had where I was allowed to browse the options, colours, etc. I placed the order and waited for 10 minutes by when another Apple Staff brought the product and handed over to his colleague. She placed my order on the same handheld PoS and my transaction was completed in less than 2 minutes. I was pretty excited doing this transaction and saw first hand how Omni-Channel Retail actually works. While I have seen similar technology being made available at a few Indian Retail Stores (Croma, For Example), the seamlessness and the convenience was fantastic from a user experience. 

There are atleast 20,000 companies, small medium or bigger who make PoS solutions including market leaders like GoFrugal, Wondersoft, Pathfinder, etc. to name a few. The solutions are priced from a one-time payment for as low as Rs. 10,000, SaaS models with recurring payments, enterprise solutions and so on. At my own Start-Up “Smiling Baby” – a chain of baby care stores, we signed up GoFrugal Technology’s eponomous “RayMedi” software which is now christened “RPoS” and have invested heavily 2 years backwith a module to manage Inventory across our multiple franchise stores including product management, adding inventory, live stock status and much more. With two running stores and two more in the pipeline, we have put the software to great use although we are yet to unlock so many hidden features including the omni-channel option where in we can rotate stocks across stores based on user requirements. Also, there is an option to connect the software with a mobile App, so Consumers can actually check which product is available at which store and accordingly, they can place orders online for a home delivery or a store pick-up. And this, for a small Start-Up like ours which is certainly not heavy on piled up cash investments. 

Omni-Channel offers a great opportunity for SME Retailers as much as the established ones. Time to make the most of it now.

Marketing or Sales – Take your pick?

I participated in a professional debate after a very long time last week. The Topic was “Marketing or Sales - Take your Pick” organised by TiE Chennai. Quite obviously I was given the topic of Sales and the co-speaker was a much senior person to me with vast experience in Marketing & Lead Generation. The Moderator conducted the session very well asking some uncomfortable questions on behalf of the august audience who were all members of TiE Chennai and many of them young Entrepreneurs. The topic was more in the scheme of Entrepreneurship and Start-Ups. For a young Start-up, be it 1 month old or 3 years old (Oh, btw, Flipkart and Ola are not start-ups anymore – the unofficial timeframe that is globally accepted for a new business to be called a Start-up is only 5 years!), should it put its focus, money and effort on Marketing (Offline or Online) or on getting the first Sale (and successive Sales) therefore effectively in building a Sales Team which will eventually build a Sales pipeline. The jury was out that evening, as decided by the Moderator and “Sales” won the topic of the day hands down. However, my co-speaker as well as a few in the audience (and some of my friends too) had a different view. Many felt that a product becomes a Brand only because of it’s Marketing, Promotions, Brand Recall and so on. 

Here’s my take. If a Brand is only remembered for it’s Marketing and probably not for its Sales, then it is, perhaps not selling enough! There’s a good old saying that a good product doesn’t need Marketing. Then there is evoking, invoking and hard selling the theories of Ace Marketing Professor Peter F Drucker (with which accompanies loads of 2 decade old emotions from University PG days) by one and all. I am of the humble opinion that Marketing, in it’s true definition and application has truly changed in the last 3 decades, more so in the last decade with the emergence of the Millenials and Gen Z as consumers of products and services.

For Ex., the newest Indian Interest which are the Food hailing Apps, affectionately (sic) known in the Start-Up ecosystem as “FoodTech” – apparently using technology to sell food (hic). Companies that are funded by Wall St., the Chinese and the Japanese, tease customers who order through the App with deep discounts, at times 50% or more effectively making a mockery of the efforts of the Restaurateurs who prefer to align with these Apps for the fear of losing out to competition. Interestingly, none of these discounts are offered in most cases by the Restaurants themselves, rather by the FoodTech companies – in order to acquire new customers and retain existing ones. The so called coupon codes aka cost of acquiring new customers is shown as Marketing – for convenience purposes as well as for the Balance Sheet. So, what was traditionally known as a one off “Sampling exercise” has now morphed in to this. Most e-commerce companies that sprang up in the past 10 years or so have effectively used this tactic to raise more funding. This, I do not call as Marketing. Cut to bigger and established consumer brands who offer 10% extra Shampoo or 15 gms extra of Biscuits and 20% more of Air in packs of Chips for the same price – No, this I do not call Marketing either. 

The core principles of Marketing haven’t died, they have just been tweaked conveniently to suit new age Marketing Campaigns, created by new age Marketers, approved by new-age Marketing Standards to please new-age Millenials and Gen-Z Consumers. Be it is a Start-Up or a Larger company, if you are not selling enough to fund your cash flows, you will cease to exist in the short term, no matter how strong a brand equity you build. Everyone is not as lucky as a Flipkart or Idea Mobile. 

I have been a firm believer of the adage, “A bird in the hand is worth two in the bush”. In the recent Tamil film “Petta”, there’s a conversation between two friends how a Facebook video garnered thousands of likes and shares to which another quips, if these could fetch him a beer. This is the reality of the so called new-age Marketing. Even as we felt that the physical sampling of audience viewership by Research Firms was a dubious exercise, today’s digital marketing metrics are not just dubious but futile. In fact, most of today’s new-age techniques do not have a conversion to sale, thereby making the money and most importantly the time invested in the exercise, a gross wastage.

Yet, there’s so much hype for Marketing a new product or service without giving it the much needed Sales push. There’s only so much Marketing can do, finally the product has to sell. And sell again and again for the company to remain in business. Be it a Start-Up or an established one. Take your pick.