Barista Coffee Shops Case Analysis. Was the current pricing and product mix strategy right one?

Barista Coffee Company Limited

Was the current pricing and product mix strategy right one?

Product Mix: Barista sells more than 21 varieties of coffee with different combinations of cream, fruits and syrup. But overall its product proposition is a service consisting of

Coffee offered with combination of cream, fruit, ice and syrups
Coffee served by brew masters called Baristas, who addressed customers by first name
Customers could hang around for as long as they wanted
Café ambience accentuated by muted music and the decor
Relaxed and fun hang out
Standardized service at each outlet

Price Mix: By 2005 levels, Barista commanded a 20 rupees premium over cafe coffee day on its cappuccino. This was because Barista was positioned as a ‘Fine Cafe’ when compared to the coffee pub positioning of its competitors. Also Barista targeted working professionals and positioned itself as a place for social interaction (on the lines of Starbucks ‘Third place’ strategy). Considering that Barista had dropped prices in 2003, there is no need to go in for a price reduction. However Barista could look at alternate sources of revenue like packaged coffee, merchandising etc.

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Should it go for premium pricing or should it focus on affordability? We should continue with our current pricing strategy as it is consistent with our positioning. Reducing prices will dilute brand value or raise questions about quality. Since Barista’s motive is to rely on ‘experiential coffee’, therefore it should look at perpetuating the coffee culture and build on its premium value. This is in sync with their décor and ambience maintained in its retail outlets that give a distinct European feel.

Should it go for expansion through company-owned outlets or should ...

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Should it go for premium pricing or should it focus on affordability? We should continue with our current pricing strategy as it is consistent with our positioning. Reducing prices will dilute brand value or raise questions about quality. Since Barista’s motive is to rely on ‘experiential coffee’, therefore it should look at perpetuating the coffee culture and build on its premium value. This is in sync with their décor and ambience maintained in its retail outlets that give a distinct European feel.

Should it go for expansion through company-owned outlets or should it adopt the franchisee route? No, Barista should not go for franchise model. Franchise Model can be deployed to create the desired growth levels but for the Franchise model to work, Barista should look at partners who share a common business philosophy and must ensure that the ‘Barista Experience’ is not tampered with. Franchising will reduce our control over quality and would eventually dilute the “experience” which constitutes the brand Barista. So it is recommended that the expansion strategy should be through company owned outlets. The rationale behind this is that it is of prime importance for us to maintain consistency of quality of “experience” across outlets. And expansion in cities like Bangalore should be high priority since target audience is upper middle class people in India (Barista has less number of outlets in Bangalore compared to Café coffee day). Not having outlets in these cities, leads to less market share in these cities which constitute target audience.

Should Barista enter overseas markets? Barista should look for opportunities outside India since the target audience is majorly located in big cities of India. Barista, therefore, should try and expand to neighbouring countries where it can find locations similar to that in India in line with its premium positioning.

How should Barista prepare itself in case Starbucks entered the Indian market? Barista and Starbucks both sell “experience” rather than coffee like normal outlets. Therefore, Barista will have to highlight its Points of differences in the experience it offers. For example, while Starbucks will have coffee as its main experience, Barista can alter its product mix to offer a different “experience” which differentiates it.

Barista Coffee Shops Case Analysis. Was the current pricing and product mix strategy right one?

This is a preview of the whole essay

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