A new book charts how Café Coffee Day catered to the youth as well as the fashionable set

In 2008, VG Siddhartha brought in Alok Gupta, another UB Group veteran, as the CEO of Café Coffee Day. Gupta recalled that a popular joke at the time was that if a UB employee wanted to quit, all they had to do was cross the road to find their next job.

The same year, Siddhartha also brought in Bidisha Nagaraj as the president of marketing. Nagaraj had largely worked with technology companies, including Google, Intel and Compaq, till then, though she had started her career as an account director with the advertisement behemoth MullenLowe Lintas.

CCD was no longer a scrappy start-up operation. It had a pan-India presence, but it faced competition from newcomers. Regulatory changes like a ban on smoking in public were also changing the way restaurants, pubs, bars and cafes operated.

The second half of 2008 saw the collapse of Lehman Brothers, which triggered a global financial crisis. The feel-good factor of the previous decade was gone; people were becoming cautious about discretionary spending. Revenue growth in most businesses had started slowing, and margins were getting tighter. Everything was not upbeat. Further, with Barista, Costa Coffee, Mocha, Java City and other old and new entrants, the competition was heating up.

One good thing did happen though. Starbucks, which had planned to open its first store in India by the end of 2007, decided to postpone those plans. A global, single-brand retail company could not set up operations in India without a local partner who held a 51 per cent stake. This was a deterrent for many global brands that did not want to enter a market where they could not exercise full control. Starbucks postponed its entry largely because it did not find an Indian partner it felt comfortable with.

Siddhartha realised that the CCD brand, though well-recognised by then, needed a revamp. He believed that the new entrants into the cafe business helped expand the overall market size, but for him to remain the market leader, he needed to stay one step ahead at all times.

With a new CEO and marketing head, CCD began preparing for its first major rebranding exercise in 2008–09. A strategy and innovation consultancy firm, Quantum Consumer Solutions, was roped in to conduct consumer research. “We did both quantitative and qualitative research. We tried to understand who the target group really was, how the brand was relevant to them, and for whom we needed to build a brand that was relevant today and would be relevant tomorrow,” said Nagaraj. This was a very different exercise compared to the research done during the early days.

As always, Siddhartha was brimming with suggestions. According to Nagaraj, though Siddhartha had a background in finance, he had an instinctive understanding of marketing and branding. He would visit cafes incognito to observe customer behaviour and come back with ideas for the team. He was trying to achieve two things that seemed to be polar opposites – he wanted to democratise his cafes without making them seem too lowbrow. “He wanted to build a brand where people felt comfortable in their chappals,” said Nagaraj. “He did not want a brand that intimidated customers or made them think twice about what they were wearing before walking through the door,” she added. At the same time, he did not want the brand to be considered downmarket. He also wanted coffee connoisseurs to visit CCD. That was his single-line brief to Nagaraj.

The first task was to figure out how consumers referred to the brand. Nagaraj recalled talking to Siddhartha, “What is it that people call us? Is it Coffee Day, or Café Coffee Day, or just CCD? To grow a brand, it’s very important to understand the naming, because brand extensions take cues from the mother brand.”

Quantum’s research offered several insights into what the brand’s focus should be. It pointed out that 60 per cent of India’s population comprised the youth and recommended that the brand woo this segment. Not only was the youth segment the biggest in terms of demographics, but it also offered the advantage that this group would stay loyal to CCD as it aged, provided they executed its branding properly. Quantum pointed out that while the older segment of the population had more money and more spending power, it was not the ideal target when trying to build a high-volume brand.

The brand archetype study showed how important conversations played out around coffee. Nagaraj recounted an interesting observation. While the youth visited both Barista and CCD, they considered the former to be more formal. If they were dating someone, they would take the person to Barista on their first date. But once they were in a long-term relationship, they would take their significant other to CCD, where they felt more comfortable.

To translate the insights of the Quantum study into a branding exercise, CCD hired Landor, the global brand strategy and design firm. Lulu Raghavan, who later joined CDEL’s board as a director for a brief period but was then in the process of setting up Landor’s office in India, was intimately involved in the exercise.

Though Café Coffee Day’s brand identity was quite strong, Siddhartha was clear that they wanted a revamp to ensure it did not face challenges in a changing environment.”I would say it was a very progressive step. The brand was not broken. It was about preparing for the next phase of growth,” said Raghavan.

Landor’s endeavour was to turn CCD from a comfortable meeting spot to one where more evolved conversations could happen. While Nagaraj’s team decided on the brand strategy, the creation of a new logo took longer, with more meetings and deliberations. After nearly three months, with Landor’s design teams from Hong Kong and India working together, the iconic dialogue box with its purple and red theme got Siddhartha’s nod. Raghavan recalled that the entrepreneur was a tough taskmaster who was sceptical about the brand ideas proposed, even after the team demonstrated how the new logo would look on everything from the walls to branded merchandise. Once they used the logo on a storefront, he loved the new design and gave it a go-ahead for outlets across the country.

The new identity, which added the lacking aspirational layer to the brand, was unveiled in October 2009, first at Bengaluru’s Indiranagar outlet and then to all cafes across India over the next few months.

While Nagaraj and Raghavan were tackling the branding, CEO Alok Gupta’s focus was on back-end operations. CCD was a well-oiled machine with teams working smoothly to open new outlets and enter new cities without significant problems. What needed to be revisited was the supply chain and the F&B strategy.

For Gupta, who came from an organisation like the UB Group, where systems and processes and a clear direction were set by the top management, CCD’s start-up culture was a pleasant surprise. The team was filled with people passionate about their mission, but they all looked for direction in terms of execution and the way forward. Gupta knew he had to gear up the team to cope with the changing landscape in terms of competition and expansion. They could not rely on the existing glory alone.

Interestingly, Gupta said that during internal workshops, he realised that different employees had different perceptions of what business they were in. Some saw themselves as being in the coffee business, while others thought they were in the cafe business, a retail operation with coffee as an important component but not the sole focus. Gupta made it clear to everyone that CCD was, in fact, a cafe business. Taking away the coffee leaf from the earlier logo was an attempt to reduce the role of coffee in the story. The dialogue box logo, which highlighted conversation, was apt because it had the potential to grow beyond coffee and outside India.

Shortly after the branding exercise was completed, Nagaraj quit in November 2009. In February 2010, Siddhartha and Alok Gupta hired K Ramakrishnan, also called Ramki, as the president of marketing. Prior to this, Ramki was the country manager for marketing at Lenovo India.

The CCD retail format also saw a major change. While the vanilla format of CCD continued, two new formats – CCD Lounge (2011) and CCD Square (2009) – were introduced. This expansion was loosely based on the strategy big automobile companies use to retain customers. The young and less affluent customers start with a hatchback, but when they can afford bigger cars, the brand tries to retain them with more expensive sedans or SUVs.

According to Ramki, CCD Lounge was created to retain customers who had had their first cafe experience in the standard outlet but were now out of college, holding white-collar jobs and seeking a different ambience. The Lounge was the more upmarket and quieter version of the standard cafe, meant for slightly older customers. It had a more sophisticated coffee menu and allowed customers to create their own sandwiches from a set of choices. It was also more expensive. The first Lounge outlet was opened as an experiment in 2003 in Bangalore, and expansion to new cities only began in 2011.

The company also wanted to hold on to the more evolved, possibly snobbish, coffee aficionados who appreciated single-origin coffee and wanted the atmosphere of a high-end private club.

This gave birth to CCD Square. There was only one outlet in Bangalore for a very long time until more were added: one at the Mumbai airport, three in Delhi and one in Hyderabad. The number of Square outlets was limited by design.

CCD also had to ensure that the customers understood this multi-format strategy. The main CCD brand was strongly youth-oriented, an image that was consistent with the way people perceived the brand. The company now had to focus on branding the Lounge and Square outlets as slightly high-end cafes, so that customers understood why the prices were higher. “It was extremely difficult to communicate that this was something different. That difference had to come from where we placed the Lounge and Square outlets, and the offerings in each. From that point of view, we focused a little more on corporates and premium locations,” Ramki explained.

Excerpted with permission from Coffee King: The Swift Rise and Sudden Death of Café Coffee Day Founder VG Siddhartha, Rukmini Rao and Prosenjit Datta, Pan Macmillan.