Catch 'em caffeinated

Cafe Coffee Day plans to leverage its clientele and real estate to support margins.

Youth hangouts. Like explorers of olden days following the spice trail to locate their land of origin, marketers these days are in hot pursuit of youth hangouts.

It's just that the aroma whiff to be trailed nowadays is that of coffee "" or so hopes the Rs 350-crore Cafe Coffee Day (CCD), a division of Amalgamated Bean Coffee Trading. It is busy selling its cafes as an ad platform to engage the Indian youngster with a stuffed wallet.

The feather in its cap: Hindustan Lever, India's premier advertiser, has already used its cafe chain to advertise its products. Rasna, Tropicana, South Africa Airways and the British Council too.

Other brands, says Sudipta Sengupta, senior general manager, marketing, CCD, should join them. "We are making available a location where there is a filtered audience "" a clientele with a certain profile," she says, "and companies find it meaningful to address this clientele."

Which is why Tropicana is willing pay Rs 20 lakh a month to sponsor the menu card. Or why the Gold Council forks out around Rs 8,000 per month to place tent cards on every alternate table in each of its 300 cafes.

There are other signage options too (after all, what's a cafe without wall messages?): a cut-out would cost an advertiser only about Rs 18,000 a month.

"Earnings from these branding alliances contribute just about 5 per cent of total sales currently," says Sengupta, "but we're looking to take this to at least 15-20 per cent in a few years." Gift vouchers and cake deliveries are the other new revenue streams.

While CCD has been clocking a reasonable 12 per cent revenue growth year-on-year (same store sales) over the last two years, this figure is a tad lower than the 15-16 per cent seen in the years before that.

One reason could be that the average bill hasn't become much bigger over the years "" it has remained at around Rs 150 in the metros and Rs 100 in smaller cities.

Prices have gone up by about 25 per cent over ten years, says Sengupta. "We're not really focussing on growing the spend per person," says she, "we're looking to get in more people into the cafes."

To that end, CCD plans to expand its typical cafe size from 800 sq ft currently to 1,200-1,500 sq ft. The crowds, though, have been growing anyhow. The average daily number of footfalls has been around 500 per day per outlet in the last couple of years""-about six years back, it was just 200.

The chain, however, continues to have differential pricing: it sells a cappucino cup at a regular cafe for Rs 22, at a premium cafe for Rs 27, and at a higher price still at the airport. Of course, there are low-cost offers too: in Madurai, for instance, it had an initial offer at Rs 12 per cup.

The margins, says Sengupta, are wafer thin. As costs increase, so does the pressure to get advertising revenue.