Undeterred by the entry of the iconic US-based coffee chain Starbucks at competitive prices, entrenched players such as, Cafe Coffee Day (CCD), Barista and Costa Coffee are unlikely to go in for a price war. They plan to continue with a differentiated-pricing strategy.
Starbucks, which debuted here over the weekend, said it would 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 would have same prices at all its stores, including the one to be launched at the Taj this week, Starbucks Coffee Company Chairman, President and Chief Executive Howard Schultz said: “The pricing will be the 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, when we open in mid-market,” Schultz told PTI after the launch of the flagship store here on Friday. When contacted, CCD, which runs 1,350 stores, said it would continue to follow a differentiated-pricing strategy, which includes rental expense.
“It is different for different outlets. Our pricing depends on consumer potential and 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 would revise its price in view of the entry of Starbucks, Ramakrishnan said, “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 would range from Rs 80 to Rs 165, while a cold coffee would cost anywhere between Rs 120 and Rs 200. CCD sells hot coffee at Rs 80 and cold coffee at 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 number two 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.
