Study the Impact on Retail

Indian Coffee Industry with the

Advent of Coffee Shops.

(With Emphasis on Cafe Coffee Day)

1

TABLE OF CONTENTS

EXECUTIVE SUMMARY 3

CONSUMER PROFILE 4

ACKNOWLEDGEMENT 6

INDIAN COFFEE INDUSTRY 7

TODAYS COFFEE DRINKER 7

ABOUT CAFE COFFEE DAY 9

CAFE COFFEE DAY – MARKET SHARE GRAPH 11

CAFÉ COFFEE DAY – SWOT ANALYSIS 13

CHANGING MARKET STRATEGY 14

OBJECTIVE OF THE STUDY 15

SAMPLING TECHNIQUE 16

DATA COLLECTION 17

SAMPLE SIZE 18

HYPOTHESIS 19

ANALYSIS 20

RECOMMENDATIONS 29

QUESTIONNAIRE 31

EXECUTIVE SUMMARY:

2

CONSUMER TASTES AND HABITS ARE CHANGING IN INDIA AS COFEE

BARS/CAFES SPRING ONTO THE SCENE. ESPRESSO, LATTES, AND

CAPPUCCINOS ARE FAST BECOMING POPULAR BEVERAGES IN THIS TEA

CONSUMING NATION.

India has always been predominantly a Chai (Tea) drinking nation. However, there has

been a sudden change in this trend with coffee becoming more and more popular in

recent times especially among the younger population. The roadside Chai (Tea) thelas

(shops) outside colleges and offices have been replaced by hip coffee joints like Barista

and Café Coffee Day. The Chai (tea) that used to cost couple of rupees (5 cents) is

replaced by coffee costing something like Rs. 100.

India has now becoming one of the fastest growing coffee markets in the world.

According to Technopak Advisors, a global retail consultancy firm, the organized coffee

retail business in India is over Rs.8 billion ($17 million), and the potential for coffee

retail outlets are nearly 3,000.

With the Indian middle class consumer ready to spend more and be a part of global

lifestyle and culture, coffee parlours in the country are on an expansion spree. From

small-sized coffee parlours to classy coffee lounges leading coffee retailers such as Café

Coffee Day, Barista, Costa Coffee and Coffee World have all been fighting hard to lure

India’s growing middle class.

3

THE NEW SCENARIO:

Cafe culture is the latest trend to take the nation by storm. It joined the race simultaneous

with the satellite culture. Although not as big, the culture has nonetheless caught on the

consumer fancy and has spawned quite a few coffee chains. Amongst the big guns is

Amalgamated Bean Coffee Trading Company’s Cafe Coffee Day.

CONSUMER PROFILE:

This study cannot be complete without looking at the ever changing habits and

preferences of consumers.

The consumer profile in India especially is one with varied cultural and traditional

influences. In terms of coffee, southern India is supposed to be one of the major

consumers of same as compared to the Northern and other parts of India.

Filter coffee is the preferred drink in south while instant coffee in north. Price also plays

a major significant role in their purchase decision.

4

In this study we have looked at the consumer from the following aspects:

Their Monthly disposable income

Services offered to the consumer

Quality of the Product

Demographic segmentation of consumers

Price

Consumer Perception towards such upcoming retail services in India is another consideration.

5

ACKNOWLEDGEMENT

The project is the result of the efforts of many people. We would like to place on record

our sincere thanks to the various people for their assistance, guidance and co-operation

for the successful completion of this project.

First and Foremost, we owe our sincere thanks to Institute of Management & Computer

Studies for all the support provided in terms of the library for providing us with timely

requirements of books and also the computer lab for giving an access to the computers

and also the Internet.

Our overriding debts continue to the respondents without the time and sincere efforts of

whom the project would not have got its current shape. And last but not the least friends

and family members who have given us enough support, encouragement and blessings

without which the completion of this project was not possible.

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INDIAN COFFEE INDUSTRY

India ranks 5th among the top 10 countries of the world, accounting for 3 % of the total

world coffee production and exporting 80 % of the total produce.

It is also the 5th largest coffee producer. Being a traditional tea consuming country, the

average coffee consumption in India was quite low at 10 cups per person annually.

People in the Northern region preferred instant coffee in contrast to the people in the

south, who preferred traditional filter coffee.

Coffee, a household beverage confined to South India became quite popular in the late

1990s. The late 1990s saw the emergence of coffee chains. Moreover, there was a

transition from the conventional and out dated coffee house to a more sophisticated and

trendy coffee bars. In the late 1990s, non-traditional coffee retailing outlets like coffee

bar chains, coffee vending machines, and specialty coffee powder shops offered exciting

growth opportunities. They constituted 50 % of sales in the Indian Coffee Industry. The

growth of these specialty and gourmet coffee shops was a result of the economic and

demographic changes, higher disposable incomes, increasing number of working women,

and increasing awareness and exposure to global trends

Today's Coffee Drinker

Today's coffee drinker who visits the cafés is mainly the youth between the ages of 15

and 35. Students form a majority of the customer base for the cafés. Café Coffee Day

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estimates that about 60% of the footfalls in its 300 plus outlets are those of students.

Barista estimates the same to be 40% in its outlets. Many of these youngsters consider a

café as a meeting place for discussing their projects or just interacting with other students

rather than as a place that just serves coffee. Many of these outlets have juke box music,

wi-fi connections, and even a cell phone charging station. It's a place where one can sit,

talk, relax and incidentally drink a cup of gourmet coffee with added flavors such as

chocolate, caramel, and hazelnut. Hence, many outlets serve more than just the various

varieties of gourmet coffee. Since students and youngsters in general prefer snacks rather

than meals, cafés serve both Indian and continental snacks. Costa Coffee as part of their

menu is planning on introducing wraps and actually adding an Indian flavor to suit the

local palate.

Barista and Café Coffee Day have entrenched themselves into the minds of the consumer.

They have outlets at almost every street corner and concentrating more on areas, which

are likely to be visited by youngsters. It would be rather difficult to steal customers from

the two leading chains even though they might claim to offer a `smoother' blend. Pricing

will be a major factor in this regard. Starbucks and Barnie's might invite traffic into their

outlets initially for the novelty aspect but might not lead to a loyal customer base as

consumers might realize that they are paying a huge price for the `un-perceived' value of

a `smoother' blend. Whether these foreign players will really make inroads and what slice

of the pie they will take is yet to be seen. It's certainly worth the wait to see them make a

mark in the mind of the consumer.

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ABOUT CAFE COFFEE DAY

LOGO:

Café Coffee Day is a chain of coffee shops in India. A division of Amalgamated Bean

Coffee Trading Company Ltd. (ABCTCL), it is commonly known as Café Coffee Day. It

opened its first cafe in 1996 on Brigade Road in Bangalore, and today has the largest cafe

retail chain in India - with 450 cafes across 69 cities in India.

The cafe chain has had much success riding, and to some extent creating, the cafe culture

wave that swept across metropolitan India following the BPO boom and the resultant

increase in youth spending power. With a hip, trendy image, the chain attracts a lot of

young folk who work in BPO businesses.

Its different divisions include: Coffee Day Fresh 'n' Ground (which owns 350 coffee bean

and powder retail outlets), Coffee Day Xpress (which owns 341 Coffee Day kiosks),

Coffee Day Takeaway (which owns 7000 vending machines), Coffee Day Exports and

Coffee Day Perfect (FMCG Packaged Coffee) division. It is now entering the European

market as well, making forays into Pakistan, Austria and Germany to set up cafes abroad.

One unique aspect of Café Coffee Day is that it grows the coffee it serves. The coffee

beans are produced in the golden soil of Chikmagalur.

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Café Coffee Day has created its own identity. When one thinks of a café it’s got to be

Café Coffee Day. The font used for “Café” is called SLURRY. The upward swirl in the

logo depicts the freshness and the aroma it provides with every sip. It has emphasized

great attention in choosing the colours, which is young and vibrant.

The Tag line - “A LOT CAN HAPPEN” is aptly chosen for the brand whose major

objective is to cater the youth in the 15–29 year age bracket. The location chosen by Café

Coffee Day also ensures that people can rejuvenate and be themselves. It has a well

equipped roasting unit catering to the specific requirement of the consumers. There are

Self service counters/outlets, but table service is also provided.

Cafe Coffee Days after sales service team are well trained and certified to service a

wide range of manual, semi-auto to fully-auto Coffee machines and related equipments.

The vast knowledge and experience of Cafe Coffee Day Coffee team will enable them to

serve customers well. They have been able to secure a strong foothold in the marketplace

by ensuring customers are happy and need not look anywhere else for the best service

and product range. Customers have attested to the consistent flavors and aroma of

premium quality Coffee and comprehensive range of other products, made even better by

prompt and friendly service.

Cafe Coffee Day Coffee Team is confident that being part of a global network which

will give them strength and diversity as they strive to improve to service customers

better.Café Coffee Day believes that - “People are hired for what they know but fired

for how they behave”.

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Cafe Coffee Day Competitors includes

Barista Cafe Mocha Qwikys

Café Coffee Day – Market Share Graph

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Mkt Share(%)

60%

30%

10%

CFD

Barista

Others

Other consists of branded retails chain like

• Costa

• Mr. Bean Coffee

• Mocha

• Qwikys

Café Coffee Day takes on Barista

PARAMETER CAFÉ C DAY BARISTA

1. Taste & Quality of products 4 3.5

2. Prices of products. 4 3

3. Order/ Delivery time/process. 4 3

4. Performance of staff. 3.5 4

5. Ambience. 3.5 4

6. Availability of products. 4 4

7. Value for money of products. 4 3.5

8. Overall performance 4 3.5

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Café Coffee Day is the clear winner as it exceeds Barista on the key parameters

Café Coffee Day - SWOT Analysis

StrengthsTaste & Quality of their

products.Grow their own coffee beansProjected as an “affordable”

brand.

WeaknessLacks the power and strength

expected to maintain brand loyalty.

Average rating for their behavior and service.

Opportunities Over 40% of the population

is under the age of 20, hence untapped market share and potential for growth.

The use of clever collaborations (bookstore, etc)

ThreatsThe brand doesn’t project a

clear image to customers about what Café Coffee Day is all about.

Brand Loyalty is not so strong

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CHANGING MARKETING STRATERGY

Cafe Coffee Day Coffee Company is changing its positioning from a premium retail

outlet to that of a hangout or a meeting place frequented by young people. Company

officials say this is because the nature of Cafe Coffee Day's clientele ranges from young

college-goers to young professionals. "With such a profile affordability becomes an

important issue."

Given below is the kind of Product Mix, Café Coffee Day has on their menu. It clearly

reflects the kind of marketing strategy it would like to undertake - Keep the Indian taste

alive.

Coffees & Teas Refreshing Alternatives EatablesHot Coffee Granitas Melting MomentsEspresso Blood Orange Banana Walnut CakeEspresson Americano Cool Blue Chocolate MousseMacchiato Pineapple Crush Banana Caramel PieCappuchino Emerald Ice Chocolate DoughnutCafé Latte Ruby Surprise CookiesChococino Marble CakeCafé Mocha Pineapple GetauxIrish Coffee Chocolate CakeInternational Coffee Smoothies Ice CreamsColombian Juan Valdez Mango Colada VanillaEthiopian Qahwah Strawberry Colada ChocolateKenyan Safari Seasons BestCold Coffees Cremosas Quick BitesSweet Mint Litchi SamosaCold Sparkle Ginger Spice PuffBrandied Banana Pina Colada PizzaTropical Iceberg CrossiantIced Eskimo French Fries

Kathi RollWrapsBiriyani/Kulcha

Coffee Add-ons Cool RefreshersHoney Fruit JuicesFlavoured Syrups Mineral WaterWhipped CreamScoop Ice CreamChocolate SauceTeasAssamMasala ChaiLemon n Ice TeaKashmiri Qahwah

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OBJECTIVE OF THE STUDY

The reason for selecting the brand ‘Cafe Coffee Day’ as the subject for research study

was to understand how the various attributes present or absent, with respect to a product

affects the buying behavior of the consumers.

The study was also undertaken to analyze whether there was any scope for improvement

for the subject under consideration and what can be done to improve its standing vis a vis

its competitors. The study was important for us to gain valuable insights into the

behavioral patterns of the consumers when it comes to buying a product which has a

premium attached to it.

It was also necessary to understand how people react to a product which has a snob value

attached to it and to understand the level of acceptability of a product when certain

attributes are available and when certain attributes are absent.

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SAMPLING TECHNIQUE

The sampling technique applied was the stratified sampling technique. Target population

was first identified as students and working executives under the assumption that these

segments were among the most frequent users of the said product.

Thus two mutually exclusive strata were formed. Next from each strata at random,

respondents were identified and questionnaires were distributed so that data can be

collected. Also age – group was one of the factors that would be considered for deciding

the basis of collection of information. Within stratified sampling, simple random

sampling was used as questionnaires were distributed at random to students and the

working executives.

One of the shortfalls of the above technique would be that other consumers such as those

constituting a family have been completely ignored as only students and working people

have been considered. Had the above segment been included, our study would have been

more comprehensive and could have given us another dimension to look into.

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DATA COLLECTION

Data was collected in the form of personal interview i.e. using the concept of mall

intercept. This method was selected, as it was the fastest way to collect data. If more

time was available then the respondents could have been targeted directly in the Coffee

shop at the appropriate time. Thus the primary data was collected through Surveys,

whereas the source for secondary data was the various websites.

SURVEY AREA

Since focus was only those Respondents who have visited Cafe Coffee Day, survey area

would be concentrated near Cafe Coffee Day outlets.

Andheri (West)

Dadar (East)

DATA PROCESSING AND ANALYSIS

The statistical tools which will be used are as follows:

a) Graph and Frequencies

b) Any other tool based on the type of data collected

The questionnaire consisted of both open ended and close ended questions. Some sample

questions that were asked were:

a) Have you ever visited Cafe Coffee Day? (Y / N)

b) What do you like most about Cafe Coffee Day?

1) Ambience 2) Service 3) Coffee 4) Any other

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SAMPLE SIZE

Took a pilot survey of 20 candidates and asked them, “What is the deciding factor while

buying Coffee at a Coffee Bar”. It was found that 75% of the sampled respondents in the

pilot test were affected by the price. Thus we took price as the parameter for evaluating

perception of Coffee bars

P (estimated proportion of success) = 0.75

Q (estimated proportion of failure) = 0.25

The formula for estimating sample size in case of proportion is

N = (Z/E) 2 P * Q

Z (95% confidence level in standard error units) = 1.96

E (maximum allowance of error between true proportion and sample proportion)

= 0.10

N = (1.96/0.10)2 * .75 * .25 =72.03=72 (app.)

Therefore N = 72 (approx)

Thus our Sample Size will be 72 respondents

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HYPOTHESIS

HYPOTHESIS STATEMENT 1

To test which attribute plays the major role in drinking Coffee at Cafe Coffee Day

H0 = Price is the sole deciding factor while buying Coffee at Cafe Coffee Day

H1= Price is not the sole deciding factor while buying Coffee at Cafe Coffee Day

HYPOTHESIS STATEMENT 2

Testing the brand loyalty of the customers.

H0 = Students are not brand loyal to CAFE COFFEE DAY.

H1 = Students are brand loyal to CAFE COFFEE DAY.

Time spent at CAFE COFFEE DAY is directly related with amount spent

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ANALYSIS

I. WHICH COFFEE BARS DO YOU VISIT V/S CATEGORY

From the table it was observed that 28% of the working respondents (i.e. 10 out of

36 working respondents) only visited Cafe Coffee Day.

On the other hand only 16% student respondents (6 out of 36 student respondents)

went only to Cafe Coffee Day.

This table also highlighted a very important characteristic of student respondents,

i.e., student population are more prone to switching Brands as compared to,

Working class who tend to be more ‘Brand – Loyal’

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II. HOW DID YOU COME TO KNOW ABOUT CAFE COFFEE DAY

Most of the respondents (31%) came to know about Cafe Coffee Day through

their peer group or word of mouth (13.8%), or because the Cafe was located in

their area i.e. their vicinity (16.6%)

This shows that the circle of friends plays an important role in influencing the

decision of an individual to visit a Coffee Bar.

At the same time it also helps if the bar is located in your area of residence or

work – place.

HOW DID YOU COME TO KNOW ABOUTCAFE COFFEE DAY

Frequency Percent

Friends 23 31

Word of Mouth 8 11.1

Hoardings 1 1.3

Vicinity 12 16.6

Friends & Word of Mouth 10 13.8

Friends & Vicinity 9 12.5

Friends, Vicinity & Word of Mouth 6 8.3

Friends, Hoardings & Word of Mouth 1 1.3

Hoardings & Vicinity 2 2.7

Total 72 100.0

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III. DOES COFFEE REMIND YOU OF CAFE COFFEE DAY

The above question was specifically put so that the brand recall value of the brand

‘Cafe Coffee Day’ could be tested.

Majority of the respondents (67.3%) did not associate Cafe Coffee Day with

Coffee.

This was identified as one of the problem areas. Possible solutions are suggested

in the recommendations that follow

DOES COFFEE REMIND YOU OF CCD

NO, 67.3%

YES, 32.7%

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IV. HOW FREQUENTLY DO THEY VISIT CAFE COFFEE DAY V/S

CATEGORY

    Category Total

    Executives Students  

How frequently do they Visit CCD

Once in a week 4 10 14

Once a month 14 16 30

Once in Six Months 18 10 28

Total 36 36 72

Through this question an attempt was made to analyse who are the frequent

visitors to the Bar and accordingly a strategy could be devised to target the

audience.

The statistics revealed that students visit the bar more often than the working

executives while the execs visit the bar only once a while.

0

2

4

6

8

10

12

14

16

18

Executives Students

Once in a week

Once a month

Once in Six Months

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V. HOW MUCH TIME DO YOU SPEND AT CAFE COFFEE DAY V/S ONE

TIME SPENDINGS AT CAFE COFFEE DAY

One Time Spending At Café Coffee Day

TotalLess

Than

RS.50

RS.50-

RS.150

RS.150-

RS.250

ABOVE

RS. 250

HOW MUCH TIME DO

THEY SPEND AT CAFE

COFFEE DAY

Less than

1 Hour2 11 6 19

1-2 Hours 4 26 10 5 45

2-3 Hours 4 2 6

More

Than 4

Hours

2 2

Total 8 41 18 5 72

The objective of this question was to study whether the spending increased with

time.

It was observed that as the time spent at the bar increased, the tendency to spend

increased and this peaked for the category of people who spent around 1 – 2 hrs.

After this peak point the spending dropped.

Thus highlighting that people sitting for 1-2 hrs spend the most and after this

point their consumption level falls.

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This proves our Hypothesis (“Time spent at CAFE COFFEE DAY is directly

related with spending”) false.

The maximum order that was booked was for the price range of Rs. 50 – Rs. 150.

VI. CATEGORY V/S ONE TIME SPENDINGS AT CAFE COFFEE DAY

Through the table it was found that one time spending of students was more in the

range of Rs.0- Rs.150.

Whereas working group are the ones who spent the most, their one time spending

ranged from Rs. 50 to Above Rs.250.

This also proves that working group is better source of income than student group,

one of the reasons being that working group has better purchasing power than

students.

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VII. PERCEPTION ABOUT CAFE COFFEE DAY AS A PERFECT COFFEE

BAR

PERCEPTION ABOUT CAFE COFFEE DAY AS A PERFECT COFFEE BAR

Frequency Percent Cumulative Percent

YES 45 62.5 62.5

NO 27 37.5 100.0

Total 72 100.0

Majority of the respondents surveyed (about 62.5% ) felt that Cafe Coffee Day

was the perfect place to have Coffee.

This shows that Cafe Coffee Day has been successful to a considerable amount in

the minds of people. But they would need to work upon new strategies to keep

their position.

PERCEPTION ABOUT CCD AS A PERFECT COFFEE BAR

Yes62.5%

No

37.5%

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VIII. RATINGS OF CAFE COFFEE DAY ON VARIOUS PARAMETERS

From the below fig, it can be seen that ambience is highly valued at Cafe Coffee

Day by the consumers

This also proves our hypothesis 1 that price is not the deciding factor to visit

CAFE COFFEE DAY.

9.68

61.29

24.19

4.840.00

19.35

54.84

19.35

4.841.61

32.26

54.84

8.06

1.613.23

38.71

50.00

9.68

1.610.00

16.13

59.68

19.35

3.231.61

11.29

46.77

29.03

4.84

8.06

1.61

11.29

40.32

30.65

16.13

0%

20%

40%

60%

80%

100%

PRODUCTS QUALITY HYGIENE AMBIENCE SERVICE PROXIMITY PRICE

RATINGS OF CCD ON VARIOUS PARAMETERS

POOR

BAD

AVERAGE

GOOD

VERY GOOD

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IX. CATEGORY WISE RANKING OF CAFE COFFEE DAY

It can be said after looking at fig below that working class ranked CAFE COFFEE

DAY as a no1 Coffee shop

On the other hand the students have ranked café Coffee day as the no 1 brand and

Barista 2nd

0

5

10

15

20

25

Execuitve Students

CCD

Barista

Others

It can also be verified from the above responses that working class are brand loyal

than the student class.

This also proves the hypothesis 2 “Students are not brand loyal”

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CONCLUSION/RECOMMENDATIONS

As per the results obtained during the course of the project we have come across the

following set of recommendations:-

The most obvious fact that came out from the project was price was one of the

factors that served as a hindrance not only to the students, but also to the working

executives. Thus the most likely solution to this problem would be nothing but

decreasing the price but at the same time the profitability of the joint should not

be affected.

The next possible step that the Coffee – bar should take is to increase its

awareness among its target audience. This it can achieve by various means of

advertising and that too keeping in mind the specific categories of its consumers.

For e.g. it can target the students by sponsoring the cultural events that are

organized in various colleges.

Keeping in mind that a student cannot spend as much as a working executive

does, special rates can be introduced for the students.

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Further more the joint can also toy with the idea of floating special membership

cards for its patrons so that they would get certain rebates and this would result

into increase in the frequency of their visits as this policy will encourage them to

visit the joint.

New varieties of product should be introduced on an experimental basis.

Also to increase the reach of the consumers more and more outlets should be

established.

The Coffee – bar can go in for competitive analysis to understand the competition

and realize its current standings.

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QUESTIONNAIRE

[Information provided by the respondent will be kept fully confidential and will be used

only for the academic purpose.]

Q1 Do you visit Coffee Bars? If yes which ones?

Yes No

Café Coffee Day

Barista

Costa Coffee

Q2 Where did you hear about Cafe Coffee Day?

A) Friends B) Word of Mouth

C) Hoardings D) Located in my Area

Q3 Does Coffee Reminds you of Cafe Coffee Day?

Yes No

Q4 What attracts you to Cafe Coffee Day?

A) Ambience B) Service.

C) Products Offered D) Location

Q5 How frequently do you visit Cafe Coffee Day?

A) Everyday B) Once in a week

C) Once in 2 Weeks D) Once a month

Q6 How much time do you spend at Cafe Coffee Day?

A) Less than1 hour B) 1 – 2 hours

C) 2 – 3 hours D) More than 4 hours

Q7 Describe in one sentence what comes to your mind first, when you hear about

Cafe Coffee Day?

_____________________________________________________________________

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Q8 Do you perceive Cafe Coffee Day as a perfect Coffee bar?

Yes No

Q9 Rate Cafe Coffee Day on following parameters?

1 2 3 4 5

Very

Good

Good Avg Bad Poor

Product Variety

Product Quality

Price

Hygiene

Ambience

Service Provided

Location

Q10 What difference do you find between drinking Coffee at Cafe Coffee Day and at

other Coffee Bars

________________________________________________________________________

________________________________________________________________________

Q11 What is your average one time spending at Cafe Coffee Day?

A) Less than Rs.50 B) Rs.50 – Rs.150

C) Rs.150 – Rs.250 D) Above Rs.250

Q12 Rate the following according to your perception?

A) CAFE COFFEE DAY

B) Barista

C) Costa Coffee

Q13 Would you like to give any special suggestions to Cafe Coffee Day?

________________________________________________________________________

________________________________________________________________________

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