Business Model for Indian Retail Sector: The Café Coffee Day Case

Vol 25, No 3; Article by Ashis Mishra; September 2013

In Conversation with V. G. Siddhartha, Chairman, Coffee Day

While the Indian retail market has been part of the global churn, the Indian retail sector is distinct on several counts.  The sector has immense potential, but the vast economic, social, and cultural diversity of the country, inadequate infrastructure, the small share of organised retail in the retail market, particularly in food and grocery,   the lack of reliable data on retail, and the ambivalent attitude to FDI in retail, present a challenge to the development of an appropriate business model for the Indian retail sector.

In our endeavour to develop a retail model for the Indian retail sector, we study the Café Coffee Day (CCD) chain of cafés, the corporate briefs about its agri business, and businesses in retail, logistics, infrastructure, and investments. We also talk to the Chairman of Coffee Day Company, Mr V G Siddhartha, about the journey of the Café Coffee Day brand, the growth strategy and the operational challenges, particularly with regard to real estate and manpower. We analyse these inputs along the parameters of customer value proposition; profit formula - including the revenue model, the cost structure, the margins and inventory turnover; key resources - including people, technology, channels, partnerships and the brand; and key processes. We then generalise the model to the Indian retail sector presenting the CCD business model as an aspirational business model for Indian retail business (specifically in the food and grocery sector). We underline the importance of relevant customer value propositions and communication with customers, multiple channels and multiple formats, nurturing of manpower, and sound systems and processes.  We sound a word of caution against organisations becoming inflexible. We recommend a structured approach of strategy as a prerequisite to business model development.