The complete coffee experience

RETAILER, Vrinda Oberai

September 2010

Initially, stocking additional merchandise was treated to be a tool for branding but nowadays the same has managed to become a source of additional revenue. Retail chains like Barista Lavaza, Costa Coffee and Gloria Jeans Coffees among others are witnessing an upswing when it comes to adding up to their sales by retailing a broad inventory of coffee equipments and related merchandise.

Products on offer

Some of the coffee equipments and other related merchandise that one can find at coffee outlets include plungers, thermos, coffee beans, mugs, coffee makers, jars, insulated and designer sippers. Thus, coffee shops can now be trusted for being one stop shop for all your coffee related merchandise!

Mr Saurabh Swarup, Head- Marketing & Product Development, Barista Lavazza says, “Our focus has always been to provide a differentiated offering. We do this by using a guest touchpoint model that focusses on the product innovation. The launches are based on global inputs from Lavazza team, international trends and guest feedback with the objective of creating guest excitement with relevant offerings.”

However, things at Costa Coffee are bit different! Mr Santhosh Unni, CEO, Costa Coffee (India) comments, “Branded merchandise does not form a part of Costa’s standard product offering at the stores. However we do offer our consumers, merchandise from time to time as a part of our store promotions and as a part of corporate gifting.”

Driving factor

Merchandising at cafes is known to be driven by two main factors. Mr Devangshu Dutta, Chief Executive, Third Eyesight avers the two factors to be – merchandise that is related (such as percolators, grinders, whole roasted beans) but which is not available easily outside the café and the desire to associate with the brand image even outside the café. The factors explain the purchase of mugs, T-shirts and other merchandise such as music CDs that help to carry the ‘mood’ even post the experience at the coffee outlet. Mr Dutta opines, “The first factor is more of a driver in India at the moment for brand-extending products, the brand itself needs to be extremely strong, consistent and desirable. This is not yet the case for the cafe brands present in India presently. However, the related products also need to be carefully thought as the profile of the customers at each outlet is quite diverse and not all outlets may be appropriate for the offering of the associated merchandise.”

The resultant sales

Merchandise is undoubtedly a tool for building brand awareness which indirectly has a positive impact on footfalls. At Costa Coffee, the addition made to the revenue generation by the additional merchandise comes up to be Rs 4 to 5 crore/annum. “The merchandise definitely helped us to increase the footfalls. However we do not look at merchandising as a way of increasing footfalls but as a part that helps complete the ‘coffee experience’,” shares Manish Tandon, President- Citymax Hospitality India Pvt Ltd. Mr Swarup adds, “All the coffee lovers who come to Barista Lavazza store for enhanced experience always pick up merchandise, showcasing their love for the brand. Barista Lavazza offers high standard and great quality merchandise. The café chain does see some additional footfalls through this category as well.”

Marketing strategy

Targeted and successful merchandise stays in people’s lives and minds for a long time. It is pertinent to bear in mind that the item in context does not only suit the company products but also builds a strong feeling of connection between the target customers and the brand.

Mr Tandon comments, “The most effective way of selling these items is through creating visibility. We keep the merchandise close to the counter to make it more visible. Also, suggestive selling works well for us.”

Mr Swarup adds, “Merchandise displays are an integral element of the overall merchandising concept which seeks to promote product sales. The recently launched open display cabinets help the consumers to see and feel the product while making a choice before the purchase.”

Perceiving the future

The merchandising business in India has already taken off in a big way riding on the ongoing retail revolution. According to the industry analysts, the business is set to triple over the next two years to an estimated Rs 900 crores. Mr Swarup comments, “When consumers purchase, wear or display corporate-branded merchandise, they’re demonstrating their brand loyalty and advocacy. It’s a brand manager’s dream.”

He also avers that character merchandising as a business is now booming in India. As per the internet data, the trade source estimates that Harry Potter merchandising sales were at a whopping Rs 1 crore. Following a close second with an estimated sales figure of Rs 60 lakh a year were the WWF characters. Krish made around Rs 25 lakh while Hanuman was not far behind, clocking around Rs 20 lakh in sales.

Mr Tandon opines, “We look at merchandising as something that adds value to the whole guest experience rather than just a source of revenue. We want our guest to remember us through our merchandise even when they are not in the café.”

Mr Unni shares that Costa is an aspirational brand within the cafe category and consumers want to be associated with the brand. However, merchandise will play a role in the coming years, but will never be more significant than the core product offering of these coffee chains, which is coffee itself.