In the late 1990s, a silent cafe revolution was sweeping urban India. Coffee drinking was increasingly becoming a statement of the young and upwardly mobile Indians. Coffee bars, an unheard concept till a couple of years ago, had suddenly become big business and coffee bars like Barista, Cafe Coffee Day (CCD) and Qwiky's had become quite popular. Though being a late entrant, Barista took elite India by storm. With 105 branches in 18 cities and annual sales of Rs. 650 million, Barista was clearly the leader in the coffee retailing business in 2002. Barista adopted a three-pronged approach to expand its business. The first was to open espresso bars in various cities across the country. The second approach was to target institutional areas and the third approach was to target the home segment. In 2001, Barista entered into a strategic alliance with Tata Coffee. Tata Coffee has the largest coffee plantation with facilities for roasting and retailing. The strategic alliance would enable the two companies to leverage each other's strengths. According to Ravi Deol (Deol), managing director, Barista, the association with Tata Coffee would strengthen the distribution network of Barista further and provide it with opportunities in the hospitality, airline, catering and other allied business. The alliance was expected to result in backward and forward integration of the coffee business with Barista and Tata Coffee offering a new concept in India: from bean to cup. The capital infusion by Tata Coffee would enable Barista to set up coffee bars abroad. The alliance would also enable supply chain integration. Tata Coffee would supply coffee beans to Barista and the Taj Hotels (part of Tata’s Indian Hotels) would supply food items like baguettes, croissants, cookies, sandwiches, pastries and desserts. In 2002, to promote its original coffees, Barista launched a new marketing initiative, ‘Exclusive Original Coffees of The Month’ at select outlets. Every month, the focus was directed on a particular type of coffee. For example, May was the month of ‘Original Colombian Coffee and June was the month of ‘Mexico Altura Organic’. This was an ongoing process throughout the year. The idea was to change customers' occasional indulgence in original coffees into a habit and to educate them about the original coffees. In 2002, Barista also opened its outlets in banks (ABN-Amro), movie theatres (PVR in Delhi), offices (HSBC and GE) airports and hotels. Other than retailing, it was also developing the store-in-store concept by focusing on themes that complement coffee such as music, books and art. In 2002, Barista entered into marketing tie ups with Planet M,1 Crossword and Ebony to set up Espresso Corners at these places. It was also planning to enter into co-branded marketing tie-ups with several banks for credit cards. Earlier, Barista had entered the home brew segment with freshly grounded coffee. The company extended its product portfolio from roasted coffee range to single origin coffee under the umbrella brand Barista. The range of single origin coffee included ‘Jaimaica Blue Mountain,’ Cuba Carocolillo Crystal Mountain’, ‘Colombia Supremo,’ ‘Brasil Santos,’ and ‘Single Mould Scotch.’ A 200 gm pack was priced between Rs. 800 and Rs. 1,800. Barista ensured that there was a clear line of distinction between its gourmet coffee and the mass market. According to Deol, Barista was not competing with the regular coffee pack on the shelf, but was in the value share game, and that explains its higher price compared to the mass market products. While some analysts were skeptical whether consumers would actually buy off the shelf, an analyst tracking the FMCG sector said, “While in-pub activity will continue to drive bulk sales, a niche set of consumers are likely to opt for gourmet coffee off the shelf. The product has a status symbol connotation which these marketers are hoping to exploit.”

1. Barista adopted a three-pronged approach to expand its business. Describe briefly, this three pronged approach? 2. Barista entered into a strategic alliance with Tata Coffee. Explain how these two companies are going to benefit from this alliance?