Linkedin Answer: Is New coffee start-up still a good business opportunity

The above question was an open question asked on Linkedin and what I post hereunder is my answer to it. I thought the answer was pretty interesting and it can be a yardstick to measure the strategic performance of almost any business. More so in economically tough times where businesses models are going to be stress tested.

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My personal opinion is that it’s going to be a real tough one. The competition in the sector is enormous, as a business you’ll compete with stores like Mocha, CCD, Barista (now Lavazza), Coffee Beans, Costa Coffee and the scores of other local operators. That is however just one aspect. Any place you go these days, be it a mall, an airport, or anywhere you’ll definitely find a coffee shop in some form or the other be it an actual store or a kiosk. The price of entry in most modern markets is to be fast, good and cheap…. Obviously cheap is a relative concept to the kind of perceived value your business provides. Not just that when entering a market where significant competition exists you need to be fast, good, cheap plus have an x-factor. Two questions you would need to ask yourself. Can I be fast, good and cheap, to make a dent in the market you would need to be industry standard at two and a market leader at one. Then you need to ask yourself what is the x-factor I can provide to my customers to induce a switch from their preferred brand. Further questions you may ask yourself: What will be the difference in experience I provide over competition? Do I have a price advantage I can leverage? Is there an un-satiated need of my target audience that I can satiate? Can I have number 1 market share/ Mind share? If you find answers to the above questions and you believe that you could be FGC + provide the x-factor then you have an up and running business model and all that then remains is the execution. I tried to think on the above lines and honestly could not come up with how this could be done in the coffee market in India. I thus believe that it’s going to be a tough ask, never the less it still is possible to make inroads into the market.