Himalayan Java marketing case

KUSOMAhead in Management HIMALAYAN JAVA A Local Starbucks Case Study Reference no 200 90 222 This case was prepared for the purpose of class room discussion by Digdarshan Lal Dhonju, Ishwory Raut, Mridu Pradhan, Nirala Tuladhar and Sanil Tamrakar – MBA students of KUSOM, under the supervision of the course instructor Mr. Sujan Raja Shrestha. It is not meant to measure effectiveness or efficiencies of any organization. ©2009 All Rights reserved by authors and Kathmandu University School of Management No part of this publication may be copied, stored, transmitted, reproduced, or distributed in any form or medium whatsoever without the written permission of the copyright owners. Kathmandu University, School of Management, Balkumari, Lalitpur, Nepal. 1 of 13 | P a g e Dhading. Any guest who comes to a house is offered tea first. the Arab world began expanding its trade horizons. Gulmi and Makawanpur are successfully growing and producing coffee beans. Sindhu Palchok. Tea was introduced in Nepal in the mid 1800’s and has been the main social beverage. Nuwakot. However. coffee is grown in Nepal at the altitude of 500 to 1500 meter above sea level and the temperature is about 30 degree Celsius. today at least in Kathmandu we see a host of coffee houses and even restaurants and hotels are offering proper coffee rather than instant coffee. Palpa. Of the two variety of coffee found – “Arabica” and “Robusta”. which in turn came into being via Arabic qahwa. Kavre. tea became the ubiquitous drink for all ages of people. Today. Tanahu. The first known coffee plantation was confined to Ethiopia. From there. Its mission is to promote Nepali coffee industry by 2 of 13 | P a g e . Coffee culture never caught on as much as tea drinking culture. which excels in quality and customer service. coffee is one of the most popular beverages in the world. According to the National Coffee development board in Kathmandu. It has been spreading in over 33 districts of the middle hill Zones. and the beans moved into northern Africa where it was mass-cultivated. and Nepalese returning from foreign countries have slowly brought in the coffee culture. However. This word was created via Turkish kahve. Districts like Arghakhanchi. Ilam. the beans entered the Indian and European markets. the Nepalese culture has slowly warmed on to coffee culture. Lalitpur. Coffee in Nepal Coffee culture in Nepal is relatively a new phenomenon. Parbat. Islam prohibits the use of alcohol as a beverage. The day of most people would start with a cup of tea.Himalayan Java: A Local Starbucks Background About Coffee The introduction of coffee to the human palate can be recorded as far back as the ninth century. Sankhuwasava. Therefore. Gorkha. Coffee entered Nepal during the mid 1900’s only. Today. and the popularity of the beverage spread all over the world. Tourists who visit Nepal. About Himalayan Java Himalayan Java Coffee House and Restaurant is the first specialty coffee house in Nepal. a truncation of qahhwat al-bun or wine of the bean. Nepal's annual production is around 460 metric tons of cherry coffee. where its native beans were first cultivated by Ethiopian highlanders. expatriates. Coffee is a high value cash crop with environmental importance and is being popular among Nepalese people since last few decades. only Arabica variety is grown in Nepal. and coffee provided a suitable alternative to wine. Tea as a social beverage had a hundred years of head start over coffee and due to it. The word coffee came into English in 1598 via Italian caffè. Kaski. Lamjung. a nonsmoking section. When he conducted the market survey he realized that the food and beverage industry was well diverse and represented. There's a sunny balcony. Himalayan Java has been doing business in Kathmandu since 1999. mellow flavor. good tea. Coffee grows best in an altitude of over 1000 m from sea level.investing in the people. Currently it offers three separate blends . But. this modern and buzzing coffeehouse serves a variety of coffee. Located above the Bakery Café. Mr. this is a darker roast with a richer taste and Long Black. Thus he decided to start his own coffee house in Kathmandu. He therefore enrolled for a three month “barista course” in the US to gain training of the art of coffee making. harvested from local Nepali growers. blended and iced coffees and snacks. Vision and Mission Himalayan Java was established with a vision to promote Nepalese coffee. House Blend. In the Nepalese market there were restaurants serving foods from all over the world.Gagan Pradhan returned to Nepal. and big-screen TV for the football. darkest roast and its strong blend is mainly used for espressos. and over the past years the company has grown and progressed in many areas. Gagan Pradhan realized that he lacked the expertise and the knowhow of operating a coffee shop. History Himalayan Java was established in 1999 by two young entrepreneurs Gagan Pradhan and an American partner. He was searching for an opportunity to invest in Nepal. during his research he did realize that there were no specialized coffee houses in Kathmandu. These high quality red beans are of the Arabica variety. Himalayan Java prides itself on the freshness of their coffee beans. on the eastern edge of Thamel. permitting it to create a specialty coffee with a distinct Nepali flavor. from the grower to the consumers. he was concentrating in the food and beverage industry. lots of mellow sofas. his background was hospitality management and as he had worked as an area manager of a multinational food chain in Australia overseeing 18 local stores. They felt that the potential for such business is very lucrative.Mountain Supreme. It's popular with and patronized by cool. Soon after his return. he conducted a six week research to identify the various potentials. but from certain angles it feels a bit like a hotel foyer. The mid hilly regions of Nepal are best suited for coffee 3 of 13 | P a g e . After completing their degree in Hotel Management from Australia. this is its own lightest blend creating a supple. After the three months training he returned to Nepal with a vision to establish his own coffee shop. and to promote local grown coffee in the international market. Mr. Nepal produces one of the best coffee beans because of its strategic geographical location. Since. urbane middle-class Nepalese. Himalayan Java offers fresh crop of coffee every year. In this market he felt he had nothing new to offer. The restaurant offers wireless/wifi internet service as well. First to implement his plan. Himalaya is the name through which Nepal is known all over the world. Mr. He went to these offices and carried out a research regarding the viability of a coffee shop in the area. There was a need to educate the customers that coffee does not mean only instant coffee like Nescafe but to introduce them to the real roasted coffee. it purchases the coffee cherries from the farmers and process it to produce coffee beans which it sells through its Himalayan Java Coffee Bar and Lounge and offers the same as coffee beverages. Himalayan Java was set up in Heritage Plaza in Kathmandu. When Himalayan Java was first established. the national production of Nepal was only 20 tons but today the national production is about 300 metric tons. Therefore. he scoured for a location that would match his requirement. there were limited commercial buildings in Kathmandu. The Mocca Trading (P) Ltd. Gagan Pradhan along with his American partner established Himalayan Java in 1999. The plaza contained lots of corporate offices. a coffee house would be established as a front. Java is a small island off Indonesia and some of the best coffee comes from there. Himalayan Java has always promoted Nepalese coffee and it exclusively serves Nepalese coffee in its outlet. Himalayan Java encourages Nepalese farmers to grow coffee as a cash crop. Development of Himalayan Java Brand Mr. Nepal is a country situated at the laps of the Himalayas and people were already familiar with the moniker. it did create some problem for Himalayan Java in the beginning. Coffee houses were supposed to be cozy. During 1999. Even though the name sounded good. Himalayan Java has always embraced and promoted Nepalese coffee. during that time the Bakery Café had just been established and a host of restaurants were coming up all ending with bakery café. People confused Java with a popular computer programming language (Java) and 4 of 13 | P a g e . Based on the overwhelming favorable response. He settled for the ground floor in Heritage Plaza in Kamaladi to set up Himalayan Java. Brand Name Java coffee is one of the most famous coffees in the world. Himalayan Java’s sister concern sells coffee machines and roasted coffee beans to various other hotels. Hence. The location was chosen after a careful research. Therefore. Mr. Gagan Pradhan wanted to target the white collar office workers as his prime customers because he felt that the white collar workers would drink coffee to reinvigorate themselves after a hard day’s work. Gagan Pradhan decided to combine these two to convey the very best of both – coffee from the laps of Himalayas – Himalayan Java.production. He wanted to differentiate his coffee house from other restaurants and cafes therefore he chose the name Himalayan Java. They did a thorough research for opening an outlet in Kathmandu. Also. In order to promote Nepalese coffee and to bring the coffee culture in Nepal there was a need for a coffee house. quiet far from the hustle and bustle of a busy city centre. He inquired the workers in those offices if they would be interested in buying coffee from the shop downstairs. restaurants and other coffee houses. Nepal grows “Arabica” variety of coffee. Pradhan initially targeted these people and also the white collar workers rather than focus on the tourists. An investigation to the cause of such high electricity bill led to the finding that their electricity line had been connected to other eight offices. Mr. The new partner was Mr. Gagan Pradhan persisted with the name and adopted a logo of a hot steaming cup of coffee. With this move. the situation became untenable in Heritage Plaza therefore Himalayan Java decided to move its base. Mr. The building management had been fleecing Himalayan Java for six months. Coffee drinking was limited to tourist who wanted their morning cup of coffee and would not be satiated by instant coffee brands. His American partner left the partnership due to the then political situation in Nepal. Tourism is a seasonal business and Mr. Another problem Himalayan Java faced in Heritage plaza was they were constantly getting very high electricity bills which greatly contributed to their overhead thereby decreasing their profit margin. The move to Thamel was a strategic decision. There was also a lot of Nepalese who had returned from their stay abroad and Mr. Initial Challenges Two to three months into the opening at Heritage Plaza. The white collar workers would look for a cup of coffee to reinvigorate themselves from the mental stress they face every day. The Himalayan Java realized a flaw in the market survey they had conducted. Anand Gurung. 5 of 13 | P a g e . Other targets included the hip and cool urbane middle class Kathmandu society. These Nepalese brought the coffee drinking culture along with them back to Nepal. It brought Himalayan Java to the centre of the city – a tourist area frequented by both the tourist and local Nepalese. They did not make losses but the expectation was also not met. Himalayan Java hoped for a change in the fortune. Pradhan was sure that they would patronize his coffee house. Target Market Coffee is not the first choice of beverage for most Nepalese. Gagan Pradhan entered into partnership with the landlord of the building. Pradhan realized that he could not base his business on seasonal customers. Nepalese people being polite did not want to disappoint the survey conducting people therefore they exaggerated their replies or gave false answers so Himalayan Java found that their sales did not match their research data. Establishment in Thamel The Himalayan Java moved to Thamel in 2000 to its current location. Maoist insurgency was gaining momentum and there was great political instability in Nepal. But. After this revelation. or foreign expatriates and Nepalese who had returned from abroad.associated Himalayan Java with computer courses! They mistook Himalayan Java to be a computer institute and were astonished to find out that Himalayan Java was in fact a coffee house. Positioning Statement The owners of Himalayan Java had a clear vision about how they want to position the coffee house to the customers. Initial Marketing Strategies Himalayan Java would rely on the “word of mouth” marketing. . The furniture consisted of comfortable and spacious couches for the customers to really relax. An expatriate or a tourist or a Nepali who had return from abroad would come to Himalayan Java with his friends. Also. He would order the drinks for his friends and educate them about how to drink coffee and about its taste. Beverages and Menu Selection The taste of coffee was not palatable to most Nepali customers who were used to the instant brand of coffees. People were tired of the same kind of restaurants in Nepal with the same kind of menu. Coffee drinkers and lovers in Nepal is a niche market in Nepal. the interiors were designed to look cozy like the living room of a house. They wanted to present the coffee house as the “third place” – a place in the minds of the customers after their home and office. The customers who experienced the taste of Himalayan Java would spread the word about Java and bring in new customers. Drinking coffee would be an experience. As expected by its name indeed Java serves good coffee. This strategy worked for Himalayan Java. they also published their advertisement in popular magazines such as Wave. But. Coffee is to be enjoyed by all the senses of our body. and then comes the body of the coffee in the mouth and the aftertaste that lingers on even after you have drunk the coffee. it would be an enjoyable moment because you would be sharing it with your friends and family. Community”. Himalayan Java would be a place where they could relax. Himalayan Java came up with the motto “Coffee. Nepal does not have a coffee drinking culture and many people initially did not know the various blends and types of coffee. Himalayan Java would be the place to socialize with your friends. Before we even drink the coffee. Himalayan Java would cater to this niche market. Conversation. Thus. Coffee may be bitter in taste but the experience of sipping it with your friends would make it sweet and a moment to cherish and enjoy. They did advertisements in the leading English daily newspapers such as The Kathmandu Post and The Rising Nepal. they did not get the mileage they expected out of the advertisement therefore they discontinued the advertisements and till today there have been no further advertisements in the print or audio visual media. Himalayan Java offered a new and innovative service to the customers.Suman Pant (Patron) Initially. It's a good spot to gather with friends and relax on the couches or on the terrace. Their motto reflected how they wanted to be positioned in the mind of the customers. Himalayan Java would always be a coffee house never a restaurant. first the aroma strikes us. Word of mouth marketing is the best kind of marketing. Many Nepalese customers could 6 of 13 | P a g e . The friend would in turn bring his other friends and so on. Therefore. unwind and socialize over a cup of coffee. Himalayan Java did go for advertisement in the print media. word of mouth had a big part in Himalayan Java’s success. The services and the products that Himalayan Java offered were new to the patrons of Kathmandu. They were not making losses but their profit margin was also less. The card would be stamped on every purchase in Himalayan Java and on the sixth purchase. They brought in their friends and the friend brought their friends and so on and thus finally Himalayan Java became the place to be . there’s a coffee place in Thamel. More syrups was added to the coffee and sweet drinks (juices) were introduced as Nepalese had a penchant for drinking sweet drinks. the coffee was on the house. They would try the coffee once – and throw it away after a sip or never drink the coffee again.the place to hang out. The strategy and gamble of putting a 50 inch TV paid off. Suddenly.150 a glass while a cappuccino was priced at Rs. During the match day. There was a time when they would be giving away 1000 coffee cards on a day. In Nepal there were no sports bars at the time. The patrons liked the fact that they could watch their football match with a drink among their friends. Frequent bandhs. People started to say. Himalayan Java would be filled with 400 to 500 customers. demonstrations marred the economic prospect of Nepal. Himalayan Java bought a 50 inch TV and started playing the live matches. the patrons remembered the atmosphere and came back again and again. Himalayan Java offered a variety of Mexican and American food like the Taco. Even after the end of World Cup. still the premium charged soft drinks were selling briskly.70 to discourage the patrons from drinking soft drinks in a coffee house. However. it’s different. burgers and pizza. Coke was selling at Rs. There would be no sitting place so Himalayan Java had to innovate and bring in the mats so that the patrons can sit down and watch the matches. Himalayan Java then decided to customize the drinks and food to match the local taste of the Nepalese. Even the menu was changed to bring in Nepali food like the ever popular momos. Nepali customers did not know how to eat the food and the taste was not palatable to Nepali taste. Then in July 2002 the World Cup was happening. Also. croissant. This strategy was also very successful for Himalayan Java. its coffee card. the sales were still not good. cookies etc. People would gather around in their homes to watch the football matches. Let’s go there. But. Soft drinks were charged a premium in Himalayan Java. “Hey. business in Himalayan Java took off. The political situation of Nepal then was also not good. Coffee was an acquired taste and after few attempts only would a customer warm up to the idea of drinking bitter coffee.not initially take in the bitter acidic taste of roasted coffee of Himalayan Java. Himalayan Java came to be known as a place where people could hang around to watch their favorite football team and cheer them along with other supporters. pastries. 7 of 13 | P a g e . The customers had to be educated about the taste of coffee. Growth Two to three years after the establishment of the Himalayan Java. People started to flock into Himalayan Java. Himalayan Java also offered food that would go with coffee – bagels.” During this time Himalayan Java also introduced. This strategy also helped to bring in more patrons to the coffee house. People saw that it was not just another restaurant but saw a truly unique offering. Himalayan Java offered a unique and innovation service in Nepal. H for Hospitality.Building the Brand Equity Himalayan Java was successful in building its brand equity. Himalayan Java will keep its roasted coffee for a maximum of seven days so that the aroma is retained and the taste of coffee is still exquisite. hotels and coffee houses as well. Patrons feel that they are coming to their home rather than feel they are away from home. the tiles used were the traditional oil tiles to give the illusion of homeliness and coziness. They always served and always promoted Nepali coffee. they have recently opened outlets in City Centre Plaza. Himalayan Java has even sold its coffee machines to restaurants in India. The coffee machines sell at a price of Rs.a sort of fusion. Himalayan Java is a member of the American Specialty Coffee Association (ASCA) and registered under FDA (Food and Drug Administration) which allows them to market the Himalayan Java brand of coffee to the US. It is the guiding motto for all the staff of Himalayan Java. Mr.000/ and on an average Himalayan Java sells 6 kg of coffee. M for Mentality. However. They are well trained and courteous and personify the quality of Himalayan Java. The staff is trained to embody CHAMPS . Ltd to other restaurants. Another source of its brand equity is the staff of Himalayan Java. P for Product Quality and S for Speed of Service. Norvic Hospital and The Tribhuvan International Airport. The upper floor of Himalayan Java showcases their coffee machines which are imported from Italy. 8 of 13 | P a g e . Himalayan Java has never compromised on its quality.C for Cleanliness. Its success was not brought overnight but is a result of years of hard work and perseverance.550. They not only serve coffee only but they provide coffee beans and coffee making machines through its sister concern Mocca Trading (P). It is due to this embodiment of the CHAMPS principles that the staff is well liked by the patrons and many are on first name basis with the servers. Expansion/Extension Presently Himalayan Java outlet is in Thamel. This adds to homely environment that Himalayan Java is trying to portray. A for Accuracy. Gagan Pradhan took the barista course and he personally trains his staff in various aspects of coffee making so that the quality is maintained. Once the coffee is roasted. It had the charm of the outback rather than the sophistication of uber posh lounges. it can be preserved for years but its aroma lasts for maximum 7 days. The interiors were given a bit of rustic look. It was a bit of blend of traditional as well as the modern . The emphasis on quality has been evident throughout its years of operation. The focus always was on coffee products. Himalayan Java has sold these machines to various restaurants and hotels all over Nepal including places like Lukla and Namche. The settings were also carefully designed. It was one of the first of its kind in Nepal. Illy. Besides providing coffee beans and coffee machines. Success Story Java Coffee House is the most famous places to have coffee in the pleasant environment of busy Thamel. Everything is freshly prepared in Himalayan Java. Central Perk are just a few of its competitors. He even sends his trained staff to various clients to help them setup their own coffee shops. Mr. Gagan Pradhan is the only certified coffee brewer in Nepal. The overall coffee production in Nepal is about 300 metric tons yearly. Kaldi. There are regulars who come to the coffee house everyday and has become and become an integral part of their life. It also offers Wi-Fi service in its outlet so that people who want to connect to the internet can relax and enjoy on their laptops with a cup of coffee.In addition there is a great demand for their coffee beans both nationally and internationally as well. Also. Himalayan Java is not fazed by its competitors but rather encourage it. there have been hosts of competitors who want to ride on the band wagon created by Himalayan Java. They even provide trainings for them also. Canada. They even provide the coffee machines and beans to their competitors. providing them with these courses. Himalayan Java has increased its services. Himalayan Java has its booth in the convention for the last eight years. The Himalayan Java brand has a strong resonance with its customers. It offers great coffee and good food also. Himalayan Java believes in itself and is confident of its brand equity. Himalayan Java has also recently started a short term intensive barista courses for students and Nepalese going abroad. the menu offers a wide range of food which are freshly prepared in the kitchens of Himalayan Java. They export their beans to countries such as USA. Himalayan Java takes part in the annual Coffee Convention which is held in Atlanta. Not only does he provide training for baristas he also provides comprehensive training and post sales service for the coffee machines. The reason for their continued success can be 9 of 13 | P a g e . He runs training courses and so far he has trained about 260 baristas. Today. Himalayan Java also provides training for baristas. By. Himalayan Java enjoys the position of being the industry leader. The courses are certified by the American Specialty Coffee Association. Market Share Himalayan Java enjoys a virtual monopoly in the coffee house market. There has been instances where importers have wanted to place an order of 300 tons of coffee from Himalayan Java alone. Himalayan Java would like to help them to get a good and better paying job abroad. Hong Kong and Singapore. Recently. The export figures are still very small compared to the world market. There have been the leader in coffee house and enjoy a resounding brand recognition and fame in this category. it is the leading coffee machine seller in Nepal. service and its product.attributed to consistency. it is a novel concept in Nepal. Himalayan Java is cutting on the food from its menu. Another innovative product. it is going to add to the overhead of the business but. Only time will tell whether their new innovations will catch on as well as their last products – but with a sound business model and marketing there is every chance that they will succeed. It has continued to build on its success and brought on new innovations. once introduced it may catch on and be an unprecedented success. They are now planning to bring in blended coffees to enhance the coffee tasting experience of the patrons. Finally. it wants to cut 25% of its food items from its menu and offer more coffee offerings only. the staff also need to be trained. The new menu will display the calorie content of all the food served in Himalayan Java along with their suggested intake amount. Future Programs Himalayan Java is working on bringing in new and innovative products in Nepal. Conclusion Himalayan Java is the premier coffee house in Kathmandu. it has prevailed and become the leader of the market. Quite popular in US and Europe. they are offering coffee in different sizes like Regular. Tall and Grande. Even people staying abroad know of Himalayan Java and crave for a cup of their coffee. One of the ideas it is soon going to implement is the take away cups. There is a huge market for Himalayan Java.e coffee only. Himalayan Java has always been consistent on quality. 10 of 13 | P a g e . It became a huge success due to its innovative and novel offering. Therefore. It had taken a huge risk in starting a coffee house when there was no coffee culture in Nepal. It was to focus more on its core product i. Today the people are getting very conscious about their health. But. For this a complete reengineering of the menu is being conducted. Himalayan Java is coming up with is the blended coffee. Right now. The cups have been specifically designed in the US. For this additional blending. Soon a customer would be able to choose to have a hazel nut flavor cappuccino or a vanilla flavored cappuccino. Himalayan Java is encouraging its own staff to take up the Himalayan Java franchises. This would ensure that the quality of the services would not be compromised and there would be continuation with the Himalayan Java brand. It has established itself and the awareness among the customers is high. Himalayan Java is redesigning their menu. Exhibit 1Coffee Producing Districts in Nepal Coffee Plantation area 1600 1400 1200 1000 800 600 400 200 0 Coffee Plantation area Exhibit 2 Coffee Plantation Area in Hectares 11 of 13 | P a g e . 500 450 400 350 300 250 200 150 100 50 0 Exhibit 3 Coffee Cherry Productions in Metric Tons Export (kg) 120000 100000 80000 60000 40000 20000 0 Export (kg) Exhibit 4 Export of Coffee in Kg 12 of 13 | P a g e . Export (Rs) 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Export (Rs) Exhibit 5 Export of Coffee in Rs. (000) Import Rs(000) 60000 50000 40000 30000 20000 10000 0 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 Import Rs(000) Exhibit 6 Import of Coffee in Rs. (000) 13 of 13 | P a g e .