Consumer Research.pdf

Café Market: Bangladesh

Nestled between India and Myanmar in South Asia, Bangladesh – a country filled with hopes and dreams of 160 mn people (8th largest) and spanning 147,540 sq. kilometers – surfaces as one of the most prominent, lucrative investment frontiers in the world. Despite its fair share of myriad challenges, the country has shown remarkable resilience to

register a steady economic growth of > 6% in the last decade, an accomplishment to take pride in. This significant growth has resulted in a massive change in the composition of the country’s workforce today, as is evidenced by the rise of consumerism.

Developed By:

LightCastle Partners

Frontier Market Series: LAW (LightCastle Analytics Wing) Publications

Photo Credit: Raitul Rabith, Title – Emerging Bangladesh

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Acronyms BDT Bangladeshi Taka bn Billion GBP Pound Sterling Kg Kilogram mn Million MW Mega Watt MT Metric Ton M MT Million Metric Ton USD United States Dollar

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Contents

1. EXECUTIVE SUMMARY ........................................................................................................................................................................ 3

2. BANGLADESH – ECONOMY OVERVIEW ................................................................................................................................................ 4

3. ECONOMIC DRIVERS............................................................................................................................................................................ 4

A. RMG SECTOR ............................................................................................................................................................................................... 4 B. REMITTANCE INFLOW ..................................................................................................................................................................................... 5 C. FOREIGN CURRENCY RESERVE .......................................................................................................................................................................... 5 D. INCREASING FDIS .......................................................................................................................................................................................... 5

4. CONSUMER INDUSTRY IN BANGLADESH .............................................................................................................................................. 5

A. GDP VS. PRIVATE CONSUMPTION ..................................................................................................................................................................... 5 B. CONSUMER SPENDING SCENARIO ..................................................................................................................................................................... 6 C. COMPARISON WITH OTHER COUNTRIES .............................................................................................................................................................. 6 D. FACTORS THAT ARE SHAPING THE CONSUMER INDUSTRY ........................................................................................................................................ 7

5. BANGLADESH – THE NEXT BIG ECONOMY IN SOUTH ASIA .................................................................................................................... 9

A. COMPETITIVE INVESTMENT CLIMATE ................................................................................................................................................................. 9 B. PROMOTING PRIVATE SECTOR PARTICIPATION..................................................................................................................................................... 9 C. GOVERNMENT PLAYING A CATALYTIC ROLE ......................................................................................................................................................... 9 D. SUBSTANTIAL OPPORTUNITIES FOR INTERNATIONAL INVESTORS .............................................................................................................................. 9

6. MARKET ANALYSIS .............................................................................................................................................................................10

A. SNAPSHOT OF THE CAFÉ INDUSTRY IN BANGLADESH ........................................................................................................................................... 10 B. COMPETITIVE LANDSCAPE ............................................................................................................................................................................. 11 C. LOCATION ANALYSIS ..................................................................................................................................................................................... 13 D. CONSUMER INSIGHT ..................................................................................................................................................................................... 13

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1. EXECUTIVE SUMMARY Bangladesh is home to the eighth largest population in the world. Despite many shortcomings like political turmoil, labor industry unrest and natural calamities, Bangladesh has registered steady economic growth in the last decade. This significant growth has brought in a massive change in the composition of the country’s workforce which is evidenced by the rise of the middle consumer class. The country’s outstanding economic growth is evidenced by the growing GDP of 6-7% and inflation has remained stable over 2013 at 7% despite frequent supply chain disruption due to political unrest. Bangladesh has been performing well compared to other comparable countries and sovereign ratings by both Moody’s and S&P are testament to the economy’s resilience. Along with this trend, geographic proximity to emerging Asian powerhouses - India and China is further adding impetus to the country’s drive towards middle income status. With an emerging economy consumer spending, disposable income and personal savings are also experiencing a positive momentum. Bangladesh is a mammoth sized consumer market consisting of almost 160 million consumers. This huge consumer base is being driven by catalytic factors like age and gender distribution (60% of the population being between 15-64 years of age), increasing urban population (growing at a rate of 30%+/year), expanding labor force (increasing purchasing power of the mass), increasing literacy rate (primary education enrollment is 95%+), rising middle class, growing white collar culture and globalization (youth influenced and linked with the globe via IT and social media). A growing labor force along with increased literacy rate had a positive impact on the socio economic condition of the mass people. This has led to a growing White Collar culture in the country. Some of the world famous banks like HSBC, Citi NA, StanC and many Fortune 500 companies like Chevron, Microsoft, Google, Coca-Cola, Philip Morris Inc. along with Starwood Hotels and Resorts are already operating in the country. And this trend has a positive correlation with the consumption of food, healthcare, education, childcare and consumer durables. World famous franchises like KFC, Pizza Hut and Nando’s have already entered Bangladesh market. Currently there are six private and one state owned mobile phone operators in the country which has a staggering aggregate customer base of almost 114 million+. Besides, the number of internet users have been growing at a rate of 14% annually. All these trends are shaping up the consumers’ minds and demand patterns as well. Furthermore, this globalization is also modifying the way people see entertainment and recreation. For example, young professionals and businessmen and students have started to hang out with friends and families and colleagues in cafés. Existing coffee market size in Bangladesh is BDT 600 mn+. Contribution of brewed coffee is almost two-third of the market while the instant coffee market counts for the rest of the market. At present, there are more or less 50 premium coffee cafés in Bangladesh which happen to cater a mammoth market of almost 160 mn consumers which clearly indicates that there is a huge untapped market. Among these 50 cafés, 4 international chain coffee shops (Gloria Jean’s, North End, Coffee World, Barista) currently operate in Bangladesh. As the industry is still very young and the consumption pattern is changing rapidly, people are now looking for big brands. To understand this behavior, we conducted a survey in which coffee lovers were asked which big brands they want to see next in Bangladesh. Starbucks was ranked as the first choice. In summary, young professionals like to go to all these cafés for various reasons like business meetings, family hang out with or without children and catching up with friends and colleagues; while the students prefer to go there for dating, hanging out with friends and passing the time while browsing the internet and preparing assignments and presentations. Other than these two groups, there are also people who are just looking for a nice and warm cup of morning coffee that would make themselves ready for the day ahead or a strong one to get refreshed after a day’s hard work while returning home.

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2. Bangladesh – Economy Overview

Bangladesh is home to the eighth largest population in the world. Despite many shortcomings like political turmoil, labor industry unrest and natural calamities, Bangladesh has registered steady economic growth in the last decade. This significant growth has brought in a massive change in the composition of the country’s workforce which is evidenced by the rise of the White Collar culture. This outstanding economic growth is evidenced by the growing GDP of 6-7%, while many of country’s competitors have faltered and lost their ways. Inflation has remained stable over 2013 at 7% (Source: Bangladesh Bank) despite frequent supply chain disruption due to political unrest. Reining of inflation is attributed to declining growth of non-food inflation e.g. Rent, which have contributed to lower inflationary pressure. Bangladesh Bank has also adopted a tight monetary policy which has further led to lower inflation. Bangladesh has been performing well compared to other comparable countries and sovereign ratings by both Moody’s and S&P are testament to the economy’s resilience.

Source: Bangladesh Bank and Moody’s Analytics

Along with this trend, geographic proximity to emerging Asian powerhouses - India and China is further adding impetus to the country’s drive towards middle income status.

3. Economic Drivers Bangladesh has been performing well due to the thriving RMG sector, flourishing remittance flow, record high foreign currency reserve and international investors’ interest in FDIs.

a. RMG Sector RMG sector has been playing the pivotal role in this economic growth over the last few decades. This figure shows that RMG exports have been consistently contributing to country’s total exports by almost 80%. Even during the global recession period, Bangladesh RMG industry has shown substantial growth.

Source: BGMEA

0

10000

20000

30000

RMG Export (in mln USD) Total Export (in mln USD)

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b. Remittance Inflow Remittance has become a major contributor to the Bangladeshi economy. As the emigrant workers from Bangladesh gradually increased over the years, the amount of annual remittance to the country significantly rose. According to World Bank, Bangladesh is now one of the largest recipients of remittance with almost $14.5 billion as of June 2013. Source: World Bank

c. Foreign Currency Reserve Foreign Exchange Reserves in Bangladesh increased to 1417.64 BDT Billion in January of 2014 from 1395.18 BDT Billion in December of 2013. It’s the all-time high in the history of Bangladesh. The reserve rose due to positive remittance flow, a 16.46 percent increase in export earnings, stable exchange rates, and increased foreign currency flow due to opportunities for private sectors to take loans in foreign currencies, buoyant rice production, and lower import cost.

Source: Bangladesh Bank

d. Increasing FDIs

Bangladesh is one of the top five recipients of foreign direct investment (FDI) in 2012, according to the recent report of the FDI Intelligence, which monitors global inflow of FDI regularly. The existing investors contributed the highest amount of FDI by reinvesting their earnings which signifies the confidence of the investors in the investment prospect of Bangladesh despite apprehension on the performance of the economy by local and international think-tanks. Source: Board of Investment, Bangladesh

4. Consumer Industry in Bangladesh a. GDP vs. Private Consumption Being the single dominant factor, consumption accounted for 75% of country’s GDP in 2009. Although the growth rate of private consumption is more volatile than GDP growth rate, it has cushioned the country’s economy during recessionary pressures of 2002-2003 and 2007-2009 periods. This figure shows that, in 2009 real annual growth rate of Private consumption (5.9%) was higher than that of GDP (5.7%). Moreover, private consumption has been demonstrating a bullish trend during the 2003-2009 period.

0 5000 10000 15000 20000 25000

February '14

January '14

December '13

November '13

October '13

September '13

August '13

July '13

Foreign Currency Reserve (in mln USD)

0.00

5,000,000.00

10,000,000.00

15,000,000.00

20,000,000.00

2004 2005 2006 2007 2008 2009 2010 2011 2012

Remittance (in mln USD)

0

500,000,000

1,000,000,000

1,500,000,000

2009 2010 2011 2012

FDI Inflow in USD

http://en.wikipedia.org/wiki/Remittance

http://en.wikipedia.org/wiki/Bangladeshi_economy

http://en.wikipedia.org/wiki/World_Bank

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b. Consumer Spending Scenario With the help of this boosted up performance, Consumer Spending, Disposable Personal Income and Personal Savings are also experiencing a positive momentum which is definitely a positive side for opening up an international chain coffee shop in the country.

Source: Trading Economics

c. Comparison with other countries

Though the below table shows that Bangladesh has low GDP per capita, low per capita consumption of electricity and energy, Bangladesh has a very high population density and moderate population growth.

Country Per Capita GDP (PPP)

International Dollar

Private Consumption as % of GDP

Per Capita Electric Energy Consumption (Watt/Year)

Per Capita Energy

Consumption (kgOE/year)

Median Age

Population Growth

Population Density (sqr-

km)

Gini Index

India 3339 56 50.5 512 25.9 1.41% 368 36.8

Pakistan 2791 80 48.4 457 21.2 1.56% 219 30.6

Sri Lanka 5220 64 38.9 424 31.3 0.90% 308 40.2

Vietnam 3134 66 69.5 539 27.4 1.14% 259 34.4

Bangladesh 1572 75 15.7 161 23.5 1.29% 1127 33.4

Malaysia 14670 50 354 2318 25.1 1.72% 86 49.2

Median age of Bangladesh population is quite low which means a relatively younger population. But, private consumption as percent of GDP (75%) is very high in Bangladesh compared to other countries and only below Pakistan.

0

5000

10000

15000

20000

25000

30000

35000

Bangladesh Consumer Spending

Bangladesh Disposable PersonalIncome

Bangladesh Personal Savings

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d. Factors that are shaping the consumer industry Bangladesh is a mammoth sized consumer market consisting of almost 160 million consumers. This huge consumer base is being driven by some catalytic factors like age and gender distribution, increasing urban population, expanding labor force, increasing literacy rate, rising middle class, growing white collar culture and globalization. Age Distribution The population of Bangladesh is dominated by youth ages with median age of 23.3 years and average life expectancy at birth of almost 70 years. According to 2009 data, 32.9% of Population is between 0 to 14 years while 63.60% of population is between 15 to 64 years. Only 3.5% of population is aged 65 years or more. A younger population depicts there is strong demand for goods like fast food, coffee and other beverages and apparels. Source: BBS Increasing Urban Population and the nuclear families Total population of Bangladesh is 156.1 million (July 2010 estimate) which is growing at a rate of 1.29%. Although the majority of the population in Bangladesh live in rural areas, the urban population is rising steadily. In 1990, 19.8% of total population lived in urban areas which have increased to 29% in 2012. Due to this rapid urbanization joint families are decreasing in number and nuclear families are gaining popularity. This trend is resulting in an increase in demand for food, housing, construction materials, transportation and recreation. Source: World Bank Expanding Labor Force Historically the labor force of Bangladesh has grown annually at a rate faster than the country’s population growth rate. The age dependency ratio declined from 85.42% in 1990 to 54.66% in 2009 (Source: World Bank). This decline in age dependency ratio implies that the ratio of working age population (between 15 to 65 years) is increasing at a faster rate compared to population unable to work (below 15 years or above 65 years).

Source: World Bank

Also the female participation in the labor force is increasing. Although Agriculture accounts for 20% of the country’s GDP, almost 50% of the labor force of the country is employed in agricultural sector. But rapid industrialization is attracting more labors in the industrial sector. As a result, minimum wage level has increased. These changes in the labor force has increased purchasing power of mass people. Demand for house hold electronics, ready-made food, day care center, homes for elderly, recreation, housing etc. will surge due to more participation in the labor force.

31%

64%

5%

0-14

15-64

64 & above

2.2%

2.4%

2.6%

2.8%

3.0%

22%

24%

26%

28%

30%

2008 2009 2010 2011 2012

Urban vis-a-vis total population

Growth rate of urban population

2.2%

2.4%

2.6%

2.8%

3.0%

70%

72%

74%

76%

2008 2009 2010 2011 2012

Labor Force vis-a-vis Total Population

Growth Rate of Labor Force

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Increasing Literacy Rate The literacy rate in Bangladesh has been very low. In 1990 literacy rate of adult population was only 35% and literacy rate of adult male and female was 44% and 26% respectively. But the literacy situation is improving fast and in 2009 literacy rate of adult population was 56% while literacy rate of adult male and female increased to 61% and 51% respectively. Primary school enrollment is more than 95%. Enrollment in secondary and tertiary levels are improving as well. More literate population will have different consumption pattern and will consume more of fast foods, IT products and other consumer durables. Source: Trading Economics Rising Middle Class and Growing White Collar Culture A growing labor force along with increased literacy rate had a positive impact on the socio economic condition of the mass people. This has led to a growing White Collar culture in the country. Some of the world famous banks like HSBC, Citi NA and many Fortune 500 companies like Chevron, Microsoft, Google, Coca-Cola, Philip Morris Inc. along with Starwood Hotels and Resorts are already operating in the country. And this trend has a positive correlation with the consumption of food, healthcare, education, childcare and consumer durables. This White Collar culture is considered to be one of the most influencing factors behind shaping the café industry in Bangladesh. (Source: LightCastle Primary Research) Globalization As the youth are getting more and more used to this White Collar culture, their lifestyles are also changing rapidly. Globalization, Information Technology and Social Media are changing life style of this generation. Culture of Western countries continue to have a significant influence on the consumption pattern of this country’s population. For example, fast food shops are gaining immense popularity in both urban and rural areas. World famous franchises like KFC, Pizza Hut and Nando’s have already entered Bangladesh market. In terms of apparels and footwear people are becoming more conscious about fashion which is increasing demand for branded apparels like Nike, Adidas, Reebok and Puma. Moreover, the number of mobile phone subscribers are increasing at a record pace.

Source: World Bank Currently there are six private and one state owned mobile phone operators in the country which has a staggering aggregate customer base of almost 114 million (BTRC). Besides, the number of internet users have been growing at a rate of 14% annually. All these trends are shaping up the consumers’ minds and demand patterns as well. Furthermore, this globalization is also modifying the way people see entertainment and recreation. For example, young professionals and businessmen and students have started to hang out with friends and families and colleagues in cafés and this is a very recent phenomena in Bangladesh.

0

50

100

2004 2005 2006 2007 2008 2009 2010 2011 2012

Mobile Phone User Per Hundred

World Bangladesh

0

20

40

2005 2006 2007 2008 2009 2010 2011 2012

Internet Users Per Hundred People

World Bangladesh

53%

54%

55%

56%

57%

58%

2008 2010 2012

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5. Bangladesh – the Next Big Economy in South Asia

a. Competitive Investment Climate Bangladesh is now trying to establish itself as the next rising star in South Asia for foreign investment. The government has implemented a number of policy reforms designed to create a more open and competitive climate for private investment, both foreign and local. The country has a genuinely democratic system of government and working towards a sustainable political stability which is a prerequisite for ensuring a favorable climate for investment and sustained development. b. Promoting Private Sector Participation Bangladesh has been quick to undertake major restructuring for establishing a market economy, with the major thrust coming from the private sector. The country enjoys a modest but steady economic growth. Its current development strategy is based on the premise that the creation and distribution of wealth occurs through the acceleration of growth driven by competitive market forces, with the government facilitating growth and making a clean break from the practices of a controlled economy where private investment is constrained. The government has been gradually withdrawing its involvement in this industrial and infrastructure sectors and promoting private sector participation. c. Government Playing a Catalytic Role The government has moved speedily to translate its policy pronouncements into specific reforms. It has been consistently pursuing an open-door investment policy and playing a catalytic rather than a regulatory role. Regulatory controls and constrains have been reduced to a minimum. The government has steadily liberalized its trade regime. Significant progress has been achieved in reducing non-tariff restrictions on trade, rationalizing tariff rates and improving export incentives. The introduction of VAT has helped rationalization of the import tariff and domestic tax structures. The tariff structure and the import policy are kept under constant review to identify areas where further improvements are called for. d. Substantial Opportunities for International Investors Motivated by the simple realization the country has embarked on a privatization program, offering substantial opportunities for international investors in responding to changing markets and consumer desires. Bangladesh offers some of the world’s most competitive fiscal and non-fiscal incentives which include remittance of royalty, technical know-how and technical assistance fees, repatriation facilities of dividend and capital at exit, permanent resident permits and citizenship on investing, tax holidays and depreciation allowances. Along with that, Bangladesh government has significantly improved the business set up procedure which is really commendable compared to the world standard.

Source: World Bank Source: World Bank

0

2

4

6

8

10

12

2004 2005 2006 2007 2008 2009 2010 2011 2012

No. of steps required to set up a new business

World Bangladesh

0

20

40

60

80

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

No. of days required to set up a new business

World Bangladesh

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6. Market Analysis

a. Snapshot of the Café Industry in Bangladesh The café culture is very a recent phenomenon in Bangladesh’s history. Post-independence, there were just a handful of places for eating out, while restaurants in general were just food serving places. Local Chinese restaurants were the only popular places for eating out, family dining and special events. In late 90s, fast food industry had a significant boom in Dhaka as well as other major urban areas. People first got introduced to local pizza and fried chicken chains. During and after 2000, the whole food industry flourished significantly. International restaurant and fast food chains started opening outlets in the country. Dhaka, being the capital, experienced the biggest transformation as many new restaurants and fast food shops have mushroomed, catering to the palate of different consumer segments. The industry witnessed an upward shift in demand over the last decade, with rapidly increasing per capita income, changing consumer taste and altering lifestyle. Massive development in electronic media introduced a complete cultural shift for the entire nation and like most other service oriented industries; this industry also got a major revamp in terms of new consumer generation, increased spending and improvement in consumer's taste and preferences which resulted in tremendous growth in this industry introducing high end restaurants with specialization in one or multiple cuisines followed by the introduction and the rise of the café culture in the country and particularly in Dhaka as unprecedented number of cafés having sprouted up in the key commercial and residential zones of the city. The traditional local tea stalls and canteens still flourish beside these new coffee joints, suggesting that the rise in café culture has not stolen business, rather it’s filling up a massive gap in the market.

Figure: Evolution of the café industry

This café culture is mainly triggered by the growing number of White Collar young professionals and college and university going students. The young professionals like to go to all these cafés for various reasons like business meetings, family hang out with or without children and catching up with friends and colleagues; while the students prefer to go there for dating, hanging out with friends and passing the time while browsing the internet and preparing assignments and presentations. Other than these two groups, there are also people who are just looking for a nice and warm cup of morning coffee that would make themselves ready for the day ahead or a strong one to get refreshed after a day’s hard work while returning home. The most triggering factor behind the rise of this phenomena has been the flexibility the customers enjoy in a coffee shop like they can spend as much time as they want without being asked to leave or make new orders. Moreover, the environment is vastly different and unique than that of the restaurant environment. It is considered informal but comfortable and cozy. There are also some cafés which offer Wi-Fi internet connection to the customers which is very much convenient. Furthermore some cafés also broadcast live football or cricket matches which further add to their attractiveness.

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To attract more and more customers, existing cafés are diversifying their offerings. Apart from coffee, these cafés are now offering customers light breakfast and afternoon snacks like cookies, sandwiches, breads, muffins, scones and croissants. They also have a wide array of hot and cold drinks like tea, yogurts and fresh juice in their menu. Some have gone further and started offering lunch and dinner packages as well.

b. Competitive Landscape Existing Coffee Market Existing coffee market size in Bangladesh worth BDT 600 mln+. Contribution of brewed coffee is almost two-third of the market while the instant coffee market counts for the rest of the market.

Source: LightCastle Secondary Research, 2014

Existing Competitors in the Market If the proposed chain coffee shop is opened here in Bangladesh, it will face two types of competitions: direct and indirect competition. At present, there are more or less 50 premium coffee cafés in Bangladesh which happen to cater a mammoth market of almost 160 million consumers which clearly indicates that there is a huge portion of the market still waiting to be exploited. Among these 50 cafés, only 4 international chain coffee shops are currently operating along with some local premium independent coffee cafés. This figure below depicts the existing competition in premium café industry in Dhaka, Bangladesh:

Restaurants and Joints that offer Premium range Coffee

Baton Rouge

Bittersweet Café

Roll Express

Shwarma House

Captain’s World

Terra Bistro

Local Premium Coffee Shops

Cuppa Coffee Club

Cofi 11

Red Shift

KIVA Han

Ajo Café

Moka Coffee Café

Coffee Bar

Coffee Glory

Next Cup

George’s Café

Café Hollywood

International Coffee Chain Shops in Bangladesh

Gloria Jean’s Coffee

North End Coffee Roasters

Coffee World

Barista Lavazza

Coffee Shops in 5 Star Hotels The Pool Café – Pan Pacific

Sonargaon Hotel

The Living Room – The

Westin

The Lobby Café – Ruposhi

Bangla Hotel

Chit Chat – Radisson Blu

Water Garden Hotel

International Fast Food Chains that also offer premium range coffee

KFC

Pizza Hut

Pizza Inn

Nando’s

Direct Competition

Indirect Competition

107 116 128 141 151.1 162 170.5444 436 456.4 443 456.8 488.4 527.3

2011 2012 2013 2014 2015 2016 2017

Coffee Industry Size (in BDT mln)

Instant Coffee Brewed Coffee

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When asked, Bangladeshi consumers ranked all these cafés in order of preference which is displayed below:

Source: LightCastle primary research, 2014

As the industry is still very young and the consumption pattern is changing rapidly, people are now looking for big brands. To understand this behavior, LightCastle Partners conducted a survey in which coffee lovers were asked which big brands they want to see next in Bangladesh. And, as expected, they ranked Starbucks as their first choice. Source: LightCastle Primary Research, 2014 Factors that influence customers to visit a particular café To better understand the existing rivalry in the market, we have conducted a primary research which identifies the competitive edges and key factors that consumers consider while choosing a café to visit. This graph lists all the factors that stimulate a particular consumer. Source: LightCastle Primary Research, 2014 From the graph it is clear that the consumer base puts more weightage in the quality of the coffee served (23%) along with the quality of service (17%) while 14% of them said that they look for a nice and cozy café environment.

1%2%

1%3%

8%6%

1%1%1%

0%16%

12%20%

1%2%

17%7%

Cuppa Coffee ClubCofi 11

Red ShiftKIVA Han

George's CafeAjo Cafe

Moka Coffee CafeCoffee Bar

Coffee GloryNext Cup

North End Coffee RoasterCoffee World

Gloria Jean's CoffeeCoffee RepublicPappa Roti CafeBarista Lavazza

Bittersweet Cafe

Percentage of Consumers Who Ranked these Premium Cafés as Their First Choice

23%17%

14%2%

10%7%

10%4%

13%

Quality of coffee servedQuality of service

Decoration/AmbienceSymbol of status

WiFiMusic

Length of stay allowed without ordering…Telecasting of live events e.g., football matches

Location/Convenience

Factors that Stimulate Consumers in Choosing a Cafe

34%

9%4%

9%

17%

26%

0%

10%

20%

30%

40%

Starbucks CostaCoffee

Cafe Nero CoffeeRepublic

McCafe Dunkin'D'ohnuts

International Chain Coffee Shops that Consumers Want to See in Bangladesh

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c. Location Analysis There are several locations in Bangladesh which are financially lucrative for setting up a café. These include - Gulshan, Banani, Baridhara, Bashundhara, Bailey Road, Elephant Road, Bashundhara City Shopping Complex, Jamuna Future Park, Dhanmondi, Uttara and Mirpur in the capital city of Dhaka. Besides, all the 5 star hotels and resorts and airport lounge can be very good options to set up coffee shops and vending machines. For analyzing the attractiveness of each location, we have conducted a survey. The estimated average basket size (spending per person) in selected food courts located in different locations are presented in this chart. Gulshan, Jamuna Future Park and Banani are among the highest revenue generating locations for cafés as they are the most prime locations for attracting crowd and the foot traffic is very high.

Source: LightCastle primary research, 2013 All of the above areas are within walking distance of several leading universities, schools, coaching centers and offices of many commercial institutions like banks, telcos and real estate developers. Since the coffee shops are primarily geared towards the students and young professionals the ambience, drink and food variety will definitely contribute to increasing foot traffic. d. Consumer Insight LightCastle Partners has conducted a primary research to understand the consumers in Bangladesh café industry which included the demographics, consumer behavior and demand patterns. The survey was conducted based on a sample size of 150 people including students, young professionals, homemakers and others. Important findings are discussed below. Demographics i. Gender Profile

The majority of café goers are male (60%) while the percentage of males in the total population of Bangladesh is only 49%. It is quite understandable as the participation rate of males in total workforce is higher than their female counterpart.

Source: LightCastle Primary Research, 2014

550

480

300

380

400

350

280

500

370

300

350

0 100 200 300 400 500 600

Gulshan

Banani

Matijheel

Baridhara

Dhanmondi

Uttara

Bashundhara

Jamuna Future Park

Bashundhara City Shopping Mall

Mirpur

Bailey Road

Per Person Basket Size (in BDT)

60%

49%

40%

51%

Café Industry Consumers

Total Population

Female Male

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ii. Age Profile This chart shows that most of the coffee consumers fall in the 19 – 25 years category most of which are young professionals and university students. They usually go there for hanging out with friends and colleagues.


iii. Income Profile People who go to most of these premium coffee shops usually have high monthly income of above 50,000 BDT per month.

Source: LightCastle Primary Research, 2014 iv. Occupational Profile People who visit these coffee shops are mainly of three types. Among them, young corporate professionals, university students and young businessmen are the major customers who visit these premium café shops frequently. Source: LightCastle Primary Research, 2014 Consumer Behavior i. Favorite Hot Drink In the survey it came out that most of the consumers who go to cafés, prefer coffee to tea as a hot drink (43%). And when it comes to the preparation of coffee, they prefer Brewed Coffee instead of Instant Coffee.


2%

65%

26%

7%

1%

0%

15-18

19-25

26-32

33-40

41-50

51 & above

54%

22%

9%

15%

0% 10% 20% 30% 40% 50% 60%

Average

Medium

High

Higher

41%

2%

53%

4%

Service Holder/Businessman

Home-maker

Student

Others

43%

26%

27%

4%

Coffee

Tea

Both

None

Preferred Hot Drinks

43%

57%

Instant Coffee Brewed Coffee

Preferred Coffee

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Consumers who prefer brewed coffee to instant, like the Cappuccino the most followed by the Mocha and Latte. It shows that Bangladeshi consumers are not just randomly picking up coffee type, rather they are picking up consciously considering the taste and flavor as well.


ii. Why Coffee is Their Favorite Most people favor coffee over other hot drinks because of the perceived taste (49%) while majority of the rest of the consumers prefer it because they find it more effective in helping them stay awake (40%). That is a strong reason that explains why young professionals are inclining to these coffee shops.


iii. Preferred Way of Having Coffee

Most of the consumers who like coffee, prefer to have it hot (46%). However, there are some people who like to have it iced (21%) while 33% said that they like it both way.


iv. Preferred Snacks with a Cup of Coffee As an additional item, most of the consumers order cookies or brownies. Sandwiches and cakes or muffins are also among the favorite additional items. There are also a few consumers who like to have scones, breads and salads with their coffee.


21%

46%

33%

Iced

Hot

Both

49%

40%

4%

7%

Taste

More effective (Helps tostay awake)

Peer pressure

Symbol of status

7%

24%

10%

19%

23%

13%

3%

1%

Espresso

Cappuccino

Americano

Latte

Mocha

Iced Coffee

No idea, I just pick up randomly from the menu

No idea, I just ask the host/waiter for help

40%27%

23%3%

5%2%

Cookies/BrowniesSandwiches

Cakes/MuffinsBread/Scones

PieSalad

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v. Reasons for Visiting a Café Consumers who go to cafés frequently admitted that the main reason they go to a café is to hang out with friends. Second most popular reason they disclosed is to hang out with spouse or date, followed by people who go to a café for a business meeting. There is also demand for breakfast or afternoon snacks in these cafes as well.


vi. Frequency of a Visit It’s interesting to see that there are so many coffee lovers in the country. The number of people who visit a café at least once a week is above 40%. It indicates that the market has immense potential and is continuously growing.


vii. Preferred Accompanies Most of the consumers love to hang out in a coffee joint with their friends (34%) and spouses/dates (25%). Some of them also love to be accompanied by their colleagues and families as well.


30%

16%

11%

12%

11%

4%

9%

9%

Hang out with friends/colleagues

Hang out with spouse/date

For only a cup of coffee

Business meetings

Breakfast/Afternoon light snacks

Lunch/Dinner

Special occasion…

WiFi

1%

15%

25%

22%

22%

11%

4%

Daily

More than once a week

Once a week

Once in two weeks

Once in a month

Quarterly +

Never

Spouse/Date

Spouse and child(ren)

Full family

Friends

Colleagues

Alone

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For complete study, please contact -

©2014 LightCastle Partners Limited

LightCastle Partners Ltd. 19th Floor, FR Tower

32 Kemal Ataturk Avenue, Banani C/A Dhaka 1213, Bangladesh

Phone: +880 1712 194944 | +880 1711 385988

Email: [email protected]

mailto:[email protected]

Consumer Research.pdf

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Transcript of Consumer Research.pdf