Bringing gourmet coffee to India: lessons of

an Italian firm in an emerging market

Bernardo Bertoldi, Chiara Giachino and Silvio Marenco

Bernardo Bertoldi is based Introduction

in the Faculty of Economics,
As Kotler (2005) observed, the brand becomes ‘‘the whole platform for planning, designing,
University of Turin, Turin,
Italy. Chiara Giachino and
and delivering superior value to the company’s target customers’’. In fact, in this new age of
Silvio Marenco are based at consumerism, doing business has evolved into a higher order of brand relationship and
ESCP-Europe, Turin, Italy. accountability. Kotler (2005) thus regards the brand as the most important and sustainable
asset a company can capitalize. This is why it is even more crucial to carefully handle name
changes and brand transfers when mergers and acquisitions occur.
Brands are important because they can easily shape customer decisions and consequently
create economic value for the company. Moreover, there is a general absence of a clearly
defined approach taken by companies to penetrate emerging markets with their brands,
especially in the Indian market.
‘‘The generation of good knowledge across national borders is bound to be more difficult
than in a single-country setting’’ (Sinkovics et al., 2005). Perhaps this is why there is a lack of
research on this subject so far. For these reasons, some scholars feel the need to better their
understanding of how different markets work and why customers from different markets
behave the way they do (Ghauri and Grønhaug, 2002).
The word ‘‘brand’’ is known by everyone even if sometimes it is used with different meanings.
Scholars and experts started to speak about brand a long time ago but the turning point was
reached in the 1980s; in fact, as Kapferer (1997) mentioned, if before the 1980s companies
wished to buy a producer of certain goods, like chocolate or pasta, after the 1980s they
wanted to buy KitKat or Buitoni. This new way of thinking is of fundamental importance
because from that moment it became clear that along with the brand it was possible to buy a
place in consumers’ minds and not simply a company producing certain goods. Thanks to
this concept the enormous psychological power of brands was discovered. In fact, ‘‘brands
are not usually listed on balance sheets but they can go further in determining success than
technological breakthroughs by allowing the marketer to demand premium prices’’
(Czinkota and Ronkainen, 2004). Brands are important because they can easily shape
customer decisions and consequently create economic value for the company.
What makes a brand so powerful is the product or service interaction with the people or
customers who decide to buy it on the market. So we have brands as a living system made
up of three poles: product or service, name and symbols and concept (value proposition).
Regarding this, Kapferer (2004) said that ‘‘a brand is a shared desirable and exclusive idea
embodied in products, services, places and/or experiences’’. Sherry (2005) adds that ‘‘a
brand is a performance, a gathering, an inspiration. A brand is a semiotic enterprise of the
firm, the companion spirit of the firm, a hologram of the firm. A brand is a contract, a
relationship, a guarantee’’. The relevance of these descriptions is that brand cannot be seen
alone but lives in a system. It is difficult to imagine a brand without the support of a product or

PAGE 32 j JOURNAL OF BUSINESS STRATEGY j VOL. 33 NO. 5 2012, pp. 32-43, Q Emerald Group Publishing Limited, ISSN 0275-6668 DOI 10.1108/02756661211282777
 a service. At the same time, the success of a brand is determined by consumers who buy a
product or a service because that brand offers them high quality, transmits particular
emotions, gives a sense of safety, etc.

Data collection
The authors had the opportunity to follow the operation conducted by the Lavazza Company
in India for three years (2007-2010), although the majority of the interviews were done in the
first two years of the research. The research focused on the brand strategy using a
qualitative approach based on interviews with Lavazza management. The interviews were
organized in two sessions. The first session of interviews was carried out during 2007-2008
with two objectives: to understand Lavazza’s values and strategies, the Indian culture and
the opportunities that this country could offer the Italian company. The second objective was
to follow the strategy Lavazza used to manage the transition after the acquisition of the two
Indian companies.
The second session of interviews was carried out during 2009-2010 to verify the current
situation and to finalize the framework developed. Interviews lasted two and one half hours
on average and when possible were supported by documentation referring to the strategies
adopted in India by Lavazza, and to research and studies either conducted or
commissioned by the Lavazza Company (n.d.).

Background of the company

Lavazza boasts a 100-year-old entrepreneurial heritage created by the perseverance and
intuition of the founder, Luigi Lavazza, who in 1895 took over a small grocery store in the old
centre of Turin, Italy. His inventiveness produced the concept of ‘‘coffee blend’’, that is, the
art of mixing coffees with different origins to create a more tasty and harmonious flavor.
Now Luigi Lavazza’s company is the leading Italian coffee roaster and seller in the ‘‘home’’
segment, with a market share of about 50 percent, and is one of the leading players in
Europe, with the top position in the espresso segment with a market share of about 40
percent. In 2009, the net revenues of the Lavazza Company amounted to e1,093 million and
the EBITDA was e168 million.
Lavazza makes coffee for home use, institutional customers and restaurants. The company
primarily operates in Italy, is headquartered in Turin, and employs about 2,000 people.
Lavazza’s vision is to bring the aroma, quality and culture of Italian espresso worldwide. The
core values of Lavazza are based on four fundamental concepts:
1. ‘‘research’’ that expresses the passion and the intuitiveness to explore new alternatives;
2. ‘‘experiment’’, meaning the discovery of new flavors in order to preserve the purity of the
coffee aroma;
3. ‘‘evolution’’, that represents the continuous transformation process that leads to the
creation of a better future; and finally
4. ‘‘innovation’’, which is the willingness to break ground to build new paths for further
development.
Consequently, Lavazza is a very creative firm, from product planning to its communication
strategy.

‘‘ [. . .] we have brands as a living system made up of three

poles: product or service, name and symbols and concept
(value proposition). ’’

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 ‘‘ Lavazza is present in 80 countries through its distributors and
agents. This was the traditional method adopted to go
international in the late 1970s and was the easiest way to sell
products in foreign countries. ’’

The international experience of Lavazza

Lavazza makes coffee for home use, institutional customers, and restaurants, with brands
including ‘‘Crema e Gusto’’, ‘‘Qualità Oro’’, ‘‘Lavazza Blue’’ and ‘‘Qualità Rossa’’. The
company also operates coffee-related training centers around the world. It is possible to
identify a first segmentation of the strategic businesses by identifying two main areas, a
business-to-business (B2B) channel involving sales to other companies like restaurants,
hotels and other firms that use Lavazza for their internal use; and a business-to-consumer
(B2C) channel which encompasses direct sales to end-users through retail distributors or
coffee shops.
Within the retail channel, the company is the market leader, mainly selling its ‘‘home’’
products, including mocha, espresso, decaffeinated and filter segments. In the Ho-Re-Ca
channel, Lavazza has a tight network of agents and distributors that mainly sell products
from vending, away-from-home and food services business areas to large retail distributors
(supermarkets, malls, etc), restaurants, hotels and cafeterias. Lavazza is also leader in the
Italian automatic distribution channel with the registered capsules system called Lavazza
‘‘Blue’’, which stands for ‘‘Best Lavazza Ultimate Espresso’’.
Lavazza is present in 80 countries through its distributors and agents. This was the
traditional method adopted to go international in the late 1970s and was the easiest way to
sell products in foreign countries. Apart from this, Lavazza opened its own subsidiaries in ten
foreign countries. The internationalization process of Lavazza started in the 1980s and
proceeded with entering foreign markets through distributors or agents while establishing its
own foreign subsidiaries. The expansion carried out by opening subsidiaries and acquiring
local companies was conducted in three stages. In fact, Lavazza undertook a first phase of
internationalization through its own subsidiaries in the 1980s and only after a decade
proceeded with a second short phase. Then, after another decade, it started a third phase of
internationalization by acquiring companies in India and Brazil. For each country Lavazza
developed a precise strategy; in the following diagram is a summary of the key strategy used
for each block of the company’s internationalization model (Figure 1).

Crisis and opportunities

In 2007 a liquidity crisis in the US led to a collapse of several US financial institutions and a
significant decline in economic activities. Many companies ran into economic difficulty in
growing locally and internationally. But some companies have continued to expand their
businesses abroad, above all by taking advantage of the vitality of the emerging markets,
considered attractive by companies because they offer opportunities for trade, technology
transfers and direct foreign investments.
Two of the most powerful emerging economies are China and India, which have large
populations and large markets and were the world’s fastest growing economies until 2012.
These are the main features that characterize emerging markets in general, and among the
key factors for the future growth of world trade and financial stability and are probably the
features that captured the attention of the Lavazza Company.
Before entering the target market Lavazza studied India’s peculiarities, in fact, despite its
attractiveness for foreign investors, the Indian market holds many surprises. For this reason,
besides politics, economics, social and technological situation, the competitors and the

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Figure 1 Lavazza’s internationalization model

positioning of the brands acquired were both studied in depth. In particular, the economy of
India has grown at an average rate of nearly eight percent per year since the beginning of
2003. The overall growth of GDP during 2006-2007 has been placed at 9.2 percent. At a
disaggregated level the growth during 2006-2007 was 2.7 per cent in agriculture, 10.0 per
cent in industry and 11.2 per cent in services as compared to 6.0 percent, 9.6 percent and
9.8 percent respectively during 2005-2006.
Indian coffee cultivations are largely confined to the hilly regions of the southern states. They
account for 53 percent of the planted area (59 percent planted with rabica, 41 percent with
robusta). Most coffee holdings are small. India produces around 260 mn kgs of coffee per
year. Indian coffee production has a yield of 800-900 kgs per hectare, which is quite low,
compared to the world average of 1,100 kg per hectare. Domestic demand for coffee has
grown quickly and steadily over the last decade. An increasing number of companies have
discovered the opportunity that lies in the Indian market, with high Consumer demand, a fast
growing population, and high purchasing power.
The Indian hot drinks market generated total revenues of $2,369.2 million in 2006. Between
2002 and 2006, it presented a compound annual growth rate (CAGR) of 3.5 percent. The
disaggregation of Indian hot drinks sales is at odds with the corresponding Italian market.
Indeed, tea is the main segment of the consumption of hot drinks in India, whilst coffee is the
second hot drink (Figure 2).

Figure 2 Coffee in India is the second hot drink after tea (% Share, by value)

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 In India, tea proved to be the most lucrative hot drinks market in 2006, generating total
revenues of $1,245.4 million, equivalent to 52.6 percent of the market’s overall value. Coffee
sales generated revenues of $735.5 million in 2006, representing 31 percent of the market’s
aggregate revenues. These and other factors persuaded the Lavazza Company to invest in
India.

The case
The acquisition of two Indian companies
On 9 March 2007 in Mumbai, India, the Lavazza Group signed an agreement with the
Sterling Infotech Group to acquire Barista Coffee Company Limited and Fresh & Honest
Café Limited, two major local distributors. Barista was the second-largest Indian coffee shop
chain in terms of outlets, with 150 coffee shops of which 132 were in India, mainly in New
Delhi, Mumbai and Bangalore.
The acquisition was carried out based on a precise development strategy that would lead to
the opening of 400 outlets by 2010 in India. This target would be achieved by leveraging the
excellent premium positioning and importance reached by Barista on the Indian market at
that time.
Fresh & Honest Café (FHC) focused on the vending machine business, specifically on office
coffee services, and was the leading company in the bean-to-cup segment (high quality
bean product). In over 22 Indian cities, FHC supplied an average of 300,000 cups of coffee
per day, equal to about 800 tons of coffee per year. The company was expanding rapidly and
had a production site in the southern region of India. Among its customers, were some of the
most prestigious hotel chains in India.
‘‘Acquisition is part of our strategy and aims at expanding our operations in markets with a
high development rate and a high growth potential’’ stated Alberto Lavazza, Chairman of the
Group. ‘‘This ambitious policy has a strong economic impact due to the importance of this
transaction, but it also has a significant impact in terms of international expansion and
development of our brand’’.
At that point Lavazza had to deal with managing the brand transfer to the acquired local
distributors, Barista and FHC. Lavazza used tactics commonly adopted by food companies
when trying to access a foreign market. In 2011 Starbucks entered India with a joint venture
with Pantaloon Retail, which that owned the largest local coffee shop.
These brand transfers are facilitated by the tendency of international markets to become
more homogeneous than ever before. As a result, companies that favor global brands have
to decide whether it is advisable to replace all their local brands with global ones or not.
Branding globally, while marketing locally (Barron and Hollingshead, 2004), assumes that
global branding must be driven by collaboration among local markets, both with each other
and with central marketing.
In the Indian coffee industry Barista and FHC had many opportunities for growth due to the
lack of power of suppliers and buyers and the increasing market volume. However, a
moderate threat lay in the internal competition that could have been harsh in the future,
particularly for Barista due to potential new entrants like Starbucks or other multinational
giants.

‘‘ Generally, consumers are likely to be strongly influenced by

brand and retailers need to stock brands that are popular with
consumers, even if they are more expensive. ’’

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‘‘ Lavazza had the chance to exploit the period before the boom
of retail infrastructures, when multinational companies would
massively enter the market. ’’

Lavazza had the chance to exploit the period before the boom of mass retail infrastructures,
when multinational companies would enter the market massively, to build strong corporate
brand awareness and train the Indian taste to a high quality espresso in order to position
itself as an interesting niche segment.

A five forces analysis of the Indian coffee industry

In this analysis it is fundamental to first set the boundaries of the industry. The authors have
adapted the five forces analysis to the Lavazza Company, particularly referring to the two
main business segments in which the acquired companies, Fresh Honest Café (FHC) and
Barista, were active.
Buyer power. It is important to define who the buyers are. The answer depends on the market
segment in which a company operates. The authors make two separate analyses, one for
Barista and another for FHC.
Generally, consumers are likely to be strongly influenced by brand and retailers need to
stock brands that are popular with consumers, even if they are more expensive. It is
important to invest in strengthening brand awareness in order to weaken buyer power and
gain market share against competitors. A medium sized company should make an effort to
invest in their brands in order to be ready when mass market distribution, like supermarkets
and malls, begin to boom in the Indian market. At that time it will be very important to have
built a widely recognized brand, which can compete against strong multinational companies
like Nestlé or Kraft Foods.
For Barista the buyers were mainly customers of its coffee shops. Buyer power was quite low
as it was fragmented into a myriad of individual decisions. Consumers were pretty sensitive
to the brand power of the cafés so, for Barista, buyer power was low. On the other hand, for
FHC the buyers were mainly companies that buy coffee machines for their employees. In this
field, it is not the end user who decides which product to buy; therefore buyers are less
influenced by the brand. In fact, they are more interested in a high level of service, quality
and good value for the lowest price. In any case, a good level of brand recognition could
give employees the feeling that the company is a successful firm that cares of them. This
could be important, especially in India, because many companies have started contending
with a skilled workforce that is likely to join the company that pays more since there is a lack
of trained workers.
In conclusion, buyer power was low for the B2B market segment, too, as in the case of FHC.
Supplier power. Both for Barista and FHC, suppliers were as companies that provided raw
coffee. Brokers, who often act as intermediaries between manufacturers and growers, taste,
value and bid on their client’s behalf. The low economic status of countries that grow coffee
combined with the large number of independent growers and the relatively undifferentiated
nature of the product limits supplier bargaining power.
Lavazza would supply Barista and Fresh & Honest Café with the ultimate expertise in
espresso, the most innovative techniques and machinery. Moreover, Barista and Fresh
& Honest Café would earn more power against suppliers thanks to the advantage of scale
they would obtain after being acquired by Lavazza. Overall supplier power was very low.
New entrants. Large multinational companies, who manufacture products with exceptional
brand strength and generally operate within other consumer markets, like Nestlé S.A. and
Unilever, were a serious threat.

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 ‘‘ The local culture is the first guide for the company: without a
good understanding, all changes can fail and can destroy the
value of the acquired brand/brands. ’’

As far as the coffee shop segment was concerned, Starbucks was the most likely to enter the
Indian market. But even with strong brand recognition in Western Countries, success in India
was not a foregone conclusion. In fact, one could argue that Starbucks could hurt Indian
pride and culture, being too Western. Others might count on this, considering the ‘‘Western
taste’’ of Starbucks a strength that would attract the Indian middle and upper classes who
could afford expensive lifestyles. They often want to distinguish themselves from other
poorer Indian classes, by showing off their new richer status compared to the past.
A particular threat for Lavazza could be the entrance of very strong multinational companies
into the retail market once large distribution infrastructures were developed in India. In fact, if
Lavazza did not build a well-recognized brand, it would be overtaken by bigger multinational
companies like Nestlé that are stronger when competition is led by cost cutting and lower
prices.
By exploiting the late boom of mass retail distribution infrastructures, Lavazza could have
enough time to make its brand well known and spread its knowledge of espresso throughout
the Indian market. In fact, another way to defend minor companies like Lavazza against the
entrance of multinational giants would also have been to train the Indian consumer taste to
prefer high quality espresso. This in turn would have reduced consumer price sensitivity in
favor of a high quality espresso like Lavazza, rather than a filter product like Nescafè. Thus,
the risk of new entrants was medium-high for Barista.

As for Fresh & Honest, the risk was lower than for Barista because it had already gained the
leadership of the B2B market and that was more difficult to jeopardize. Above all, there was a
market entrance barrier created by high fixed costs, but it is also true that several big players
capable of affording high investments could be listed, so several incumbents could be found
even if some entry barriers did exist (e.g. regulation, high investments required to start up a
company, etc).
Substitutes. The main hot drink in India is tea, which represents an ancient tradition although
espresso and coffee consumption are increasing. For FHC the risk of substitute products
was lower than for Barista because companies, many of which as multinational foreign
companies, want to provide their employees with both tea and coffee. On the other hand, in
the B2C channel, drinking an espresso is perceived as a moment to relax with friends,
without the practical use it has in Italy (e.g. people have espresso at breakfast to wake up).
So consumers may choose among a wider range of products when they are out and want to
spend some time with friends. For instance, they can have ice-cream, soft drinks or other hot
drinks. Hence Barista may have had to deal with a higher risk of substitute products than
FHC, because end users (employees of a company or guests in an hotel, etc) cannot choose
among a wide range of products but just between two or three drinks that their company has
chosen to provide by partnering with a particular supplier (e.g. Fresh & Honest with Lavazza
coffee blends).

Consumers may limit their caffeine intake and therefore coffee consumption due to health
concerns, with other soft or hot drink categories forming potential substitutes. However,
considering that the proportion of the population consuming coffee is increasing, it was
unlikely that such substitution would substantially impact coffee sales. Moreover, Barista
overcame this threat by offering a wide range of products. Indeed, Barista provided their
clients not only with coffee but also with tasty specialties like ice-cream, chocolates, cakes,
soft drinks and sandwiches.

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Internal rivalry. There were a few major players in the coffee shop chain sector: the Café
Coffee Day, Costa Coffee, Café Mocha, Java Green and Nescafé outlets. Players attempt to
distinguish themselves from competitors by offering gourmet variations on essentially the
same products, and propose a wide menu and a pleasant atmosphere with soft lights, colors
and music, merchandizing, and Internet connections. Usually the products become more
differentiated with the addition of various ingredients and flavors.
Although for Fresh & Honest Café the product differentiation was lower and consisted more
of variations in the production process of the coffee blends, overall the internal rivalry for
Barista was moderate and for FHC it was quite low.
Finally, in the Indian coffee industry Barista and FHC had many opportunities for growth due
to the lack of supplier and buyer power and the increasing market volume. Nevertheless, a
moderate threat lay in the internal competition that could have been quite harsh in the future,
particularly for Barista, due to potential new entrants like Starbucks or other multinational
giants already active in the consumer goods or food service.
Lavazza had the chance to exploit the period before the boom of retail infrastructures, when
multinational companies would massively enter the market, build strong corporate brand
awareness and train the Indian taste to appreciate a high quality espresso in order to
position itself as an interesting niche segment.

Indian consumer perception of the Lavazza brand

The general image that the Indian people interviewed had of Italy, although they often
associated Italy with other European countries, was quite stereotypical: for example, they
connected Italy and food, especially with pizza and pasta, and with the Mafia. Only a
minority recognized Italy as a country with a strong tradition, an important history and
imposing architecture, monuments and churches, with a considerable presence in the
fashion world and with great football clubs.
But if Italy evoked few images in the minds of Indian people, the ‘‘Lavazza’’ brand did not
evoke any response at all. Consumers had not heard this name at all and there was no value
connotation and no link between the world of coffee and the name ‘‘Lavazza’’. People taking
part in the focus group received more information about the Italian company, especially with
reference to the concept of Lavazza. This phase was important because it provided initial
feedback about how Indians perceive the coffee world. The interviews considered another
factor that could influence the customer choices: the identity of the brand conveyed by
images.
In conclusion, although Lavazza was not known by Indian people, there was a huge
opportunity for the Italian company to be the ambassador in charge of communicating the
meaning of ‘‘Italianness’’. Since no coffee brand existed in India, the value related to
expertise and tradition potentially represented a great opportunity for Lavazza to become a
leader in a still virgin market.

An overview of the strategy and the current situation

‘‘Lavazza’’ sounded like a nonsense word with an Italian sound to Indians. Hence, a strategy
consisting of the immediate substitution of the two acquired brands, Barista and Fresh
& Honest Café, with ‘‘Lavazza’’, would have exchanged the value of the two Indian brands
with something meaningless in the Indian mind. For this reason Lavazza chose, at least in an
initial phase, an adaptive branding strategy.
However, Lavazza’s mission is to become a world leader. After the acquisition there was
clearly the need to manage the transition from the two Indian brands to the introduction of the
Lavazza brand. The risk in making the transition was that of destroying the acquired brands’
value, hurting Indian pride or even assigning negative values to the Indian perception of the
Lavazza brand.
The final objective of Lavazza Company is, even today, to be present in all the channels and
to penetrate the Indian market with the Lavazza brand in the retail segment. But the path to

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 reach this objective is not simple and, above all, requires a long time. In designing the path
the Lavazza management started with identifying medium-short term objectives to leverage
the two companies acquired and increase awareness and respect for the Italian brand.
Lavazza adopted a cautionary approach in managing the transition period because it knew
that an error could have been fatal and management was not in a hurry to reach its
objectives.
Three years after the arrival of Lavazza in India, the company’s brand awareness and
presence is still increasing. The objectives and the strategy chosen by the Italian company in
2007 are the same today although the economic scenario and the development of the
country have caused a slowing down in the penetration of the market. Lavazza did not retain
the entire initial plan because the reaction of the local population and the market itself were
not quite as expected but all the goals were achieved because the strategy adopted allowed
Lavazza flexibility.

The framework developed

In the case study analyzed there is a single Italian company – Lavazza – with the ambition to
enter the Indian market (Figure 3). The authors have summed up and generalized the main
steps followed by Lavazza in penetrating the Indian market:
B Pre-assessment: study the target market and identify its potential; find target companies
with strong brands.
B Adaptive brand strategy building: create brand awareness and value by exploiting the
strength of the companies acquired.
B Implementation: design the strategy and translate actions into reality.
B Monitoring: check performance and results obtained and when necessary change or
implement the branding strategy.
The second phase of the ‘‘adaptive brand strategy building’’ model, the focus of our
research, was created by taking the model of De Chernatony (2001) that ‘‘adopts a more
balanced perspective than existing models, since it builds on the asset of knowledgeable
and committed staff whose values ideally align with the brand’s values. The model

Figure 3 Steps to enter an emerging market

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‘‘ The final objective of Lavazza Company is, even today, to be
present in all the channels and to penetrate the Indian market
with the Lavazza brand in the retail segment. ’’

encourages a multifunctional brand team progressing through the phases of strategy to

tactics to implementation’’.
The company has strong brand awareness in its home market and in Europe but is unknown
in India. The Indian market has two acquired companies with strong brands to manage.
Moreover, the Italian company already committed staff aligned with the brand’s value. These
features have a strong influence on the model developed and although the model of De
Chernatony (2001) offers guidelines, some changes are necessary in order to adapt it to our
case.
The general steps followed by the Italian company in penetrating the Indian market are
outlined in the model. These steps can be generalized for all companies that have to develop
a strategy to enter an emerging market through acquisitions.

Steps to implement when penetrating a foreign market

The first step, called ‘‘assessment’’ in the model, includes preliminary studies and research
on economic and social aspects of the target market. In fact, it is very difficult to make
managerial decisions in an unknown environment. After having drawn a clear picture of the
country it is important to analyze in-depth the sector the company intends to enter. In
conducting this analysis, researchers will probably identify the most important brands
present on the market. At this point, managers will have the task of identifying potential
partners or target companies to acquire. The requirement is that the target companies have
strong brands that are well recognized by people. This makes it possible to exploit their
values and, if the brand strategy is well structured, establish brand awareness with its own
brand.
The second step, the most important one for this research, is called ‘‘adaptive brand
strategy building’’ (Figure 4). To enter an emerging market where the foreign brand has
very low or even non-existent brand awareness, the best brand strategy is the adaptive
one. In this way, the entrant company will have the opportunity to exploit the values of
the brand/brands acquired and, at the same time, increase the awareness of its own
brand among the local population. The true objective of this second step is to build a
brand strategy that can create value. How can this be done? To explain the process the
authors have taken the model created by De Chernatony (2001) and adapted it to the
case of a company that wants to enter an emerging market through acquisition of local
companies.
The core of the model is based on the brand vision of the company. In fact, the brand
vision is the driver for setting the brand objectives. Management has to decide short
and long term brand objectives in line with the real positioning of the brand on the
target market and calibrated with the positioning of the brand/brands acquired. Of
course, if a brand has nonexistent brand awareness on the target market and the
brand/brands acquired are not the leaders, probably management has to set objectives
with lower expectations.
Once the company has a clear brand vision and real objectives, there are a number of
actions that must be implemented: organizational culture, audit the brand sphere, KPIs for
brand building and brand essence.
As for the De Chernatony (2001) model, the organizational culture can be considered an
important brand discriminator and a real competitive advantage for the company. It is very

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 Figure 4 Focus on the second step ‘‘adaptive brand strategy building’’

important to consider how consumers perceive such aspects as the quality of service, the
uniforms and employee preparedness. But in order to do this it is necessary to get into
people’s minds, understand their culture, their habits and their needs. The local culture is the
first guide for the company: without a good understanding, all changes can fail and can
destroy the value of the acquired brand/brands.
Second, there is ‘‘audit the brand sphere’’. This step differs from De Chernatony’s (2001)
because we must consider that when a company decides to enter an emerging market
through acquisitions, the companies are already structured and inserted into the market. The
‘‘audit the brandsphere’’ phase, in the case analyzed, means to apply the five forces
analysis of Porter (1985) to the brand/brands acquired. The objective is to understand how
strong the brand/brands are on the market and which are the weaker areas. This can help
when the company has to define the strategy and future actions.
Third, the company has to set the ‘‘KPIs brand building’’ in order to monitor the performance
of the brand. In particular, for the first phase the KPIs will be mostly qualitative; for the
company it is essential to have an awareness of how the brand is perceived by the local
population, what the reactions to the changes made are and to identify the opportunities as
soon as possible.
Finally, the company has to find a ‘‘brand essence’’ for the target market that is the core of
the brand, a promise.
The third step is the implementation or the ability of the company to transform the strategy
Keywords:
into reality.
Brand,
Emerging markets, Finally, the company has to monitor the results achieved and, if necessary, intervene on the
Strategy, brand building strategy in order to correct it and adapt it to the new needs.
Coffee market,
Indian market,
Multinational companies,
Conclusion
International business,
Food and drink products, This case study offers recommendations on how firms in the food and beverage industry can
India, be most effective in managing their brands abroad and illustrates the required steps and
Cross-cultural studies strategic choices that companies need when deciding to go international.

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PAGE 42 JOURNAL OF BUSINESS STRATEGY VOL. 33 NO. 5 2012
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Corresponding author
Chiara Giachino can be contacted at: [email protected]

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