Branding Phenomenon of Local Coffee in Shifting the Existence of Foreign Coffee Brands in Jakarta, Indonesia

INTRODUCTION

The culture of drinking coffee has become part of the lifestyle of Indonesian society at this time. The trending of coffee consumers from year to year keeps on increasing, and it causes coffee businesses to be in high demand. Many outlets or coffee shops have opened in some areas in Indonesia, especially in Jakarta. The prospective coffee shop business trend can be seen from the continued growth of domestic coffee consumption per capita, of at least 8% per year (Idris, 2017). Statistics Indonesia (Badan Pusat Statistik abbreviated BPS in Bahasa Indonesia) recorded that coffee production in 2016 amounted to 21,773 tons valued at Rp 14.5 trillion, which was enjoyed by 1.9 million coffee farmer households. Coffee exports in January-August 2017 amounted to 335,027 tons or a 50% increase compared to the 2016 period which only had 212,514 tons. This is because coffee commodities also contribute to the trade balance surplus of 823 million US dollars. Meanwhile, coffee imports from January-August 2017 totaled 8,776 tons, a decrease of 63% compared to the same period in 2016 of 23,550 tons (Pertanianku, 2017). Indonesian coffee consumption has been increasing in the last few years as seen in Table 1.

Table 1

Indonesian coffee consumption from 2010-2016

Table 1.

Source: Asosiasi Eksportir dan Industri Kopi Indonesia (2018)

Increasing coffee consumption can also be translated into growing number of coffe shops. In 2014, the growth of coffee shops reached 100%. In 2013, there were 100 entrepreneurs who handled their coffee shops through the Specialty Coffee Association. This number increased up to over 200 as registered in the association in only five years (Pusporini, 2014). The increasing coffee consumption in Indonesia at this time is also inseparable from the growth of young businesspeople in Indonesia who started their businesses by opening local coffee outlets in Indonesia, especially in Jakarta. In addition to Excelso, which has remained in competition with foreign coffee brands, many new local coffee brands have emerged, such as Anomali, Kopi Filosofi, Tuku Kopi, Kulo Kopi, and many more. They provide a new breakthrough for coffee lovers and are ready to compete with foreign coffee brands that have stayed in existence in Indonesia. Table 2 summarizes the foreign coffee brands that are present in Indonesia and still operating.

Tabel 2

Foreign coffee brands in Jakarta

Table 2.

Source: Based on the brand’s website information.

When it comes to product categories that have a significant functional character and vast symbolic capacity, consumers have a tendency to view global brands as being superior to local brands (Davvetas & Diamantopoulos, 2016). For this reason and to maintanice competitiveness with foreign products, local coffee shops need to ensure constumer loyalty. Relational benefits in the context of coffee shops directly affect perceived value and customer loyalty. In addition, relational benefits also have an indirect effect on loyalty through perceived value. Finally, perceived positive values affect customer loyalty. Coffee outlet operators should better understand their customers’ perceptions, and assist them in developing competitive strategies that differentiate themselves from competitors and win customer loyalty in aggressive markets (Chen & Hu, 2010).

Corporate image has been assessed as an important antecedent of customer satisfaction and loyalty in the case of coffee shop (Tu & Chang, 2012). Corporate brands are very important because a positive corporate brand helps companies achieve higher performance, such as sales. Marketing exists to provide more value to satisfy customers and build long-term and mutually beneficial relationships with customers. If a company’s product or service does not satisfy or meet customer needs and desires, all strategies are insufficient. Having loyal customers, companies can have a higher market share and reduce operating costs. Tu & Chang (2012) found that the company’s brand image significantly affected customer satisfaction and customer loyalty; and customer satisfaction had a strong impact on customer loyalty for the sample. Therefore, companies must specifically focus on these factors to build long-term and mutually beneficial relationships with customers and create loyalty as a competitive advantage in the market and competition. In the context of coffee shop costumer loyalty has also been critical aspect for company’s sustainability (Wu, 2017; Han et al., 2018; Chang, 2020).

Many factors contribute to consumers preference on local or internasional products. According to Ismail et al. (2012), the most important factors that affect consumers’ final decisions about a product are price and quality. Since consumers usually connect a price to a product quality, it means that a product with a low price will have low quality. A product that has a high price may not be affordable for some consumer levels. Other factors that affect consumer preference are consumer ethnocentrism (Karoui & Khemakhem, 2019; Sun et al., 2021), origin, social status, price relativity towards competitive brands, family, and friends.

Self-congruity and functional congruity could also affect brand loyalty for the context of coffee brand (Kang et al., 2012). Self-congruity significantly influences cognitive and affective loyalty in the central persuasion pathway. Functional compatibility significantly influences cognitive loyalty in communication peripheral pathways (Kang et al., 2015). Furthermore, the appearance of social media as a tool of marketing communication has also begun to be used by brand owners as one of the strategies in introducing or strengthening their brands (Tugrul, 2018; Barnet & Ferris, 2018; Riaz, 2019). Booth & Matic (2011) found that marketers changed their method of communication towards their target audiences through social media. The basic of a social relationship is the same as a social media relationship. This new additional advertising channel gives practitioners the possibility to have one-on-one communication with their influencers. Marketers have to listen and take action to any communication with consumers regarding their brands (Ashley & Tuten, 2015; Killian & McManus, 2015).

From the number of studies that have been done above, it can be seen that many factors are related in maintaining the existence of a brand as mentioned in the description above, including relational benefits that directly affect the perceived value and customer loyalty and help in developing competitive strategies that differentiate themselves from competitors and win customer loyalty in an aggressive market. It was also revealed that the company's brand image significantly affected customer satisfaction and customer loyalty, and customer satisfaction had a strong impact on customer loyalty and enabled marketers to develop appropriate post-crisis strategies based on predicted consumer responses depending on the level of brand equity and branding strategies. Self-congruity also significantly influences cognitive and affective loyalty in the central persuasion pathway, while functional suitability significantly influences cognitive loyalty in peripheral communication lines. In reviewing the various research above, this study uses a communication concept, marketing, and branding communication, so that the results of this study provide a relevant picture, in accordance with the current conditions and the objectives of the author can be achieved as expected.

LITERATURE REVIEW

Strategic brand management combines the design and implementation of marketing activities and programs to build, measure, and manage brands to maximize their value. This strategic brand management process has four main steps, namely: identifying and establishing brand-positioning, planning and implementing brand marketing, measuring and interpreting brand performance, as well as increasing and maintaining brand value in relation to brand-positioning (Keller, 2013; Erkollar & Oberer, 2016; Högström et al., 2015).

Branding has existed for centuries as a means to differentiate goods from one producer to another. At present, the brand plays a number of important roles in improving the lives of consumers and increasing the company's financial value. Brand image creates a mental structure that helps consumers manage their knowledge of products and services in ways that clarify their decision making and, in the process, provide value to the company. In order for a branding strategy to be successful and the brand value that will be created successfully, consumers must be convinced that there are significant differences between brands in the product or service category. Brand differences often relate to the attributes or benefits of the product itself (Brooks, 2014; Sammut-Bonnici, 2015; Kotler & Keller, 2016; Johansen, 2018).

Basically, a brand is a proprietary name for a product, service, or group. On a more multifaceted level, a brand is the sum total of all functional and emotional assets of the products, services, or groups that differentiate it among the competition. The term ‘brand’ can be thought of as having three integrated meanings: the sum total of all characteristics of the products, services, or groups, including its physical features, its emotional assets, and its cultural and emotional associations; the brand identity as applied to a single product or service, an extended family of products or services, or a group; and the ongoing perception by the audience (consumer or public) of the brand. When brands were first introduced, it was the brand name, brand promise, and logo and packaging that established the brand identity. Now, branding has grown to include the entire development process of creating a brand, brand name, brand identity, and, in some cases, brand advertising (Landa, 2005; Johnson, 2016; Slade-Brooking, 2016; Wheeler, 2017).

According to the American Marketing Association (2019), “a brand is a name, term, design, symbol or any other feature that identifies one seller’s goods or service as distinct from those of other sellers.” In fact, however, many practicing managers refer to a brand as more than that – as something that has actually created a certain amount of awareness, reputation, prominence, and so on in the marketplace (Keller, 2003).

In a start-up, non-profit competition, products and services offer a variety of choices or values for unlimited customers. The company seeks ways to establish relationships with customers, make the company an irreplaceable customer choice, and maintain a firm relationship with customers forever. To that end, the company makes a very strong and prominent brand in the target market by making the brand preferred and believed to be a sign of the company (Kapferer, 2008). A brand has three main functions: navigation, certainty, and involvement. In terms of navigation, brands help consumers to make choices. In terms of certainty, the brand communicates the superiority of the product or service offered, so that it helps consumers determine the right choice. Meanwhile, in terms of involvement, the brand shows an image using language and associations to encourage consumers to be able to identify the brand (Haigh, 2003; Haigh & Gilbert, 2005).

The key concepts regarding a brand are brand awareness, brand association, brand identity, brand image, and brand personality (Mindrut et al., 2015; Sasmita & Mohd Suki, 2015; Su & Tong, 2015; Aktaş Arnas et al., 2016; Balmford et al., 2016; Hemsley-Brown et al., 2016). Brand awareness can be defined the power of a brand that is able to be in the minds of customers or users. In this case, customers and users have awareness of the brand. Brand association is the brand impression in the form of verbal messages and non-verbal messages that are in the minds of customers or users associated with the brand. Brand identity is the brand displays an identity that represents the brand as well as brand promises to customers or users. Brand image means the brand is perceived by customers or users. Brand personality implies that a set of human characteristics are associated with a brand. Brand equity shows that a set of assets related to a brand that adds or reduces the value of a product or service.

Brand according to Kotler & Armstrong (2020) is a name, term, sign, symbol, or design, or a combination of these, which identifies the products or services of one seller or group of sellers and differentiates them from the competitors. Consumers view a brand as an important part of a product, and branding can add value to a customer’s purchase. Customers attach meanings to brands and develop brand relationships. A brand name becomes the basis on which a whole story can be built about a product’s special quality. Branding is endowing products and services with the power of a brand. A credible brand signals a certain level of quality, so that satisfied buyers can easily choose the product again (Wood, 2000; Rowley, 2004; Vrontis & Papasolomou, 2007).

A brand strategy is the core tactical underpinning of branding, uniting all planning for every visual and verbal application (Tsai, 2005). The brand strategy defines the brand’s personality and promise, differentiates the brand from the competition by defining the brand’s positioning, and codifies the brand essence; it is a conceptual plan providing guidelines – for both client management and creative professionals – to drive all brand applications from identity and packaging to advertising. Essentially, the brand strategy is how you are conceiving, creating, and positioning your brand in the marketplace to achieve differentiation, relevance, and resonance (Landa, 2005).

There are tools or models which are helpful to create a branding strategy. The three models are interconnected and in turn become larger in scope. The three models provide crucial micro and macro perspectives in successful brand building. These are the three models: the first model is the brand positioning model, which describes how to establish competitive advantages in the minds of customers in the marketplace (Shafiee et al., 2020; Vilasanti da Luz et al., 2020). The second model, the brand resonance model, describes how to take these competitive advantages and create intense, active, and loyalty relationships with customers for brands (Huang et al., 2015; Duman et al., 2018); and the third model is the brand value chain model, which describes how to trace the value creation process to better understand the financial impact of marketing expenditures and investments to create loyal customers and strong brands (Lindemann, 2010;Lewis et al., 2014).

In general, there are six criteria for brand elements: memorable, meaningfulness, likability, transferability, adaptable, and protectability. Ideally, a brand name is easily remembered, highly suggestive of both the product class and the particular benefits that serve as the basis of its positioning, inherently fun or interesting, rich with creative potential, transferable to a wide variety of product and geographic settings, enduring in meaning and relevant over time, and strongly protectable both legally and competitively (Keller, 2013; Arora et al., 2015; Slade-Brooking, 2016; Johnson, 2016).

METHOD

This study provided an in-depth understanding of the local coffee branding strategy in shifting the existence of foreign coffee brands in Jakarta. Therefore, this research approach used qualitative research, where researchers can explore and understand the meaning of each individual or group of people related to a problem or phenomenon under a case study (Creswell & Creswell, 2018). The research method used was a case study. The case study method is a method that explores where researchers explore in-depth the programs, events, activities, and processes of each individual or group. The case is limited by time and activity, and the researcher collects detailed information using various data collection procedures over a continuous period of time (Yin, 2017). The main characteristic of case study research is to show a deep understanding of the object under study. So, in case study research, it is not enough to use only one data source. To develop a deep understanding of the study object, various forms of qualitative data in the form of interviews, observations, documents, and audiovisual material were collected (Edmonds & Kennedy, 2016).

In the data collection process, the research was conducted through in-depth interviews (in-depth interviews with several informants, with or without the use of interview guidelines, where the interviewers and informants were involved in the relative social life (Eriksson & Kovalainen, 2015), so there was an understanding of the views, attitudes, feelings, and behaviors of individuals or groups of people (Daymon & Holloway, 2010). In addition, observations were also made by going directly to the object of research (Rodriguez & Ryave, 2001) and also direct observations on the media used by local coffee brands and foreign coffee brands in branding activities. After that, a detailed description was provided of the results of the theme analysis that had been carried out until the reporting stage of the research results.

The data analysis technique used in this study was the Strauss & Corbin’s (2014) model, which consists of three main coding types, namely, open coding, axial coding, and selective coding. Furthermore, for data validity, source triangulation was used by conducting interviews with the brand executive supervisors and marketers from local coffee brands and foreign coffee brands. Triangulation here is the technique of checking the validity of data by using something outside the data that has been obtained from the study as a comparison of the data (Flick, 2018). By using that method, the researcher can compare the results of the research with the formulation of the branding strategy used by each brand.

RESULTS AND DISCUSSION

This case study shows that the foreign coffee brands have mature and diverse branding concepts that are adjusted to the characteristics of each brand and also the target market they are targeting. In line with the development of time, the development of the market looks even clearer, so that foreign coffee brands also need to adjust their branding strategies with their brands. The change in market competition is also a result of the many emerging local coffee brands that carry concepts and styles that are more creative and up-to-date. It cannot be denied that the presence of the local coffee brands also has a great influence on the existence of foreign coffee brands in Jakarta. The branding strategies carried out by local coffee brands in competing with foreign coffee brands in Jakarta will be explained.

The emergence of local brands in the coffee retail industry is so rapid and even greatly influences changes in people's lifestyles that are very significant in enjoying a cup of coffee. Brand competition began to emerge and became a concern for local coffee brands as newcomers in the coffee retail industry in introducing their brands to the public, so that the market can be known and can survive in the face of competition. Kotler & Armstrong (2020) explained that consumers' beliefs about products or services form a brand image. A product or service requires a personality or image that can be identified by consumers to obtain a sustainable competitive advantage through differentiation. To build a brand, creating a brand identity must be supported by a concept of marketing communication that is in line with the brand identity. Kotler and Armstrong wrote their definition of marketing as follows:

“Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.”

Marketing is a process by which companies create value for customers and build strong relationships with customers to capture the value of customers in return. Marketing communication represents a combination of all elements in the brand marketing mix, which facilitate exchange by creating a meaning that is disseminated to its customers.

Brand Positioning Model

In forming a local coffee brand-positioning, it still uses the classic "word of mouth" strategy in building the brand image, but this local coffee brand still supports their strategy with a marketing communication concept that has strong characteristics towards the brand itself that distinguishes its brand from the other coffee brands, both local brands and the existing foreign brands. This strong and distinctive characteristic will cause curiosity from the community, build strength from the identity of the brand; and after they feel the differences themselves, they will share their experiences with their friends, family members, and colleagues. This was said directly by informant A in the interview in this study, as follows:

“Carrying the concept of the neighborhood, for customers who come directly to the store, they will be welcomed by employees who are not only good at making a cup of coffee but can also provide knowledge about coffee from the process of planting to a cup of coffee. With their experiences visiting the store, customers are expected to share their experiences with friends, family members, and other colleagues. Here it still seems very clear that "the power of word of mouth" plays a very important role in branding our coffee.”

By choosing a concept that matches the character of the market as a new local coffee brand identity, the relationships created between employees and customers in building a brand can have a significant impact on a local coffee brand that is present in the midst of foreign coffee brand competition that has a place for the community. The relationship continues the process of growing a brand by generating customers who are loyal to the brand. Chen & Hu (2010) explained that relational benefits directly affect customer value and loyalty. They also revealed that by better understanding their customers' perceptions and helping them, a brand can develop competitive strategies that differentiate themselves from competitors and win customer loyalty in aggressive markets. The strength of a brand image and brand identity is what is included in the Brand Positioning Model, where a brand has the right positioning of competitive advantage in the customer's mind.

Brand Resonance Model

Brands that are strong in the eyes of customers cannot guarantee the continuity of the company if it is not balanced with activities in the digital world. Digital marketing communication is needed to build a brand of this coffee product. Local coffee brands utilize social media – Instagram – in communicating their brands. Not only describing the coffee they sell, this local coffee brand displays more about the situations and interactions that occur in the coffee shop between employees and customers who come to the store and the surrounding environment. It was also conveyed by informant A in this research interview that:

"Every branding activity we do, we also insert positive messages to our customers that are more directed towards education such as 'throw garbage in its place', 'do not drive to our coffee shop', and many more messages which have an impact on the environment."

With branding activities carried out using this marketing communication concept, customers will feel closer to our brand. Kotler and Armstrong also explained that marketing relies on core concepts, two of which are: first, needs – wants – demands. Second, market offerings – products – services – experiences (Kotler & Armstrong, 2020). After the customers get what they need and get a product that suits their needs, with the new services and experiences provided by this local coffee brand, customers will feel comfortable in choosing the brand.

In addition to using social media, local coffee brands also utilize online ordering applications such as Go-Food and Grab-Food as one of the brand awareness activities. In accordance with what was said by informant A, the sale of coffee products is greater than ordering through an online application:

"60% of the sales comes from the "Grab and Go" order via the Gojek application with an average of 3 cups of drinks in 1x of the order compared to the number of customers directly visiting the store for only 40%."

Increasingly intense competition in the coffee retail industry makes foreign coffee brands, especially in Jakarta more aggressive in maintaining their market. As a foreign coffee brand whose presence in Jakarta is quite mature and known by the public, they also grow with new concepts and ideas that are adjusted to the shifting market. They still maintain the classic strategy of "word of mouth" and balance it with a market analysis to create concepts that are in accordance with the market. This was expressed in an interview with informant B:

"Our concept is different from the types of places and classes of visitors who come. If, for example, you could say in Citos, we dare to put in a really nice place, and later in Gandaria we are also very brave, later the renovation will be like that. That's because we know what their characteristics are, and what their habits are like. If we have outlet in plaza indonesia its more business like so we are not going to put the outlet in the place like Citos because it will be really hits so we won’t have anymore meeting later.”

The core concept of marketing is at the next point (Kotler & Armstrong, 2020): third, customer value and satisfaction. Foreign coffee brands also apply it in the concept of "taylor made" to every outlet they have. This concept means to conceptualize each coffee shop outlet that is adapted to the market's characteristics in the area. This is also done to facilitate the shift of the market for coffee lovers. The combination of products, services, information, or experience offered to the market to meet their needs or desires will provide satisfaction to customers, so that they will build and maintain good relationships. Then the fourth core marketing concept, exchanges and relationships also occurs. Good relationships will be created and make customers more loyal to the brands. Related to this, informant B reaffirmed the concept of "taylor made" and the strength of social media:

"So we will have a unique outlet that can only be found in Cilandak Town Square and Gandaria City. Why do we choose those two places? Because the Cilandak Town Square and Gandaria City crowd are more similar. They are the urban millennial crowd, those who like to come to a place and take photos of where they are and their food, and post it on their Instagram accounts and Insta-stories. We want it in those places so that we do not introduce our brand but our customers do it, because we know there is no marketing strategy that is more effective than that from our own customers. You want to pay for the influencers, Zomato, or all the various channels. It’s not needed if the customers who come feel proud to share their moments with their friends. Those are the best marketers."

The Brand Resonance Model is illustrated by brand loyalty, where a brand will take this competitive advantage and create an intense and active loyalty relationship with customers for their brand.

Brand Value Chain Model

Continuing the fifth concept of core marketing concepts, according to Kotler & Armstrong (2020) is a market, where loyal customers are a manifestation of brand loyalty. Tu & Chang (2012) suggest that corporate image has been assessed as an important antecedent of customer satisfaction and loyalty. Corporate brands are very important because a positive corporate brand helps companies achieve higher performance, such as sales. Marketing exists to provide more value to satisfy customers and build long-term and mutually beneficial relationships with customers. If a company's product or service does not satisfy or meet customer needs and desires, all strategies are insufficient. With loyal customers, companies can have a higher market share and reduce operating costs. The study found that the company's brand image significantly affected customer satisfaction and customer loyalty, and customer satisfaction had a strong impact on customer loyalty for the sample. Therefore, companies must specifically focus on these factors to build long-term and mutually beneficial relationships with customers and create loyalty as a competitive advantage in the market (Tu & Chang, 2012). Informant B also said that customer satisfaction is the basis of marketing activities:

"If they are happy and having a good time at our store, it will be like a media campaign for passers-by, considering them as our marketing target too, right."

Thus, the company can make its loyal customers as an extension of its branding activities with the classic concept of "word of mouth" which will have an impact on the sale of the product brand. In the brand value chain model, brand equity plays a role in tracking the value creation process to better understand the financial impact of marketing and investment spending to create loyal customers and strong brands.

CONCLUSION

Based on the results of the study, the conclusion of this study is that the branding strategy carried out by local coffee brands to compete and maintain their existence against foreign coffee brands is carried out with a variety of business strategies, including devising memorable values ​​that create word-of-mouth in the community, and by using digital media to be able to reach consumers more broadly, and provide a good brand image that can attract consumers. As such, this is in line with the concept of the branding strategies which consist of a Brand Positioning Model, Brand Resonance Model, and Value Chain Model.

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