Abstract
Filli Café in the United Arab Emirates (UAE) has captured a slice of the market with the unique taste of zafran tea. This was superimposed by applying a unique branding strategy. The brand’s unique selling proposition was to create a homely ambience at Filli Café, where people could chat for hours while immersed in the joy of a warm, soothing cup of tea. This led to the brand’s huge success, with the target audience being the expatriates and Emirati population, as they liked the taste of the zafran tea. The challenge in front of the Chief Executive Officer, Mr Rafih Filli, was to grab the market and work on diversification and expansion globally.
Discussion Questions
Explain the concept of service mix with respect to Filli Café in the Middle East. Will the marketing mix be the same for all countries where Filli is expanding?
How do you assess the role of the franchise model in the success of Filli Café?
Discuss the unique selling proposition of Filli Café. What brand image was established in the initial years, and how did this image change?
What are the expectations of the customer from outlets like Filli Café? How did these expectations develop? Assess the zone of tolerance with respect to Filli Café.
Examine the role of integrated marketing communications in the success of Filli Café as a brand. Do you think the café would have been successful without it?
Create a marketing mix and brand promotion strategy and conduct a SWOT analysis for Filli Café. Finally, design a marketing plan for Filli Café.
Introduction
Mr Rafih Filli, the Chief Executive Officer, along with Mr Aseem Chaudhary, Franchise Development Manager and Mr Riaz Ahmad, General Manager, met on 10 January 2017 at 5:10 p.m. at Filli Café’s corporate office in Al Qusais Industrial Area, Dubai and discussed their strategy to grab the market and work on diversification and expansion of Filli Café. The plan was to open 100 outlets in the UAE (United Arab Emirates) and capture 500 locations globally in the next three to five years. Filli Café captured a slice of the market with the unique taste of zafran tea in the United Arab Emirates. It was superimposed by applying a unique branding strategy. The tea drinkers liked the special formula for tea, popularly called masala tea, and motivated Mr Filli to expand globally.
In the UAE, coffee was preferred over tea. The concept of a café was positioned as a place for having coffee, and a conversation over a cup of tea was not popular. The challenge for Mr Filli was to create a café where people could chat for hours while immersed in the joy of a warm, soothing cup of tea. The food prepared at Filli Café was always crisp, fresh and prepared by experts, which met quality standards. Filli Café wanted to create a dining experience for its customers; simultaneously, the delivery option was already available.
The Origin
When an innovative mind meets the right opportunity, even an old idea could find novel expression. This was the story of Mr Rafih Filli, founder and CEO of Filli Café, a vibrant and premium brand of boutique teas. In 2004, the young 21-year-old Mr Rafih came up with the idea of flavoured tea created based on client preferences across various segments and delivered with an aesthetic touch. He soon set up a small cafeteria and realized that customers noticed a good product if it came with passion and care. This was the attention to detail that Rafih poured into every single one of his customers’ cups, which earned him a growing clientele. He was a true entrepreneur who hit upon an idea, crowd-sourced unique recipes from customers and developed a brand that catered to their tastes.
Mr Filli’s father started a cafeteria (Figure 1) in 1991 in Dubai, where café culture had become an integral part of the city. The cafeteria was not profitable during the initial years. There were issues of high rent and other sundry expenses. Mr Filli helped his father in the business. He got motivated at the age of 21, and in 2004 started the first outlet of Filli Café in an area of 1,500 square feet in Mamzar, Dubai, UAE. All cafeterias used to sell karak tea, so he wanted to find a unique signature tea. Soon after tasting tea made with zafran at Filli Café, the locals liked it and through word of mouth, the popularity of zafran tea spread. For many, tea became the drink of choice.
During Mr Filli’s school days, his friend gave him the nickname “Filli” for fun. Little did he know that this name would become a hit among UAE’s tea lovers with a special liking for Filli’s zafran tea.
Expansion of the Brand
The company’s vision was to be known as the most admired tea brand in the world, followed by making it the second home not only for the people in the UAE but for tea lovers worldwide. They also wanted to give tea its place of pride in the coffee-dominated beverage industry and wanted to make its presence felt in the UAE market. The mission was to create a more olfactory experience for the customers with their tea blends. The entire team at Filli Café served the customers with an absolute commitment to provide high-quality products. The chief executive officer headed the organization, to whom the general manager, franchise head and operations manager reported. The area manager headed one area; under him were the outlet manager, supervisor and crew. The outlets were company owned in the United Arab Emirates (UAE), Kerala and Karnataka in India. Most of the stores in UAE were able to bear the cost with sales and were self-paying. Filli had worked towards having over 100 outlets up and running in the UAE alone by 2020 and 70 franchises operating worldwide by 2017 (Filli, 2018a).
Filli Café managed 30 functional units and sold about 40,000 cups of tea daily in the UAE. The cost of a cup of tea ranged from 1.00 AED to 5.00 AED depending on the outlet’s size, flavour and location. Hence, the competition was with the budget café category as the tea was 40%–50% cheaper than competitors like Starbucks. In 2007, Mr Filli saved money and looked for a second location to open the café in Al Mankhool, Bur Dubai, which had a large South Asian expatriate population. Facing competition with international coffee brands, the outlet at Al Mankhool became a success in 2008. The decoration in the outlet was according to standards defined by Dubai municipality. A Canadian-based interior design company, Plural, was hired to design the café. By the end of 2017, there were 26 operational outlets, and three were in the pipeline for the UAE. The brand was a huge success, with the target audience being the expatriate and the Emirati population; both liked the taste of the zafran tea. All this was possible under Mr Filli who followed the expansion through a concentration strategy that required an investment of capital and resources. The main strength was the satisfaction of the target market. The focus of the business was on the market using existing product lines.
Tea Drinking Habits in the UAE
Tea consumption in the UAE reached a robust growth rate of 47% in 2017. People consumed tea for various health benefits like curing various diseases and weight problems. Tea drinking habits in the UAE and across the region had also evolved over the years with the introduction of a much wider variety of teas, including new tea blends that combined more than one type of premium tea (Emirates 24/7, 2018).
In 2021, the global tea beverage market was estimated to be worth about US$44.3 billion. Looking at world tea sales, the United States generated approximately US$11.5 billion in 2015, of which US$5.56 billion in sales was generated from ready-to-drink tea (Statistica, 2018a) (Figure 2).
Tea was the second most widely consumed beverage worldwide, followed by water. In 2015, global tea consumption amounted to about 5.2 million metric tons. China, India, Kenya, Sri Lanka and Indonesia were among the main tea producers in 2016, based on production volume. China was responsible for about 50% of tea production, with 2.35 million metric tons in 2016. The Russian Federation was the largest tea importer, with about US$548 million in trade value (Statistica, 2018b).
The Franchisee Models
The brand, Filli, was registered in 44 countries and was looking for franchisees in various countries. Two outlets were operating in Qatar, three in Mumbai and one in Bahrain. The franchising began by signing with partners in India, Qatar, Bahrain and Saudi Arabia in 2016, with 47 stores across the globe.
Franchising was the preferred way to expand the business. It involved business strategy, franchisee involvement, investment, operational support, marketing and promotion. Filli Café had three business franchising models available for business expansion. The three formats available were the business format, the product distribution and the manufacturing franchise format. In product distribution format, a franchisee had the right to distribute the products the manufacturer provided. In the business format model, the franchisee got marketing, training, operational, production, advertising, strategic planning and quality control guidance support from the franchisor. The format also included assistance from the franchisor for the appointment of staff and the organization of day-to-day marketing activities at the local level. In the manufacturing franchise format, the manufacturer company gave exclusive rights to the franchisee to manufacture and distribute its products in a particular area. The comparative analysis of the franchising models can be seen in the table below:
Franchising Model Comparative Analysis
The most suitable for Filli was the business format. The business format model was named the multi-store area/country development model and was followed for expansion by Filli Café. Filli Café chose this format as it was popular with most food chains. The café had a centralized team for marketing activities, including promotion of the brand and designing of the outlet, and training of the employees, operational standards for dining and delivery were well defined, production systems for food and beverages were standardized, and quality control of tangible and intangible services were consistent. The format also included assistance from the franchisor for the appointment of staff and the organization of day- to-day marketing activities at the local level.
Filli Café faced some challenges while selecting the franchisees. The franchising model followed by Filli Café consisted of one main franchisee having a cluster of stores, as the business was volume-driven (Figure 3). No sub franchising was allowed. This allowed Filli to have better control. Location and branding played an important role in franchisee management. While deciding to open new outlets, a market research study was done on the feasibility of the outlet, and the aim was to reach breakeven in profits from the café.
Countries, such as Bahrain, Oman, Qatar and Kuwait had a single franchise model, whereas in Saudi Arabia the eastern, central and western parts of the country had multiple franchisees. The franchisee investment was about US$350,000 per outlet and working capital. For the opening, a franchise minimum of five outlets were to be opened in the identified area. The profitability level of opening a franchisee was between 8% and 10%. The other challenges in appointing a franchise involved reference checks, interviews, understanding the audit statement, the capital base of the applicant, and management meetings followed by the letter of interest. The main requirement for the appointment of the franchise was that the applicant had a company registered in their name and was already present in the market where they desired to open a store.
To support Filli Café in appointing the franchisees, the franchise model was outsourced, and expertise was provided by ‘Francorp’, the leading franchise consultant in GCC and Levant countries with a strong presence in Dubai, Kuwait, Saudi Arabia, Qatar, Lebanon, Jordan, Egypt and Turkey. They provided professional consultancy in developing the business plan, legal documents, operation manuals, marketing strategies and materials and guided them through the establishment process.
Capturing the Target Market
The unique selling proposition for Filli was the ‘Taste of Zafran’ instant tea and the café being ‘the second home for tea drinkers’. The target market for Filli was the expatriate community and the Emiratis, 1 including both males and females. With the growing popularity of the café culture, they took advantage of the concept of instant fresh tea, unlike the CTC tea or the tea bag option. At Filli, they created a calm and welcoming venue for much-needed rest and recuperation for customers in an increasingly busy and stressful world, which attracted them to the café. Thus, Filli captured the ancient art of authentic tea-making, the sensational aromas and the refreshment that revitalized both body and mind.
The Marketing Strategy
Filli competed with Cha Cha Chai and karak tea in the UAE market. It had created its niche in this segment, popularly known for the quick-paced, instant, premium tea. The marketing objective was to create a positive experience with unique, innovative offerings to its customers. The indirect competition was faced with international coffee. Filli extensively used free sampling promotion during events and gatherings by invitation. This made the brand very popular. The CEO believed that until people tasted the tea, they would not know the difference and uniqueness of Filli tea. Events were organized where people were invited to come and taste the tea and participate in a contest. The excerpt from one of the invitations for the contest is shown below:
The culture of UAE isn’t restricted to any religion or nationality, which is one of the main reasons people seek to be one and should celebrate oneness. The UAE has been one nation since 1971. The spirit of oneness in culture has been living in the minds of the people for a long and now, FILLI wishes to be that One taste which can stand for the UAE. We invite you to participate in our Sip a Selfie Contest and share your views on the One Nation, One Taste contest! (Filli, 2018b)
The promotion tactics used were relationship marketing, digital marketing, word-of-mouth, diversity marketing and transactional marketing like coupons, discounts, etc. Positive reviews on Zomato made the brand more popular (Figure 4). There were 102 reviews on TripAdvisor. The logo of Filli Café was quite popular and identifiable (Figure 5). They also planned to make some viral videos and jingles and delved into PR marketing.
The pricing was affordable, and the organization believed in market penetration and geographical expansion strategy. The outlets offered food, beverages and milkshakes, but a good percentage of sales came from the tea. The company’s sales turnover was 40 million AED in January 2017, aiming to reach 200 million AED (Table 3). The international brands of coffee had created a gap, and the development of Filli matched and captured the market. Globally, the taste of the tea remained the same, but the food was altered to local tastes, and specific products (Table 1) were developed for different countries. The food was freshly prepared by different vendors, but the final touches were given at the outlet. The supply chain was integrated with sales. The organization had a total staff strength of 400 with a robust human resource department where the employees had an opportunity to grow and reach higher levels (Table 2, Figure 6). Most of the senior staff had been with them since inception. The staff was trained internally by an in-house trainer. The number of repeat customers had grown over the years.
Products Sold at Filli (UAE).
Filli Café and Employee Count.
Growth of the Brand: Filli Café.
Review of Filli Café: Customers and Employees.
How Was All This Possible
The success of Filli was based on a number of parameters. The brand experience created by Mr Rafih was based on several positive implementations carried out under his leadership. The secret of success was the innovative process designs followed diligently, along with continuous employee training. Highlighting the importance of innovative service, which was of high value to customers, was always important. Being accessible on social media and participation in conference panels and speaking engagements by Mr Filli substantiated the expertise and value and built peer relationships giving access to people and technology. This kept Filli Café in the minds of the customers. It was well communicated to each employee that every interaction with each customer should be positive. The service delivered should be exemplary.
The zone of tolerance was established to understand the range of service performance that a customer considered satisfactory. To measure satisfaction with the quality of services at Filli Café ‘FILLI AFÉZOT’ (Nadiri & Hussain, 2005) instrument was used. The zone of tolerance provided insight into the relative importance of tangibility, reliability, responsiveness, assurance and empathy. Moreover, the gap between perceptions and expectations provided a means for analysing the situation and steps to improve the services were taken accordingly.
Managerial Implications
This case research contributes to the work in service marketing, giving importance to promotion and branding in the service industry (Bojanic, 2009). This case talks about a solution to consumer satisfaction, which is important for brand growth. This would interest marketing professionals, media, information technology and advertising professionals. There is a need for active and meaningful participation and consumer feedback in any service to expand and grow. This case focuses on knowledge and emotions along with the consumer’s self-involvement, which would lead to the successful adoption of this tea brand.
Consumers could co-create with the service provider’s help, which made them feel empowered. This would enhance the feeling of ownership and belongingness. Satisfaction would lead to positive referrals (Chen & Xie, 2008), thus leading to wider adoption of the brand.
The user-friendliness, ease of access, privacy and trust would add value and enhance engagement in making the brand favourable and user’s choice in this segment. Spending time with family and friends reportedly reduced stress, and cafés like Filli would help build social networks and foster a healthy environment for consumers.
The Road Ahead
The discussion on the expansion of the café was the most important agenda. The stakeholders discussed the expansion strategy to expand in various malls in Dubai using the same marketing and branding strategy as loved by its target audience. Working on this plan, where signature branding and experience of people were involved, the team at Filli Café wondered if this move would keep bringing them close to its customers, leading to a successful expansion in the future or would it have to devise a completely new innovative strategy for sustaining the brand in the market?
Footnotes
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The author received no financial support for the research, authorship and/or publication of this article.