Bangalore-based Café Coffee Day (CCD) is taking the battle to the enemy camp - before the enemy arrives. It plans to scale up its premium coffee chain format Square to counter the entry of US major Starbucks in India. While prices would be marked up, the large size of the Square cafes aims to catch up with the US chain that wants to position itself at the top end.
Market sources say the joint venture between Tata Global Beverages and Starbucks, which plans to invest Rs. 400 crore and open 50 outlets by the end of 2012, is looking at outlets measuring 3,000 to 3,500 square feet.
VG Siddhartha, who owns the Amalgamated Bean Company that runs the Café Coffee Day chain of coffee shops, first opened Square three years ago and then went slow. As of now there are two Squares, one in Bangalore and one in Delhi and the company aims to scale up with at least one store each in the metros and key cities.
"Square is a tough format to expand," said Ramakrishnan K, president, marketing, Café Coffee Day. "Typically it requires a 2,000 sq. ft. space and we need experts in terms of staff working there."
"Between Lounge and the Square, the difference lies in the treatment," said Ramakrishnan. "The Square format is for the absolute coffee connoisseur. It is coffee snobbery and we don't serve tea at Square."
Square will also serve breakfast, lunch and dinner.
"We control over 60% of the coffee chain business in India," said Ramakrishnan. "We are in a position to negotiate rentals and have an advantage. In any case any new player entering India will only expand the market."
The American coffee giant first tried to enter India in 2007 but plans failed. CCD on the other started operations in 1996 and has a total of 1,285 stores and plans to take it to 2,000 outlets by 2015.
Costas and Baristas have far less stores but are also looking at aggressive expansions. Lavazza, which owns the Barista coffee chain, has 160 stores and is looking at more than doubling the numbers by 2015.
CCD is also counting on building its franchisee across formats especially in religious spots. It has mapped the number of religious places across the country and will look at expanding presence there.
"Between verticals and formats we keep looking at opportunities for expansion," said Ramakrishnan. "We recently entered Patna and now have three stores in Bihar. Places of pilgrimage is emerging as a potential vertical. We are looking at opportunities in religious places where people from large cities go."
The other verticals where CCD is expanding include transport hubs, malls, multiplexes, highstreet, residential, premium institutions (such as hospitals and educational institutions), and highways.
CCD's ambition is to retain the over 60% market share in the coffee business even as other players put in more investments towards expansion.