Barista Lavazza is hoping to turn a catch-up tortoise in a race with Café Coffee Day (CCD), which has clearly bolted ahead like the proverbial hare. The cafe majors entered the market almost together but their gap has widened ever since. CCD has grown tremendously since it opened the first café in 1996 at Bangalore's trendy Brigade Road.
India-born Barista, on the other hand, entered the market in 1997 as Barista and was later taken over by Italian Lavazza (Tatas too owned it between this). It has grown at a much slower pace and is now waking up to play catch-up with the market leader and the emerging new players.
"Ours has been a deliberate strategy to remain selective in where we open, even if this means going slow," said R Shivashankar, director, South Asia, Lavazza. "The focus has been on metros and we are moving to mini metros now."
Lavazza, which owns the Barista coffee chain, has 160 stores and is looking to take that number to about 400-460 over the next three years. It is looking at tripling its revenues over the next three years. CCD aims to have 2,000 outlets, adding 900 outlets across 330 towns in India over the next three years.
Even Britain's Costa Coffee, which entered the market much later in 2005, now has 85 stores and plans to raise the number to 300 in three years.
"India contributes about 4% of Lavazza's turnover. We want to grow it to 10% in the next three years," said Shivashankar.
The Lavazza cafe chain reported a turnover of €1.2 billion (Rs 6,870 crore) in 2011 of which Barista's India sales are just a little over Rs 200 crore.
"The investment cost per store averages to about Rs 15 crore. It will be across all formats but predominantly in the normal size stores," said Shivashankar.
At present, it is test marketing Espressions, a new premium futuristic high-margin format. The first store opened in Delhi. The company aims to have 15 Espressions over the next three years.
"Espressions is a premium format with an international touch and feel. The average pricing is 15% more and it's a high margin business," said Shivashankar.
Café Coffee Day is also betting big on its premium offering The Coffee Lounge. It now has 20 lounges and has 100 more are planned. The lounge format will help it target the premium clientele and position itself as a competitor to Starbucks.