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Can Delhi become a caffeinated capital?

Farmers and others in the coffee industry view northern India as a long budding market that has yet to boom. Robbie Corey-Boulet reports on the growth potential for entrepreneurs in Delhi and all its surroundings.

india Updated: Jun 29, 2008 22:43 IST
Robbie Corey-Boulet

Prashant Baluja, 24, and his 18-year-old sister, Nimisha, have never worked in a coffeehouse, nor do they own an espresso machine. But lately they have been making plans to open coffee kiosks near college campuses and other areas in New Delhi that see heavy foot traffic.

In mid-June the Balujas attended a workshop for prospective coffee entrepreneurs hosted by the Coffee Board of India, at which they learned about everything from the different types of European roasts to the 17 production steps between coffee plant and coffee cup. The siblings are exactly the type of people the government-run Coffee Board hopes to see at such workshops, part of a new effort to bolster consumption in northern India.

Farmers and others in the coffee industry view northern India as a long budding market that has yet to boom. India consumed 80,200 MT of coffee in 2005, the last year for which Coffee Board statistics are available, marking a 7-percent increase over 2003 consumption. But the north accounted for only 20 percent of that total.

Still, experts see cause for optimism: Because northern India has a higher percentage of occasional - as opposed to daily - drinkers than the south, the region is believed to have the greatest growth potential. This growth could be aided, some say, by a proliferation of new cafes and kiosks in underserved neighborhoods.

"Our assessment is that Delhi and all its surroundings have a huge potential for tremendous growth for coffee consumption," said Coffee Board Chairman G.V. Krishna Rau. "How do we make it materialize? People from the south are not going to come and set up shops in Delhi for selling coffee. It has to start in the region itself."

Several private firms clued into this untapped potential years ago. Barista, a coffee chain that strives for "a truly Italian coffee experience," first entered the Delhi market in 2000 and now has 68 stores in the NCR region. CEO Partha Datta Gupta said the chain plans to expand over the next two years both in New Delhi and in smaller northern cities such as Agra, Jammu and Jodhpur. Café Coffee Day has even more outlets: 157 in northern Indian, up from 35 in 2003, and 97 in New Delhi alone. Marketing President Bidisha Nagaraj said the chain also plans to expand in an attempt to meet a perceived rise in local demand.

Instead of competing directly with already-established firms, Rau said he wants the Coffee Board to educate new entrepreneurs and provide them with resources and assistance as they enter the market on their own. He emphasized that he is not looking to partner with retailers or engage directly in any sort of commercial enterprise.

"Branding the Coffee Board is not an issue for us," he said. "Branding of coffee - that's what's important."

This approach underscores the extent to which the Coffee Board's role in the market has changed since the mid-1990s. Before the market underwent economic liberalization, the Coffee Board enjoyed exclusive control over the marketing of coffee products and operated more than 150 coffee retailers nationwide. At one point, the Coffee Board ran 13 outlets - both cafes and depots - in New Delhi.

The explosion of private firms, however, led to a massive downsizing in which two-thirds of the Coffee Board's employees "were retired under a voluntary retirement scheme," according to its Web site. Now there are only five outlets in New Delhi, all within government buildings.

For longtime coffee drinker Rohit Kumar, this is just as well: Fifteen years ago, back when the Coffee Board was chief among local outlets, he bought his coffee in the cafes of five-star hotels, which he said were more customer-friendly and had a wider selection of items. Describing the old Coffee Board outlets, he said, "The ambience and environment wasn't that encouraging."

With most of its outlets closed, Krishna Rau described the new role of the Coffee Board as that of an observer in many respects. Its efforts include researching consumption patterns and enhancing the product's popularity among potential retailers and consumers.

Today's industry players, from farmers to big chains, say they appreciate the Coffee Board's marketing work. Regis Gustave Julian of Joseph Coffee Curing Works in Tamil Nadu said such efforts would help retailers target members of the rising middle class, who are seen as likely to make coffee a part of their daily lives. "What we are trying to do is promote regular drinkers," he said.

But it remains to be seen whether the Coffee Board's efforts will give entrepreneurs like the Balujas a leg up on the competition - or whether there is any room at all for them in the market.

Anupama V., quality manager for WowBeans, said trying to bolster at-home consumption makes more sense than trying to increase the appeal of India's café culture. Marketers should focus on reaching out to people who might like coffee but do not want to go to cafes, she said. She has data on her side: According to the 2005 consumption study, only 24 percent of coffee consumption takes place away from home.

Even if there is demand for more cafes, the Balujas face stiff competition from already-established retailers. And several consumers said that some parts of the city, particularly busy areas such as Connaught Place, are oversaturated with coffee retailers.

But Nimisha Baluja sees no cause for concern. "Every day youngsters are wanting to go out for coffee," she said. "They don't want to sit at home. And it's just going to keep growing."