India’s per capita coffee consumption, at a nascent 75-80 gm stage, is set to see a push from coffee retail chains that are looking at rapid expansion in the face of 35-40 per cent annual growth.
“The total organised coffee market in the country is $140 mn (about Rs 630 crore). There are 1,300-1,400 organised café outlets. We will see a lot of global players coming in even as existing players expand their operations. Growing youth spending, lack of alternative hang-outs, and a growing number of office complexes will drive this market. There is growth potential in tier II and III markets as well,” said Purnendu Kumar, AVP, Technopak Advisors.
The homegrown Café Coffee Day (CCD), Italian Barista Lavazza and Costa have around 1,250 cafes across India. Most of these players are expanding. According to industry estimates, there is scope for another 5,000 outlets close to offices, colleges and malls.
Amalgamated Bean Coffee Trading Company’s CCD is expanding in India even as it looks at acquisitions overseas. It recently acquired a Czech Republic-headquartered coffee retail chain and is looking at the Middle East and the Far East. “The foreign business contributes only one per cent to our revenues. By 2015, we expect this to be at least 10 per cent,” said Gupta. CCD has 16 outlets abroad.
In India, eyeing tier II towns, the chain plans to invest Rs 150 crore to increase its current retail strength of 970 stores (70 added in 2010 already) to 1,150 by the year-end. “The growth story cannot be talked about without including non-metro locations,” said Alok Gupta, director, CCD. The company claims that small towns and cities account for two-thirds of its revenues.
Café Coffee Day recently unveiled its new brand identity — a more trendy, chatty red logo, with a positioning statement of ‘A lot can happen over coffee’, targeted at youth. The font used for the brand name is casual and youthful.
Localisation has been part of CCD’s efforts to pull in consumers. “We are re-creating street food, café-style. It is about appealing to the Indian taste but in a café style,” said Gupta. Food makes up 40 per cent of CCD’s menu.
Barista Lavazza, the second largest in organised coffee retail in India, has just over 200 outlets and plans to launch 45 outlets a year over the next three years. It will set up 12-15 highway stores, with the menu altered to suit the traveller’s appetite. Recently, Barista introduced idli and kaanda-poha in its menu. It plans to invest Rs 250 crore in the next four years to take its store count to 500. It has signed pan-India deals with HPCL, IOCL and BPCL for highway outlets. It has marked the Bangalore-Hosur, Delhi-Chandigarh, Delhi-Mathura, Delhi-Shimla and Bangalore-Mysore highways for standalone and gas station cafes in 2010.
Barista Lavazza grew 25 per cent last year to touch Rs 225 crore, and enjoys 17 per cent market share. Lavazza India has two verticals — Fresh & Honest and Barista Coffee Company.
Meanwhile, Costa Coffee and Coffee Bean are expanding in major metros, with Costa targeting 300 outlets by 2014. And at least three international brands — Coffee Republic (UK), Coffee Club (Australia), and Café Jubilee (Malta), are looking to set up outlets in India.
Going forward, “price and local menu will be the driving factors. With tier II & III cities as growth markets, a robust supply chain will be important. The chains will have to have sufficient scale and good supply chain logistics,” concluded Pinakiranjan Mishra, partner and national leader – retail & consumer products, Ernst & Young.