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Coffee chains smell aroma of growth

Global and home-brewed café chains alike are eyeing high growth thanks to middle class youths hanging out with friends and having a good time. A report by Varun Soni and Ruchi Hajela.

business Updated: Jan 07, 2008 23:02 IST
Varun Soni and Ruchi Hajela
Varun Soni and Ruchi Hajela
Hindustan Times

US, Italy, Britain and now, Australia. Cafes are coming from all over to India. Global and home-brewed café chains alike are eyeing high growth thanks to middle class youths hanging out with friends and having a good time.

Australian coffee chain Gloria Jean announced last month that it had entered into a master franchisee agreement with Citymax India, a part of the $2.0 billion Dubai based retail giant Landmark Group, to set up 500 coffee outlets in India over the next ten years. Gloria Jean's revenues stood at $ 300 million in the last financial year, and the company currently operates around 770 outlets in more than 30 countries.

While Starbucks, the world’s biggest café label, is making a tentative entry into India with a tie-up involving PVR Cinemas, UK's Costa Coffee already has a presence here with plans to have atleast 300 outlets in the next five years. Early last year, Delhi-born Barista was taken over by Italian chain Lavazza after changing hands from Sterling Infotech which in turn had bought a key stake from the Tatas.

Industry officials say India has about 1,200 coffee parlours and 800 kiosks at present. "The coffee retail business in India generates about Rs 500-Rs 600 crore in an year and is growing at a rate of 12 to 15 per cent annually. Internationally, there are about 25,000 branded coffee outlets though Paris alone has about the same number of unbranded ones," said Ravi Saxena, Managing Director, Citymax India.

As it happens with increasing competition, coffee lovers can expect better ambience and services and the ability to choose between options.

Citymax India will offer franchises of Gloria Jean's to other vendors. The coffee outlets are expected to have facilities like Wi-Fi connectivity that allows users to access Internet wirelessly on their compatible devices. At present, a couple of existing coffee outlets already offer the service. There are about 175 Barista outlets across India and more than 30 of them offerWi-Fi.

Citymax India has plans to invest Rs 40 crore to set up around 90 Gloria Jean outlets, which will include various models like standalone outlets, kiosks, co-branded parlours and company owned outlets across India. The company will be targeting places like airports and hospitals as well as these attract a large number of traffic.

Internationally, it is already opening up an outlet at Singapore's Changi International airport. The first Indian outlet is expected to open in Lokhandwala, Mumbai by February this year and will be followed by another outlet in New Delhi by June.

Given the high urban rental costs in India, Citymax expects to break even only in the fifth year as compared to the average global period of three years. The company will be considering smaller towns as well. "Smaller cities are also very attractive for us as they offer much lower rental costs. We are considering cities like Chandigarh, Ludhiana and Goa that have a distinct lifestyle of their own, " Tony White, Regional Development Manager, Gloria Jean's Coffees told Hindustan Times.

Barista outlets are also present across Tier II and Tier III cities like Cochin, Bhopal, Amristar and Chandigarh amongst others. There are about 175 Barista outlets across 29 cities in India.

“We plan to set up at least 80 stores per year for the next two years with an investment varying between Rs 35-Rs 40 lakh per store," Rini Dutta, Vice President, Marketing and Product Development, Barista told Hindustan Times.

Costa Coffee is present in cities like Ludhiana, Rajasthan, Punjab and Lucknow amongst others. Bangalore-based Amalgamated Bean Coffee Trading Company Limited, is fast expanding its Café Coffee Day outlets, which is present in more than 80 cities. There are 486 Café Coffee Day outlets across India, and the company plans to have around 500 of them by the end of this financial year.

“Café Coffee Day are also located in Tier II and Tier III Indian cities like Lucknow, Kanpur, Jaipur, Udaipur, Jodhpur, Baroda, Rajkot, Vizag, Vijaywada, to name a few," Simran Sablok, General Manager - Marketing, Cafe Coffee Day, told Hindustan Times. UK’s leading coffee chain, Coffee Republic, whose cafes also offer food in deli format, advertised last month that it is looking for franchisees to expand in India.