The entry of a host of foreign retailers into the Indian coffee space ? Gloria Jeans, Costa Coffee and, now, Starbucks ? demonstrates that the beverage is fast claiming the mindshare of urban Indians, although the market has been traditionally skewed towards tea-drinking.
With India still ranking low in coffee consumption ? an average American drinks 50 times more coffee a year than an Indian ? these players expect to create and sustain a new ?culture? in coffee drinking, in the big cities to start with.
Cafe Coffee Day (CCD), run by Amalgamated Bean Coffee Trading Co, is looking to open one store a day, aiming 2,000 outlets by end-2014 from 1,318 now. Barista Coffee Co, the Italian chain of cafes with 320 stores here, expects a three-fold rise in revenue in three years.
The Indian cafe market is pegged at $230 million in 2012 and is expected to grow at a CAGR of about 13-14% over the next five years, according to management consultancy firm Technopak.
?Ten years ago, coffee was fuddy duddy and tea was zingy. But now, it?s the other way round. This is, however, only in image terms,? brand expert & CEO, Harish Bijoor of Harish Bijoor Consults Inc says. India is predominantly a tea market, barring the southern part where coffee is the preferred beverage. But coffee drinking is surely becoming a culture in the bigger cities.
?We are responsible for the culture of coffee in India,? K Ramakrishnan, president, marketing, CCD, says. ?There is plenty of competition. But one can’t keep changing because of rivals,? he adds. The cafe had revamped its menu last year and introduced entry level at R20 and combo meals to attract youngsters.
While CCD, which has a fairly ubiquitous crowd, has been focusing on tier 2 -3 towns, along with the bigger cities, Barista has been eyeing the bigger and the more dependable market ? the metros. This places the Italian giant in direct competition with Starbucks, Gloria Jeans and Costa Coffee.
Starbucks’ first cafe has been opened in the upscale Horniman Circle in South Mumbai, a few months after Dunkin’ Donuts came into the New Delhi’s Connaught Place area. ?This is the perfect time for foreign players to come into India. The country is already used to coffee places and they would like to experience the new ones coming from abroad,? says a consultant.
While food and beverage offerings will largely be the same, the stratification will happen in ambience norms, says Bijoor. ?There sure will be a clamour to retain customers. At the end of the day, the cafe market in India will see a stratification in terms of ambience on offer. At one end will be an old world charm married to modernity, like Starbucks, and at the other will be the modern and functional cafe of a CCD.”
In many ways, what leader CCD does and what it does not, will dictate the way the market will go, experts feel. CCD started advertising in the print medium a month back and Ramakrishnan adds they are open to the television medium as well.
The CCD Squares and Lounges are a bit more premium than the CCD cafes, but the company is yet to have definite expansion plans on that front.
Hindustan Unilever, on a pilot basis, opened Bru world cafe outlets last year. There are seven outlets of the format currently. The biggest challenge in the sector is the real estate, experts say, which is often a big part of the operating expenses. ?Existing brands need to streamline operations for operational profitability as they grow in store numbers,? says a report by Technopak.
Starbucks, in India has priced itself nominally, with espressos starting at R80, but experts feel feels that this entry price may not be forever. The company will raise prices going forward, keeping in mind the real estate costs and inflation, they say.
