Next week, Coffee World, a gourmet coffee chain launched by Global Franchise Architects (the promoter of Pizza Corner India) in Thailand, will open its first outlet in Bangalore.
In April next year, the Rs 600-crore (Rs 6 billion) Ravi Jaipuria group will bring in the Costa coffee brand through a franchisee tie-up with the £ 1.8 billion Whitbread PLC of the UK.
Craze -- Not Just Coffee is a little-known brand beyond the borders of Gurgaon's corporate complexes but its promoter, the real estate company Enkay Group, is chalking out plans to expand its presence.
After selling its stake in Barista Coffee Company, Tata Coffee Ltd also kicked off its Mr Bean Coffee Junction chain in Chennai this month.
So what's brewing in the Rs 250 crore (Rs 2.5 billion) organised coffee retail business? For one, coffee consumption in India is on the rise and has increased from 55,000 tonnes to 75,000 tonnes in the last three years after decades of stagnation. With the fast food segment growing at 40 per cent a year, coffee consumption is set to grow further.
Clearly, with India's middle class aspiring to be in sync with global culture, coffee retailers are looking at expanding their market share by offering that "total exprience" -- right coffee, food and ambience with Wi-fis and jukeboxes -- to pull customers.
There are not more than 350 outlets in the organised sector today but retail consultancy KSA Technopak reckons that India's potential for coffee retail outlet is 2,000. Retail brands say it could be 3,000 to 5,000 outlets. "There is a huge demand and India needs a higher penetration," says Munri Suri, manager, south India operations at KSA Technopak.
Calling it a coffee retail revolution at this stage may be an exaggeration, but domestic players like Barista, Cafe Coffee Day and the new foreign entrants are definitely gearing up to expand. Retail industry sources say the niche coffee retail format is growing at 10 to 12 per cent a year. Barista, which introduced lifestyle to coffee-drinking in India, plans to take the number of outlets from 120 to 450 in the next three years.
According to T V Krishnamurthy, director, Barista, "the company will invest Rs 50-60 crore (Rs 500-600 million) in expansion to offer a core coffee experience." Barista is now 100 per cent owned by the Sterling Infotech Group.
Similarly, Cafe Coffee Day, which is promoted by the Rs 200-crore Amalgamated Bean Coffee Trading Company plans to increase the number of outlets from 200 to 500 in two years.
Says Sudipta Sengupta, marketing head, Cafe Coffee Day, "Deregularisation of coffee in the mid-90s and fluctuating coffee export prices, has led to the burst in consumption in India."
Coffee World, meanwhile, plans to set up 27 outlets by the end of 2005 through the franchisee route. "Coffee World will have a premium look and feel," says Anoop Sequeira, CEO, Pizza Corner, who will also manage the Coffee World brand in India.
The coffee parlour players are really looking at an equal mix of food and beverage to draw profits. For instance, both Coffee World and Costa say that 60 per cent of their business will come from food and it will be the differentiating factor.
Both the brands will also leverage their existing strength in the food business: while the Jaipuria group owns brands like Pizza Hut and Cream Bell, Coffee World will share the infrastructure with Pizza Corner. "But pricing", according to Jaipuria, "will be crucial as no one is ready yet to pay Starbuck rates."
But are the coffee chains making profit? Cafe Coffee Day claims it broke even with its 55th outlet last year.
KSA's Suri also says the franchisees are making a 15-20 per cent annual profit. "But the real challenge is to have the right rental and revenue mix. This will be the key in ensuring profitability," concludes Suri.
