K Ramakrishnan, President – Marketing, Café Coffee Day, talks about the factors driving the growth rate and future prospects of the Indian cafe industry.Q. What are the growth factors for the café market in India?
India is experiencing a growing coffee culture. In fact, it is CCD that introduced into the country the culture of socializing over a cup of coffee way back in 1996, and there has been no stopping of this trend since. Our cafes are a place for people to meet, be it for a get together, work or spending some time alone.
Cafes have now become the places to meet up with each other and coffee has turned into essential social glue! People have a need for a place near their homes or office where they can “hang out.” The demand for cafes is great. That is why cafes today exist at extremely close proximities to one another, and they co-exist quite well.
Q. What kind of locations would you be targeting for expansion?
We are currently operating 1,180 cafes in 175 cities in India. We plan to expand in the existing markets as well as look for newer ones. Café Coffee Day since the beginning has focused on the potential that exists in Tier I, Tier II and even Tier III markets. We welcome any opportunity for expansion.
We have an approach in which we divide a particular area into various verticals such as malls, corporates, transport hubs, high street, highways, premium institutions and store-in-store, so as to understand the prospects in a specific market better and maximize on these. We have been very successful with this approach. This has worked for us in big as well as relatively smaller cities, allowing us to penetrate into 175 cities and towns in India.
Q. What kind of format would the new outlets have?
Café Coffee Day has moved up the value chain with a proposition called the Lounge, which is a space that offers a little more to the consumer. It is for slightly mature customers who are now willing to experiment. Available in the Lounges are coffees procured through alternate brewing techniques, world cuisine and various other unique beverages under the “mixology” category. There is also the Coffee Day Square, which is a space for the absolute coffee connoisseur. It is where people can try out single origin coffee with the right food pairings.
Q. How would entry of international coffee chains like Starbucks add to the competition in the café industry?
Competition is always welcome and the Indian coffee market has enough space for all players to co exist. Our focus is to reach 2,000 outlets by 2014 and involve and engage our consumers like we have along the way. Competition will offer good amount of choices to the consumer.
Q. Where do Indian coffee chains stand in comparison to the international ones?
Café Coffee Day cafes are a format that can fit into almost any space since the need to meet and socialize is felt everywhere in the world. This is also one of the reasons why our outlets offer 100 per cent Indian-grown coffee across places like Austria and Czech Republic. Where we do have our cafes, consumers have accepted us with open arms.
Q. What is the share of coffee industry in the market? By what percent is it bound to grow in the coming few years?
The out-of-home coffee consumption in India is fast growing and has contributed immensely to the growth of in-home consumption of coffee in the non-traditional markets. India has scope for around 5,000 or so additional coffee outlets strategically located close to offices, colleges and shopping malls.
In advanced markets like Austria, the per capita consumption of coffee is 10 kg while in the US it is about 5-6 kg. In India, this figure is currently at about 600gms, which is to say that the potential is huge in the country for café chains to grow. The café culture is on the rise in India and this will also lead to in-home consumption of coffee. We believe that coffee is fast becoming the beverage of choice for young India.