Coffee retail: More than just a sip

By Sarimul Islam Choudhury

India has always been predominantly a tea drinking nation. Coffee had been only moderately popular in some southern states. However, there has been a sudden change in this trend with coffee becoming more and more popular in recent times especially among the youth. Thanks to the new entrants in the segemnt including Barista, Café Coffee Day (CCD) and others.

Cafés are increasingly becoming more than places to sip coffee. A lot many things in life and work happen over a cup these days. India has now become one of the fastest growing coffee markets in the world. It is taking great strides on both counts; making its presence in the world market as well as in the domestic retail arena as more and more Indians prefer the drink.

Tecknopak advisors, a global retail consultancy firm, pegs the organised coffee retail business in India at over Rs 8 billion with the potential space for nearly 3,000 coffee retail outlets in India.

Raman Mangalorkar, former head, AT Kearney’s consumer industries and retail practice in India, once said, “Retail is not just a big boys’ game; small start-ups with a clearly defined product offering will do very well in the Indian retail market.” And thus chains like CCD, Barista, Costa Coffee, Coffee World, The Coffee Bean and Tea Leaf (CBTL), some Indian and some overseas chains, have been cultivating their ground in this niche segment and offering desired delicacies to millions across the country.

Key players:

CCD: Taking pride in 130 years of coffee growing heritage, CCD is the first chain to enter retail by incorporating Amalgamated Bean Coffee Trading Company Ltd (ABCTCL) in the year 1994. Pioneering the café concept in India in 1996 by opening its first café at Brigade Road in Bengaluru, ABCTCL today is one of Asia’s top 500 companies and aims to be among the top three coffee retailing companies in the world. It currently operates 683 cafés in India, Pakistan and Austria. ABCTCL also has an ambitious growth plan of opening 1,000 cafes by 2010 marking its presence across 102 Indian cities and also establishing 50 cafes in 10 foreign countries.

Barista: Barista traces its roots back to the old coffee houses in Italy – the hotbeds of poetry, love, music, writing, revolution and of course, fine coffee. Offering alternative options and pleasures of coffee to millions, the chain is also revolutionising the coffee drinking experience in most Indian cities. Barista, which owns 206 stores currently, including 17 overseas, plans to boost the number of stores to 300 by the end of fiscal year 2008-09, says India Retail Report 2009.

Costa Coffee: As part of its overseas expansion, British coffee retail chain Costa Coffee launched its outlet in New Delhi, becoming the first international coffee chain to start operations in India in September 2005. It has also been expanding its business through exclusive franchisee partnership with Devyani International. The chain is currently operational with 36 outlets and expanding aggressively to tap this potential market.

Coffee World: Coffee World is a premium specialty coffee house that offers a comprehensive range of hot, iced and ice blended beverages. The brand is known for its premium quality products and its signature ‘Frappes’ – ice blended coffees.

CBTL: The Coffee Bean & Tea Leaf is a California-based coffee chain, owned and operated by International Coffee & Tea, LLC and has opened its first store in India in the last quarter of 2007 opening stores in Rajiv Gandhi International Airport, Hyderabad followed by a store in Select Citywalk mall, New Delhi in March 2008.

Besides, retail players like Reliance Retail and Shoppers Stop are also retailing coffee with their multi-products offering outlets like Reliance TimeOut and Desi Café respectively.

Product offerings:

In keeping with the global coffee culture, purveyors in India have been offering the products in a wide range of variants that include hot coffee, cold coffee, coffee add ons, powder coffee etc. The chains have also been adopting state-of-the-art store formats and some even offer wi-fi access to their customers. As a step forward achievement, CCD has incorporated formats like music cafés, book cafés, highway cafés, lounge cafés, garden cafés and cyber cafés targeting a diversified customer profile.

Prime customers:

These cafés are increasingly filling in a sorely felt gap by becoming a meeting place for people in the age group of 15-29. India, with its huge young population flooded with disposable income, offers an exciting and ideal market to coffee retailers. According to researches, teen-agers form 25 per cent of the customer profile while 38 per cent of them are between 20 and 24 years and another 23 per cent belong to the age group of 25-29 years. Students and young professionals comprise around 72 per cent of the customers.

As a matter of fact, these chains, nowadays, have been opening small-sized coffee parlours to provide a neighbourhood coffee experience and lure more people. Despite their best efforts, the question still haunting many of these players is how long will they be able to sustain these high cost, high turnover business models? How long before they are able to turn a tea drinking nation into coffee lovers?