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Provoking the cult of coffee consumption

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Barista heralded the concept of ‘out-of-home premium coffee consumption’ in outlets with an ‘attitude’. However, a lot of retail coffee has flown down the throat of Indian coffee lovers, since Barista made its foray in 2000.

The Rs 500-crore premium retail coffee consumption market in India is now growing at 30 per cent. Competition from Café Coffee Day (CCD) is literally hotting up, even as Starbucks has recently withdrawn its application to enter India for the time being. Be that as it may, Barista seems to be in need of re-inventing itself, to remain hot and trendy.

In an exclusive interview to Raja Ghoshal, Partha Duttagupta, CEO and director, Barista Coffee Company Limited (BCCL), tells what’s brewing at Barista, post its acquisition in March by Italian coffee major Lavazza.

• What is the size of the retail coffee consumption market in the country? What part of it belongs to Barista?

The space in which we are operating is the premium coffee consumption market, which is estimated to be about Rs 500 crore and growing at an estimated rate of 30 per cent. Since Barista is not a publicly listed company, I cannot disclose the turnover. I can only say that it will turn a cash-positive company very soon. (At present, we are EBITDA- [earnings before interest, taxes, depreciation and amortisation]-positive.)

• Italian coffee major Lavazza acquired Barista in March this year, for around Rs 480 crore. What kind of investment is Lavazza planning in India?

I cannot comment on the actual acquisition amount since the matter is between the earlier promoter C Sivasankaran and Lavazza. However, the acquisition was for both Barista and Fresh and Honest, which is a separate company in the business of vending machines for freshly grounded coffee.

• Can we have the investment plans of Lavazza?

Well, Lavazza has big investment plans for India. It is in the range of 100-120 million euros in the next three years.

• Does Barista still have the first-mover advantage?

By definition, first-mover advantage is first-mover advantage; so we already have it. We are seen as the pioneers in the category.

• Compared to Barista’s 170 outlets, your competitor Café Coffee Day (CCD) has 400 outlets. Your comments?

I will rather not comment on the competition. What I can say is that I see huge potential for the growth of the coffee chain business. Our expansion strategy will factor that in. Currently, the expansion strategy is based on sustainable and profitable growth. This helps us decide where we open outlets and at what pace.

• Do we see an increasing use of the Lavazza brand? Or, does the brand value of Barista make enough business sense for Lavazza to retain it?

See, this equation will depend on what the consumers want. Presently, research is being conducted to find out exactly that. Meanwhile, in our outlets we are selling both Barista and Lavazza brands. I have to add here that the Lavazza cup of coffee comes at a premium price point. We are working on how the Lavazza brand and expertise can both be leveraged. Products sold under the Lavazza name are being made from imported Lavazza coffee.

• Are there plans to open café outlets with the Lavazza brand?

It is not under consideration right now.

• What are the expansion plans for Barista?

In the current fiscal year, about 75 outlets of Barista will be added. Around 40 per cent of the new outlets will be opened in the southern region.

• What about overseas expansion plans?

At present, we have Barista outlets in the United Arab Emirates, Sri Lanka and Oman. Apart from opening new outlets in these regions, by the end of this fiscal we intend to enter new locations as well. These will be in Bahrain and Bangladesh.

• How are you expanding the premium Barista Crème’ outlets?

At present, we have nine outlets of Barista Crème’. By the end of the year, we plan to have around 20 of these outlets, since the response is very good. Pune, Bangalore and Chennai are the places where we are most likely to open more premium outlets.

• Starbucks has recently withdrawn its application to enter the Indian market. What does this mean to you?

I think it is a matter of time before they come to India. Whenever they do, the competition is welcome. It will only expand the market. It will provide the consumers with a choice. On our part, it will keep us on our toes to constantly improve our efficiency.

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