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research 2013-12-03

Growth Story of Cafe

Valued at around USD 290 million, the organized café market in India is estimated to be growing at a compound annual rate of 20%.

By Deputy Features Editor
Growth Story of Cafe

Café

Coffee chains in India remained an underpenetrated market until the past few years, a consequence of the fact that India is primarily a tea-drinking nation with low coffee consumption, both in terms of frequency and quantity. The per capita coffee consumption in India is 80 gm a year, whereas in developed countries, the consumption is 8 kg a year. However, of late, the Café market has witnessed an aggressive expansion by established brands, and also the entry of new domestic and international players, driven by increased consumer exposure to cafes, with increasing inclination towards tea substitutes.

Over the past 5 years, the café culture has grown, with many new cafes opening, primarily in the metros and mini metros. This is due to the forays by new brands and the cosmopolitan culture of these cities.

Over the past 5 years, the café culture has grown, with many new café opening, primarily in the metros and mini metros. This is due to the forays by new brands and the cosmopolitan culture of these cities.

 Coffee Retail Formats

 

Lounge

Café

Express

Kiosk

About the format

Premium format with emphasis on ambience along with F&B experiance

Format with a big seating area, to induce sonsumers to spend more time

Abridge version of café format with limited seating

Smallest format in terms of size with high focus on merchandise display

Space Dynamics

Elaborate café with plush & comfortable seating

Smaller than lounge but similar number of seating

Smaller than Café format in terms of seating and size

Smallest amongst all the formats, with no seating

Food Preparation

Usually includes kitchen where some items are cooked and prepared fresh (expect for CCD Lounge)

Pantry area used to freshly prepare beverages and heat/grill  other items

Only beverages are freshly prepared amongst all menu

Malls, high streets, popular markets, office complexes, airports, highways, educational campuses, multiplexes

Representative Brands

Mocha, Barista Crème, CCD Lounge

CCD, Barista Lavazza, Costa Coffee, Starbucks, Coffee Beans & Tea Leaf, Gloria Jeans Coffee, Au Bon Pain, Segafredo, Dunkin’ Donuts, Chokola, Muffin Break

CCD, Barista Lavazza, Gloria Jeans Coffee, Au Bon Pain, Segafredo

CCD, Barista Lavazza, Gloria Jeans Coffee

On the consumer side, cafes are becoming popular hang-out destinations and, at the same time, the evolving consumer lifestyles have given rise to other beverage-based outlets such as Tea lounges (Wage bakri, Infinitea), Liquor cafes (Boombox café, Urban café), Chocolate cafes (The Chocolate Room, Bliss chocolate lounge) and juice/Smoothie cafes (Booster Juice).

The Café segment has been burgeoning in India with several domestic and international brands making inroads into the market. Currently, there are ~100 chain cafes and bakery brands, with an estimated 3,100-3,200 outlests spread across various cities in India. As the competition is increasing in the sector, players are trying to differentiate themselves by tailoring their offerings in terms of outlet ambience, services and developing newr products such as regional flavours, international coffee blends, etc. Market leader Café Coffee Day and Barista Lavazza have a presence across all 4 formats, viz. lounge, café, express and kiosk while others like gloria jean’s coffees and Bon Pain have a distinguished presents in more than two formats. In contrast, Coasta Coffee is present only in the Café segment.

Brands Outlets Presence- City Type

Chain Café City- Type outlet Presence
 

a. Product Sales and SKU Mix

Food constitues over 40% of the lounge SKU mix, with a~35% contribution to the sales mix. The contribution of desserts is small, with an equal proportion in SKU and sales revenues in the express format as they are key items in the takeaway basket

The Café culture is ruling the streets of India with majority of the sales (over 80%) coming from dine-in across various seating formats, with takeaway sales only coming in second

c. Sales Mix- Peak Business Hours

As for Kiosks which are located mostly in office complexes and offer takeaway and delivery services, the afternoon time (1300-1600 hours)gets the maximum customer traffic due to concurrence with office lunch hours and preference for “On the go” food.

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