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Feb, 05 2015

A piping hot opportunity

Indian coffee industry is revving up big revenues. All the credit goes to the shifting consumption patterns for coffee among young population that loves to enjoy aroma of freshly brewed coffee at coffee shops or lounges. The industry indicates positive si

As café culture in India is thriving exponentially, it is believed sooner or later, absolute volumes will pick up in this under-penetrated market with a huge growth potential and thereby opening fruitful prospects for prospective franchisees to enter the business. Now, cafe's or coffee shops of organised brands are exploring untapped locations or cities besides eyeing to expand across metros. Currently, tier II and III cities are explored by organised coffee chains to target the end consumer. All thanks goes to homegrown coffee chain  Café Coffee Day for creating a new phenomenon in coffee industry of India by tapping right customer with its popular tagline  “A lot can happen over coffee.” Here after comes Barista, which is considered as second largest coffee chain, was earlier owned by Lavazza. Barista has been sold by Lavazza to Carnation Hospitality Pvt Ltd in 2014 and is now looking to open its franchise stores in India. 

Several market reports say that Indian coffee industry is set to grow rapidly in the future. In this segment, the brands that are willing to join hands with franchisees are  Barista, The Coffee Bean & Tea Leaf, America's Classic Rock Coffee Co. (CRCC) which entered the market through Food Jockeys LLP, Australia's Di Bella, Mocha, part of Impresario Entertainment & Hospitality, Hindustan Unilever's Bru World Café, Coffee N U, Brewberry's café, and Java Green. According to 'India Coffee Shops & Café Market Forecast & Opportunities 2017,' the coffee shops and café market in India is expected to witness phenomenal growth in the next five years.

Business prospects

For strengthening the brand's franchise, coffee retailers are rely on three types of business models including  franchise-owned company-operated (FOCO), franchise-owned franchise operated (FOFO) and company-owned company operated (COCO).  Commenting about the most suitable business model for spreading his brand's franchise, Rahul Leekha, Director, Di Bella Coffee, says: “All three models have their own uniqueness and mainly depends upon the experience of the franchisee. On the other hand, Avinash Agarwal, CEO, FoodJockeys LLP which will soon be opening Classic Rock Coffee outlet, says: “For the initial roll-out, COCO is the most suitable model since we can control all the areas of the brand. After the flagship store is running, FOCO and FOFO model will be the best business model.”

On the expansion front, Carnation Hospitality, is looking forward to open 550 Barista outlets in five years. Of the total planned outlets, 350 will be owned and operated by the company, while the remaining will be franchise ones. FoodJockeys LLP plans to open at least three franchise outlets of Classic Rock Coffee Co. India by this year end. On adding coffee shops, Rahul Leekha informs: “We are currently focusing on building 15 more café’s in Mumbai (Company-Owned) and 10 in Hyderabad (Franchisee-Owned).”

The way ahead!

Coffee market in India definitely continues to steal the show as industry as love for coffee in a purely tea drinking country is accepted by youth. In fact, entry of global coffee chains has also turned out to be the biggest growth driver. Now, consumers in India are exploring western trends and increased disposable income is another factor which is propelling more organised coffee chains to enter the fray. Indian consumers are now longer conscious about spending Rs 150 or above on a cup of coffee. Enlightening about the upcoming trends that he foresees in the coffee industry, Vishal Kapoor, CEO, Costa Coffee India, says: “At this time, I see a lot of consolidation in the market. As companies change hands, or decide to abandon the market, the landscape of competition is changing; for chains like ours, we will continuously try to reach higher levels of penetration. I see more coffee companies will invest in our country as the large population base and demographics make a very compelling case for an investment.”

Experts feel that, to be successful in this industry, players need to strategise to enhance customer footfall and profits. Foreign brands need to study the market well and customise their offerings and must have that “Indian feel” in their stores to achieve more sales.


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