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Retail 2014-06-18

Steaming up coffee retailing

Coffee retailing is growing at five to six percent annually.

By Deputy Features Editor
Steaming up coffee retailing

Coffee consumption in India is increasing from 2.5 to 3 percent a year, which is huge if you consider the total consumption across the world which is 140 million and 60 kilo bags.

India is placed well for huge coffee consumption backed by growing population and growing middle class. Experts say, the total coffee production in the country is slightly greater than demand, but five years down the line, there will be greater demand and production may fall short.

Retailing facts

Coffee retailing in India is growing at five to six percent annually triggered by the ‘café’ culture. Two years back coffee companies from all over the world ventured into Indian market seeking a deeper penetration as the consumers were ready to experiment newer tastes and experiences rather than preferring a normal cappuccino. And following the trends, coffee retailing has shifted focus from cappuccinos, espressos to single origin coffees from India and other parts of the world, catering to more evolved tastes. 

Speaking about the coffee business, Anil Bhandari, President, India Coffee Trust, says, “If you see the coffee consumption trend in India, you’ll see that CCD is expanding, foreign chains like Starbucks are coming to the country, Dunkin Donuts sells more coffee than donuts and are expanding by opening more and more outlets”.

Foreign brands coming to India

Realising the great potential that the domestic markets shows, brands like Costa Coffee, Starbucks, Di Bella Coffee, Coffee Bean, Tea Leaf have started coffee retailing and few of them are doing well too. According to the industry experts, the estimated size of organised coffee retailing in India is 200 million and the estimated number of stores is 5,000 at an average growth rate of 40 percent. Rahul Leekha, Director, Di Bella Coffee, informed, “We at Di Bella had a common goal to convert every-customer into a loyal customer. We have invested heavily in our product and services and we believe a Coffee Shop is more than just coffee but a complete experience.”

Challenges faced

Industry experts say, with the growing number of foreign brands in this space, the real- estate sector started overcharging the international players. Such players complained that the rent to revenue ratio was very high which created a market consolidation forcing the major players like Costa Coffee and Gloria Jean’s Coffee to get reasonable and cut losses or face closing of the stores.  At the same time coffee chains owners also commented that as the foreign brands are struggling to place them in the Indian market this is making the market unrealistic by real estate providers charging high rentals. This is actually turning into an overambitious real-estate segment by creating problem for other brands to get the right place at right price. Often, this is the reason that led many foreign brands to get into losses and may move out of the high paid locations. However Di Bella Coffee which closed its Indian operation two years ago is back now..

Learning from the successful brands

Despite all this fallouts, few coffee brands are a hit in the country. For example, Cafe Coffee Day (CCD) is planning to have around 2,500 outlets in the next three years at the same time Starbucks which made its India debut in partnership with Tata Global Beverages has set up 46 outlets in two years and has been aggressively expanding throughout the country. According to the experts in the industry what other brands should learn from these players in the market are maintaining consistency, increasing customer loyalty, wide product range, smart real-estate and increasing popularity through social media.

Venu Madhav, CEO, Cafe Coffee Day, says, “We have a core team of F&B experts, food technologists, trainers who ensure that the chain remains relevant and trendsetter. It is ensured that there is something new and exciting on offer at regular intervals.”

Based on the current market trends, if all goes well with current players in the market, India is likely to hit among the top five markets for coffee consumption.

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