The coffee bar scene in India
By Aparna Datta
Is the coffee cup half-full or half-empty? Is the retail
coffee revolution in India for real, or just maya (illusion)?
Some nine years since the second big wave in retail coffee
(more about the first anon), coffee companies are still reading
the grounds. As with many other consumer sectors, it’s
a mixed bag. Getting the formula right is about figuring out
what the foray into coffee retailing really means in terms
of corporate strategy – and it may not be an upward
graph on the sale of liquid coffee per se.
The burgeoning coffee bars in India have been identified
as one of the more visible signs of a booming consumer economy.
Currently estimated at INR 2.5 billion, with about 500 retail
outlets in the organized sector, the potential exists for
at least 2,000 outlets, according to retail consultancy KSA
Technopak. So, who are the existing players, and what path
have they taken to coffee nirvana?
Café Coffee Day: When Amalgamated
Bean Coffee Trading Co. (ABC) launched the first Café
Coffee Day outlet in Bangalore in November 1996, it truly
was a leap of faith. It was early days for the Internet in
India; ‘coffee shops’ were either the five-star
hotel or the dhaba variety. ABC, one of India’s leading
coffee exporters, were clued into the international scene
and saw a business opportunity in fusing two distinct trends
– the cyber craze and the yen for gourmet coffee –
and the concept of an independent, stand-alone coffee joint,
the cybercafe, was born. Store expansion took place gradually,
with cafés set up in Bangalore, Chennai and Hyderabad.
But competition in the shape of ‘Barista’, gave
ABC a jolt, and accelerated the pace of expansion on an all-India
basis. As of June 2005, this group is the # 1 coffee retailer
in India, with 229 coffee bars and counting. Headquartered
in Chikmagalur and Bangalore, this is a fully integrated coffee
company, with 5000 acres of coffee estates, curing works,
R&G network in southern Indian cities called “Fresh
n’ Ground”, kiosk business under the Coffee Xpress
brand, Coffee Day Take Away, the vending business with 7000
units, and a packaged coffee division. In fact, the company
has the entire seed to cup value chain wrapped up with a large
footprint of 56 cities across India.
Barista Coffee Company: The credit for raising
the profile of coffee retailing in India goes to Barista.
It started out with a bang in March 2000, with the first outlet
coming up in New Delhi, opening up the north Indian market
for coffee. Today, the company has about 120 units, and has
extended its presence to Sri Lanka and Dubai. In the meantime,
there have been ownership and management changes: the original
promoters, Turner Morrison and Co. have sold out to the Chennai-based
Sterling Infotech Group; Tata Coffee, which had taken a stake
earlier has also exited. High-end pricing appears to have
been a limitation, as well a belated recognition that in India,
food service must accompany beverages, but the company is
evolving. Plans are on the anvil to develop kiosks suitable
for petrol pumps on highways, as well as a lounge format for
upscale consumers in cities. The Sterling group earlier promoted
a vending machine venture in Fresh & Honest Café
that has tied up with five-star hotels and companies and is
present at many railway stations around the country.
Qwiky’s: Set up its first coffee pub
in Chennai in October 1999. Started by two software engineers,
Shashi Chimala and Shyam, this group is registered as Qwiky’s
Corporation in the US, and in India operates through Chimayo
Chains. Concentrates on a franchise system, with the preferred
format being the Coffee Island, a ‘store in store’
Javagreen: Over the past year, Javagreen
has emerged as an active stakeholder in the Indian café
sector. Situated within the Reliance WebWorld stores, the
retail arm of telecom major Reliance Infocomm, it has a distinctive
presence on high streets and malls with plenty of footfalls.
Currently in rapid expansion mode, Javagreen had 150 outlets
in 25 cities across India in March 2005.
Javacity: One of the early birds in town,
Raj Madnani, earlier a non-resident Indian, set up Javacity
in Bangalore in July 1999, and now operates four units around
the city. The flagship outlet on Lavelle Road is a spacious
café with outdoor and indoor seating. A patisserie
and an exhibition area give people a number of reasons for
frequenting the place besides the cosmopolitan atmosphere
and a sense of community. Javacity was the first to bring
specialty coffees to Bangalore, with the full espresso line-up
and beans imported from Colombia and Ethiopia and Jamaica.
Kalmane Koffee: A location in Bangalore’s
Forum mall gave this retail outlet a good start in 2004. What
was initially an experiment by a coffee planter to retail
R&G coffee has, within the space of a year, become a full-fledged
business, aiming at 10 stores by 2006. (See story under Mill
Coffee World: A venture of Global Franchise
Architects (GFA), Coffee World opened its first unit in Bangalore
early 2005. The group has a number of outlets in Bangkok,
and has a standardized store layout with a lounge concept,
which has ushered in a new dimension in the coffee bar retail
format in India. The group also has a successful business
in Pizza Corner, a restaurant and home delivery service in
major cities in India.
Café Mocha: It’s rated the
hippest coffee chain in Mumbai, and has the maximum blogs
dedicated to it by coffee lovers. Part of the fascination
is the hookah/sheesha, which was served from the day the first
café opened in Mumbai’s Churchgate area, fitting
in perfectly with the “coffees and conversations”
tagline. Today, the chain has five outlets, owned by the Rs
19 crore Impressario Entertainment & Hospitality, and
is gearing up to open 65 more outlets, primarily through the
franchisee route. Mocha has taken the community building route
to strengthen its brand and sustain customer loyalty. It is
adding new clubs - music and coffee and wine appreciation
to its existing two, the Backpackers Club and the Film Club.
The first overseas Mocha cafe is slated to come up in Dubai
followed by Singapore.
Moca Café: The vibrant Indian economy
is attracting entrepreneurs from around the globe. Marc Tormo,
once a barista in Barcelona, brought his talent in opening
and operating cafes to India, initially to Pondicherry. Tormo’s
Moca Café, now with two outlets in Madras, serves a
classic Italian espresso prepared from organic, single-estate
arabica coffee, sourced from Nandanvan Estate in Kodaikanal,
Tamil Nadu state, roasted on-site at the estate, at levels
prescribed by Tormo, and forwarded on just-in-time basis to
the café. This is the only café in India that
serves certified organic coffee in its preparations.
Georgia & Nestle: Georgia has tied up
with McDonald’s and operates in all the major Indian
cities. Nestle has a visible presence through vending machines
at many public places, though primarily in North India.
Costa: UK-based Costa, part of Whitbread
plc, has announced that it will open 300 outlets in India
over the next six years through a franchise agreement with
the Indian R K Jaipuria Group, starting out in New Delhi.
Coffee beans will be supplied from Costa’s roastery
in the UK, using the company's unique espresso blend, Mocha
Italia. In India too, Costa stores are expected to use specially
designed Italian espresso machines, developed in collaboration
with the manufacturer.
Starbucks? Just yet, it’s in wait and see mode. Arguably,
it’s been the inspiration for many of the new generation
of coffee bars in India.
Sub-continental scale and population base of a billion plus
makes the café industry in India extremely diverse.
Traditional darshinis, the Indian version of fast food joints,
co-exist alongside the new western-style cafes. Yet for retail
opportunists, it’s evident that the emerging café
scene holds great promise, with franchisees said to be making
a 15-20 per cent annual profit.
But the real issue for coffee retailers is: don’t expect
to make money on the coffee service alone. For young people
these days in India, chilling out at a coffee bar is more
of a lifestyle thing, a convenient hangout. Food service is
recommended; the basic cookies and pastries routine is a no-no.
With an expanding middle-class, the potential is big, but
the defining a business model could take some effort.
And that first wave in coffee retail? It dates back to 1936,
when the first India Coffee House opened
in Bombay, as part of a strategy to promote domestic coffee
consumption. At the height of its glory, the India Coffee
House chain numbered 72 outlets, extending to Lahore in pre-partition
India, and till the 1960s and 70s, was quite the rendezvous
for the coffee house revolutionary. Those days are gone, and
the India Coffee House, operated by the Coffee Board of India,
is down to around 11 units around the country. But they still
hold their own as the place for the ‘cheap and best’
cup of filter coffee that’s possible in a city.
PENSCAPE July 2005