The brewing business of coffee parlours in India

According to a global retail consultancy firm, Technopak Advisors, the organised coffee retail business in India is over Rs.8 billion ($17 million), and the potential for coffee retail outlets is 3,000. The retail brands, however, say the figure is between 4,000 and 5,000.

Arvind Singhal, chairman of Technopak Advisors, told IANS: 'In the organised segment there are three major players - Barista, CafA© Coffee Day and Costa Coffee. A few others are beginning to grow and India has a huge potential for retail outlets.'

The good news also is that coffee consumption on the rise.

According to industry sources, coffee consumption has shot up from 55,000 tonnes to 80,000 tonnes since the liberalisation of the economy in 1991.

Sudipta Sengupta, marketing head of CafA© Coffee Day, said: 'It is on the rise and with niche coffee parlours coming in, the figure is only likely to go up.'

With the Indian middleclass ready to spend more and be a part of global lifestyle and culture, coffee parlours in the country are on an expansion spree.

'Between 2003 and 2005, domestic consumption went up by seven percent per annum and this has come after a long spell of stagnancy,' said Barista chief Partha Dattagupta.

'The company plans to invest Rs.400 million in expansion. By the end of this financial year we plan to open 100 outlets and expand to at least 40 cities.'

Likewise, CafA© Coffee Day, promoted by Amalgamated Bean Trading Company, plans to open 500 cafes by June 2007. Britain's Costa Coffee, promoted in India by the Rs.12 billion Ravi Jaipuria group's Devyani International, also plans to invest Rs.1.5 billion in the next four years.

'By 2010 we are confident of opening 290 outlets and we expect our growth to be much faster in the coming years,' said Virag Joshi, chief executive of Devyani International.

Competition is going to get fierce with international retail brands Starbucks, Gloria Jeans, Berries Coffee eyeing India - even though they have not been able to fix the pricing.

However, almost unanimously, the Indian retail brands say there is enough space for all. 'There is enough space for all of us. We have already carved a niche for ourselves, so we do not need to worry,' Sengupta stressed.

'At Barista we have factored in the entry of big players in our strategic plans. The arrival of international players like Starbucks will stimulate growth in the coffee and hangout culture,' Duttagupta said.

Technopak also believes that the impact on current players will actually be positive since the overall market will expand, and with a likely premium pricing and positioning of Starbucks, the current players will get a good 'price shelter'.

Since 2004 some new names have also come up with the mushrooming of the glittering shopping malls and cineplexes. One such player is Craze Coffee promoted by real estate firm Enkay Group.

Pawan Kohli, director of Craze Coffee, said, 'We plan to expand to 20 new outlets by the end of this financial year from the present 13.'

Tata Coffee Limited, after selling its stake in Barista, has opened up Mr Bean Coffee Junction in Kochi, Kerala, to understand the market. Others like Cha Bar, Coffee World and Passion have also jumped on the bandwagon.

So why are the masses actually flocking to coffee parlours given the fact that India is primarily a tea-consuming nation?

Said Joshi of Costa Coffee: 'This has changed over the last three-four years. We have seen the emergence of coffee as the lifestyle choice of the new generation.'

Puja Talwar, 24, a civil service aspirant, said: 'These are cool places to hang out with family and friends. One can eat, read good books and listen to one's favourite music.'

The coffee parlours, however, are aiming to provide not just that favourite cuppa. Also on offer is a huge range of lip-smacking snacks to complement a cappuccino or an iced mocha. 'Sixty percent of our business comes from food,' said Sengupta.

Technopak's Singhal believes 'the business objective is about increasing the average bill size. Only coffee will make the entire business model financially unviable'.