Coffee in India: It’s Not All Starbucks—Part 3
By Perry Luckett, CoffeeMan1
As mentioned in Part 2 of this series, during the last ten years Indian middle-class consumers have become ready to spend more and be part of global lifestyle and culture, so coffee parlors are expanding rapidly in the country. Outlets are gaining popularity as coffee cozy “hangout zones” with friends, family, colleagues, and business associates—especially for people 16 to 45 years old. As a result, the market has grown enough to support two niche players: Barista Coffee and Costa Coffee.
Barista Coffee was the brand of Italian company Lavazza, but they exited the Indian coffee market by selling their brand and 190 shops to New Delhi-based Carnation Hospitality in 2014. Lavazza decided to focus on the coffee processing and distribution business but continues to supply Lavazza coffee to Carnation under a long-term agreement.
Barista Coffee has continued to thrive in India under Carnation, with about 240 shops and kiosks now operating. They’ve also expanded beyond India with outlets in Sri Lanka, Bangladesh, Nepal, Myanmar, the Maldives, and Pakistan. They intend to more than double their stores in India through franchising and to rapidly increase outlets for their fast-moving consumer goods (FMCG) offerings. Barista CEO Puneet Gulati recently said: "Coffee consumption in India is very low compared to developed countries. We see tremendous opportunities in the coffee sector here. We are looking at operating 500 outlets and distributing our FMCG offerings through 10,000 outlets in the next 2-3 years."
Barista freely acknowledges their indebtedness to Italian coffee culture, as stated on their website: “No one has mastered coffee better than the Italians. Tipping our hats their way, Barista brings new meaning to Italian coffee and eats in the Indian sub-continent.” But they also want to stay in touch with India’s millions of regular tea drinkers, so they offer nine flavors of tea for those who haven’t yet embraced the coffee scene.
Speaking of eats, Carnation has expanded their food menu to include quick bites, six sandwiches or stuffed rolls, and both chicken and vegetarian biryani. When a main course isn’t enough, customers can choose from 14 kinds of desserts and six cakes. One might think Indian customers have a bit of a sweet tooth, eh?
Costa Coffee has only 46 shops operating across the country as of 2017, which puts them in 5th position (behind Starbucks) in terms of total outlets in India. They had built the chain to 100 outlets before their master franchiser, Devyani International, shut down more than half of them to reduce costs. But they’re still competing strongly with other chains in select urban markets.
In fact, location has played a crucial role in their business plan. Although they’ve made a few mistakes such as replicating the UK model in India and opening stores at expensive locations when they came to India in 2005, they’ve managed to bounce back somewhat by concentrating on more accessible locations and catering to the upper 20% of India’s coffee consumers. Their most profitable venture today is from off-premises business: setting up cozy coffee kiosks at marriages, seminars, and meetings.
It will be interesting to see how Costa Coffee develops in India now that Coca-Cola has purchased parent company Costa Ltd. (Whitbread PLC) for $5.1 billion. They may have to establish different supplier arrangements because their current master franchiser’s parent company also distributes Pepsi products in much of India through a separate bottling company. Coca-Cola’s deep corporate pockets and successful record of acquisitions portend good things on the horizon, so we’ll stay tuned to track Costa Coffee’s fate under any new agreements.
We at Koffee Kompanions like to keep you informed about the coffee industry, so cozy up to our blog as often as you can. Meanwhile, please also explore our unique cup wraps, cup and mug lids, ice cream pint koozies, teapot cozies, and French press cozies—all with 3M Thinsulate™ insulation to keep your beverages hotter longer. Know something about coffee in India? Please share in the Comments below.