Changes in lifestyle of the urban
population have given rise to the coffee culture in India. Contributing to the
growth is also globalization and changing pockets. The coffee culture has now
percolated from metros to tier – II and tier – III cities. Coffee earlier was
considered to be expensive indulgence and also coffee cafes were places for
socializing or for holding business meetings. Major chunks of the urban
population live in a nuclear set-up and also fall in the DINKS (Double Income
No Kids) segment. This target clientele would not mind to replace a meal with
coffee and a snack, which could be a sandwich, wrap or doughnuts. Comparing the
growth to the last decade there has been a significant increase in the
consumption basket too.
The new age coffee brand primarily
target corporate and students. According to TechSci Research’s report titled ‘India Coffee Shops/ Café’s Market
Forecast, Consumer Survey and Opportunities, 2021’, coffee shops market in
India is projected to grow at CGR of over 11% during 2016 – 2021, on account of
the growing coffee culture among young population, increasing urbanization,
rising disposable income levels and changing lifestyles preferences of
consumers. There has been a significant change also in the way people work now
(virtual offices), most of the coffee shops offer free Wi-Fi and entertainment
zones. The demand for coffee brands is huge from New Delhi, Mumbai, Chennai,
Kolkata, Bengaluru and Hyderabad. While they are expanding here at a break neck
speed, the coffee chains are also targeting expansion to tier II and tier III
cities.
Café Coffee Day introduced India to the coffee culture and also
considered to have pioneered the art of coffee serving. The brand plans to open
400 new outlets in the country, with an investment close to about 400 – 450
crores. While 70% would in opening up new outlets in cities they already exist
and the remaining in new cities and highways. Tata Starbucks Pvt. Ltd is a 50/50 joint venture between Starbucks
Corporation and Tata Global Beverage Ltd. As of now they operate 79 Starbucks
store as of Feb’16, after launching in Oct’12. UK based Costa Coffee entered India in 2005 on an exclusive master franchise
with Devyani International. Costa Coffee
was the 1st International coffee chain to set up operations in
India. Costa currently operates 96 outlets.
Logistics is one of the biggest
challenges faced by coffee retailers. Huge cost involved in supply chain
restricts expansion of many coffee brands and considering that there’s a huge
investment setting a new production unit, seems an expensive affair. Location plays a very important role in
steering the business towards profitability. High rentals are also one among
the many challenges faced by them. Brands are focusing more on making coffee
culture a profitable business rather than increase the counts.
Indian and International coffee
chains should be able to cater to the local flavors. With the existing
competition one needs to incorporate specific regional preferences in their
menu. While coffee chains operating in the country are taking pro-active steps
to change the perception and overcome the challenges, at the same time
somewhere, someone is enjoying their cup of cappuccino and thanking all the
coffee retailers for making coffee a stress buster / pick me up /wake me up
drink.
- Ms. Bindu Menon
Sr. Faculty, INLEAD
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