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  1. Analysis
May 7, 2002

A real wake up call: Coffee house culture in India

Coffeehouses are nothing new in India, but the current wave of outlets under the various banners of companies such as Barista and Qwiky’s are swiftly becoming the breath of fresh air that could well revitalise a flagging sector. just-food.com’s Debasish Ganguly takes up the story.

Coffeehouses are nothing new in India, but the current wave of outlets under the various banners of companies such as Barista and Qwiky’s are swiftly becoming the breath of fresh air that could well revitalise a flagging sector. just-food.com’s Debasish Ganguly takes up the story.

Not so long ago, India’s coffee sector suffered a major setback as global prices slumped. Domestic coffee consumption almost stagnated at 80,000 tonnes a year, while the annual production of coffee [which is mostly exported] was constant at about 325,000 tonnes.

The currently booming concept of café chains has stirred hopes that domestic consumption may finally come to the rescue of the largely export-driven trade, however. The popularity of the concept is expected to spread fast in the next three to four years, driven by the fact that coffee houses offer a respectable way to spend spare time.

Coffee culture?

Coffee shops are now often perceived as hangouts for college students that want to display their wit and yuppies that want to do some business brainstorming. Older generations are familiar with the coffee board’s own Indian coffee house chain, but in most cases these outlets are too decrepit and rundown to serve the purpose anymore.

The new coffee bars are quite different from these original coffee houses. The profile of the customer has changed completely and the range of coffee served has expanded.

The credit for the of coffee house boom may in part go to Swiss food behemoth Nestlé for its instant coffee-dispensing machines, which sells coffee at Rs5-10 (US$0.08-US$0.10) per cup. The only thing lacking with this innovation was the ambience and infrastructure. Nestlé operates through outlets that offer shoppers a kind of pit-stop, but of late it is branching out into larger outlets selling not only coffee but iced tea and other snacks.

Ambience

Unlike the darkened bars that many Indians are used to, the new coffee chains are bright and cheerful. They offer the same kind of ambience as their international counterparts, with floor–to-ceiling window fronts. Social approval of the concept is important and this triggers the chain owners to avoid the ugly scenes that brought most beer bars into disrepute. Most of these cafés are designed like real bars, with friendly ‘baristas’ and bar tools, well-lit interiors, ‘funky’ furniture, spare guitars and some even have graffiti boards for consumers to leave their wit behind.

Market players

Qwiky’s claims to be another pioneer of the speciality coffee pub culture in India. It opened its first shop in Chennai in October 1999. The NRI (Non resident Indian)-promoted brand operates through its master franchisee Chimayo chain (p) Ltd. This chain, in the process of finalising its three-year-old business, is also going for equity placement of about Rs12-15 crore. Qwiky’s also has a tie-up with Bharat Petroleum Corporation to set up 35 coffee kiosks or vending machines in Chennai, Delhi, and Mumbai. Ten such kiosks have already been opened in Chennai.

Followed by Qwiky’s, Barista Coffee Company Ltd opened its first Espresso bar in February 2000 in New Delhi. Within no time Barista established itself as a vibrant experiential brand. The chain now claims to cater to over 12,000 customers everyday in its 70 outlets across Delhi, Mumbai, Bangalore, Hyderabad, Chennai, Chandigarh and Ludhiana. Barista came into India in collaboration with Asia’s leading coffee company; Tata Coffee Ltd, which acquired 34.3% equity in Barista.

With the success of Barista spreading fast, Café-Coffee-day has joined the competition. The café is a part of the Amalgamated Bean Coffee Trading Company, a 250 crore major coffee conglomerate. Café-Coffee-day actually started its operation by opening up an Internet café in Bangalore in 1997. The company now runs about 200 coffee points in southern India selling various blends of coffee.

Price and variety

The coffee served at the chains includes lattes, mochas, Colombian Juan Valdez , Ethiopian Qahwah; an overwhelming variety for Indians who have mostly known just filter or instant coffee. The new varieties cost anything between Rs20 to 45 a mug whereas the ordinary restaurants in India offer coffee at between Rs5 to 10 a cup. In the gourmet coffee category, for example, the Barista house blends, sold in vacuum-sealed packs with air valves, will be priced at Rs120 for a 200g pack, while fine coffee blends are expected to bear price tags ranging anywhere between Rs300 and Rs2,000 for a 120g pack.

Going forward

All of the sector’s players are adopting similar approaches to spreading awareness of the new varieties of coffee that are now available. They are all set to sell coffee packs and espresso machines in India that will bring in more customers through increased awareness. However, to avoid being tagged with a “mass positioning” label, the marketers are ensuring that they draw a clear line between gourmet coffee and the mass market. While pub activity will continue to drive the bulk of the sales, a niche set of consumers are likely to opt for gourmet coffee of the shelf.

New players?

Industry players are beginning to suggest that the entry of Seattle coffeehouse giant Starbucks is on the cards. The arrival of the most successful coffee house chain in the world could shake things up a little. Meanwhile, the current success of coffee bars in recent years has been something of a wake up call for other food industry players in India. Fast-casual dining chain Pizza Hut is believed to be contemplating adding branded coffee and tea on its menu list. Tricon Global Restaurants, its US-based parent company, is discussing possibilities with Nestlé and coffee chain Barista for tie-up ventures.

Company

No of outlets

Future plans

BARISTA

70

Barista plans to introduce home brewing products in India with the launch of the Barista Home Blend, an exclusive and premium blend of the Arabia Coffee. It also plans to introduce home brewing equipment that will be retailed through selected Barista Coffee espresso bars. Plans to increase coffee parlours to 200 by 2003.

QWIKY’S

38

Plans to open 55 coffee pubs, 35 “store in store” and 100 kiosks all over India by 2003. Also plans to sell home espresso machines and coffee packs, through premium or lifestyle retail stores.

CAFÉ-COFFEE-DAY

30

Although ambitious, the café aims at setting up 200 cafes, 400 coffee retail stores, and 3000 coffee vending machines by march 2004.

By Debasish Ganguly, just-food.com correspondent

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