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Indo American News • Friday, March 25, 2011
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Friday, March 25, 2011
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IndoAmerican News
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BANGALORE (ET): A story of initiation told by Santhosh Unni, CEO of Costa Coffee India , captures the window of opportunity in India’s cafe business. Last June, India’s thirdlargest coffee chain opened a cafe next to an outlet of market leader Cafe Coffee Day on a Bangalore high street. “They were doing Rs 18,000 per day ($391). We started doing Rs 18,000 in a month,” says Unni. “The market just doubled.” There’s the addition of two American heavyweights, Starbucks
Starbucks and Dunkin’ to Enter India
and Dunkin’ Donuts, to what is currently a three-horse race between Cafe Coffee Day (CCD), Barista and Costa Coffee. There’s a threeyear plan by CCD to
double its outlet count, aided by a Rs 960 crore investment chest from private equity. “We took 14 years to reach the 1,000 mark,” says K Ramakrishnan, president,
marketing, at CCD. “We want to reach 2,000 cafes by 2014.” Elsewhere, smaller players like Costa Coffee (73 outlets), Gloria Jean’s Coffee (15 outlets), and Coffee Bean & Tea Leaf (13 outlets) are also looking to double their presence in the next 12 months. Harish Bijoor, a veteran of the coffee industry, doesn’t see a crowd. He sees catalysts for the cafe business, which currently stands at 1,926 outlets. “India can absorb 5,400 cafes,” says Bijoor, whose
marketing consultancy has done research across 180 cafes. The Indian market is estimated to be between Rs 650 crore and Rs 1,100 crore ($15- 25 Billion). “The pie will get bigger now,” says Tony White, regional GM for Australian chain Gloria Jean’s Coffee, citing its experience in its home market. Bijoor feels the time for expansion for existing players is now. “The window for them is around three years,” he says in light of the impending onslaught by cash-rich Starbucks and Dunkin’. Starbucks is the world’s largest coffee chain, with 17,000 cafes in 55 countries, and revenues of $10.7 billion in
2010. Dunkin’ has 9,760 cafes in over 30 countries. “They, typically, announce 30 outlets in the first year, and then 400 outlets in the next two years,” says Bijoor. Expansion, especially of the rapid variety, poses its own challenges for companies. Of paying top rental in upmarket locales. Of managing coffee prices, which are at a 17-year high and showing no sign of receding. Of handling a young and restless workforce. Of handling the Indian consumer, who is gaining affluence but remains price-conscious. How companies manage these pressures holds the key to their profitability.
INDO AMERICAN NEWS • FRIDAY,MARCh 25, 2011 • ONLINE EDITION: WWW.INDOAMERICAN-NEWS.COM