Café Coffee Day brews major expansion plan

Homegrown cafe chain, Café Coffee Day (CCD), credited with popularising coffee in a predominantly tea-drinking market like India, is adding 150 cafes and 120 Xpress outlets across the country this fiscal.

While the cafes will be sized between 800 and 1,000 sq ft each, the Xpress outlets, which are small and on-the-go formats, will be of 125 sq ft each.

CCD already has over 1,500 cafes spread across 300 cities and towns in the country and over 900 Xpress outlets in public places such as hospitals, airports and railway stations.

“We are targeting a 10 per cent growth in outlets and an 18-20 per cent growth in revenue during this fiscal (2014-15)” Venu Madhav, CEO of CCD, told Business Line .

He said there was a huge potential in the country for opening more cafes. “Going by the demand, there is a potential for 5,000 cafes in India. And one measure of assessing this potential is the number of malls in India – there are 800 malls in the country and each mall can ideally take one cafe. Similarly, every residential area, high street, mass transit location, etc can have cafes.”

In-home consumption

The average price of a cup of coffee at CCD has nearly doubled from ₹40 in 2009 to ₹75 (cappuccino) now. Madhav attributes this increase to the rising cost of rentals, which has almost doubled over the last three-five years.

With over 5 lakh people walking into CCD’s cafes around the country every day, the coffee chain, which garners 60 per cent of its revenue from the sales of beverages, 35 per cent from food and 5 per cent from merchandise it sells in cafes, is trying to increase in-home consumption of coffee.

“We are selling Filter Fresh and Trist coffee pouches for ₹125 each, and a range of coffee makers from Stove-top Espresso makers for ₹499 to semi-automatic and automatic coffee brewers that are priced at ₹4,499 and ₹6,499, respectively,” said Madhav, who declined to mention the number of units of coffee brewers that have been sold to date.

According to Madhav, there is a growing number of connoisseurs whose demand for premium single origin coffees sold in ‘The Square’ format of CCD, has prompted the company to retail its speciality estate branded coffee powders in its cafes.

“Consumers love our high altitude estate coffees, which they buy for a premium. Two popular estate branded coffee powders that we sell in our cafes are from our own Kathlekhan and Rajagiri estates,” said Madhav.

Regular coffee powder is also retailed at CCD outlets at prices starting from ₹35 for 100 gm.

Per capita consumption The per capita consumption of coffee in India has also increased nearly 60 per cent to 86 gm from 54 gm eight years ago. However, industry experts say there is scope to increase per capita consumption substantially. “Although South India has traditionally been a coffee drinking market, the proliferation of cafes pan-India has more or less evened out coffee consumption between the Northern and Southern regions,” said Harish Bijoor, CEO of Harish Bijoor Consults.

For per capita consumption of coffee to increase to the levels of the Scandinavian countries and the US, which stands at 2.7 kg and 2.5 kg, respectively, it must become an in-home habit (like in the South and West) for people in the North and East where coffee is currently an out-of-home habit, thanks to their exposure to cafes.

The entry of global major Starbucks into the country in October 2012 through a 50:50 joint venture with Tata Global Beverages called Tata Starbucks Ltd is giving stiff competition to CCD.

Over the last 18 months, the Starbucks juggernaut has set up 45 cafes spanning Delhi NCR, Mumbai, Pune and Bangalore.

COMMENT NOW