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Costa Coffee brews big plans for India, including an India-only menu.

ALAN PARKER, Chief Executive of Whitbread Plc, which owns Costa
ALAN PARKER, Chief Executive of Whitbread Plc, which owns Costa

Dharini Nagarajan

Cashing in on the `big-bang' retail boom, bolstered by a specially customised menu to suit the Indian palate, seems to be the mantra that cafe major Costa Coffee is betting on. The British leisure company, Whitbread Plc, which owns the Costa brand, plans an ambitious increase in outlets across the country from the present 13 to 300 over the next five years. Just eight months into its Indian operations, the UK-based café major is taking a cue from its more experienced predecessors in the Indian fast foods business and is introducing a whole range of an India-only menu. While attempting to go beyond a traditional café by including full-fledged meals in its menu, the company hopes its focus on quality will set it apart in the crowd.

Emerging market

According to Harish Bijoor, CEO of Harish Bijoor Consultants Inc, there are an estimated 500 cafe outlets in the organised sector and there is potential for lot more. "A back of the envelope calculation shows that India can easily accommodate another 6,000 cafes in the next five years."

"India has always been a very interesting market place for me," states Alan Parker, Chief Executive of Whitbread Plc, the firm that owns the Costa brand. "I've been coming here every year for the last four years and I think the time has never been better for the Indian economy." And Parker is already mapping his way forward in leaps and bounds. Costa, he says, fits in with the "evolving Indian tastes and lifestyle".

So satisfied is Parker with the Indian experiment that his company has charted out a massive expansion plan. "We expect to be in all the major cities and metros in the next couple of years," he says.

Costa is expanding in the country through its master franchisee, Devyani International Ltd, a food and beverage group, which is also the franchisee for fast food restaurants such as Pizza Hut and KFC.

The company is looking to expand at a rapid pace in and around the Capital and later target Mumbai and Pune. "We hope to add another 40 to 50 outlets by the next year," Parker says, adding that the company would also be beefing up its marketing operations and kick-start campaigns to increase its popularity once it has achieved a certain scale of operations.

So how does the head of the £1.8-billion leisure company hope to create a niche in the Indian coffee retailing market already dominated by Indian players such as Café Coffee Day and Barista? "We will be localising our offering to the consumer," Parker answers candidly.

The company is looking to introduce certain items specially tailored to suit the Indian market and may also introduce a luncheon meal priced at Rs 100-150, apart from its current offerings of sandwiches and paninis. "The Indian consumer likes variety and we realised that snacks alone are not sufficient for a lunch.''

The learning curve for Costa has been rather steep, with customer responses and feedback being quickly put into practice to fuel growth. Starting at the beginning, of course, with the absolute basics such as locations of outlets. According to Parker, getting the location right is probably among the most important factors contributing to the chain's success in this line of business. "We are now looking to open larger format outlets. These would be located in atriums and prime locations that have higher footfalls," he says. Asia, especially India, is high on Parker's global plans for the brand. "For now it's Costa for us in India. I think the brand has immense potential. Costa is looking at aggressive growth and Asia, especially India, is going to be the key contributor to our target of doubling the number of Costa outlets to over 1,000 by 2010, he says.

Does he fear local competition? "From the growth of the Baristas and Coffee Café Days, it's clear that coffee converts are growing at an incredible pace. I am confident that the supreme quality of our coffee beans and the experience and ambience in our cafes will help us steal a march over others," says Parker defiantly.

He also feels that quality will be the key differentiator between Costa and competition. "The first thing we do when we expand is put our supply channels in place. We have a commissary serving 40-50 outlets in any region and in line with our expansion plans, we hope to open a commissary every year," he explains. Complete standardisation, no outsourcing is our model, he says. Shrugging off the much-talked about entry barriers that businesses face in India, he says: "Expanding presence in the country has been easier, thanks to the advanced democratic Indian system, language, and openness to new formats."

On the viability of his aggressive expansion plans, he says that the company opens nearly 100 stores every year in the UK ... "I don't see any reason as to why we shouldn't be able to have a similar growth rate, if not more, in India," he argues.

So, is Parker contemplating bringing in his other brands? "Maybe later," he says, adding that for now the complete focus is on Costa in India. So upbeat is Parker about the India foray that he envisages in due course more Costa outlets in the Indian market than the 450 outlets currently operational in its UK home turf. "I hope that Costa will play its part in contributing to the great Indian growth story," he says.

The café industry seems headed for exciting times. So, what can one expect in the future? Says Bijoor: "We would notice many theme based or attitude specific cafes in the country. This could range from pop music cafes to book club orquiz club cafes. Eventually, the cafes would differentiate on the experience of branding and service. Also, the kind of community building activities that a particular café undertakes would determine its popularity in the location."

(This article was published in the Business Line print edition dated May 25, 2006)
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