Australia’s Di Bella Coffee has floated a 70:30 joint venture (JV) company in which the Indian partner, Mr Sachin Sabharwal will have a majority stake. The India-born Australian entrepreneur has picked up 70 per cent stake in Di Bella Coffee India while the balance will be held by the parent company in Australia. Unlike most international coffee chains that have entered the country through a master franchise arrangement, Di Bella Coffee has opted to float a JV with a local partner.

Speaking to Business Line , Mr. Phillip Di Bella, Chairman, Di Bella Coffee, said, “Instead of the Indian company paying us a royalty, we took equity in the company, as we believe in being here for the long term. The brand will continue to be owned by the Australia-based parent company, while the Indian partner will have the responsibility of growing the business.”

The only other coffee chain to have forged a JV in India is Starbucks (an equal JV with the Tatas).

Going forward, Di Bella’s Indian partner is expected to appoint franchisees to build the business with 50 stores in the next three years and also break even during the same time period.

Local understanding

“It makes sense to forge a JV as the local partner understands the market. The majority of the financial risk will rest with him as he has a 70 per cent stake in the business,” added Mr Di Bella.

In fact, Di Bella coffee has engaged in a similar business model in China as well where it has a JV with a local partner. “We entered China in 2010, but we feel that India is going to be our second biggest market outside Australia as there are more drinkers here than in China,” added Mr Di Bella.

Having set up its first outlet in Mumbai early this year, currently the coffee chain is restricted to the city with seven outlets. The JV company in India would operate on three different verticals. While retail (through the coffee outlets) would form nearly 70 per cent of the business, wholesale (20 per cent) and online sales (10 per cent) would comprise the rest.

Online business

Mr Sachin Sabharwal, Managing Director, Di Bella Coffee, said, “We would also be selling our coffees to high-end hotels and restaurants as part of the wholesale operations. The online business would start towards the later part of the year as we are waiting to have enough number of stores which can deliver the coffee.” The company is also planning to take up space at showrooms selling premium cars and bikes. It is currently in talks to set up a 1,000 sq ft coffee outlet at the Harley Davidson showroom in Hyderabad.

In India, Di Bella coffee is positioned at the premium end of the coffee retail business and has competitors such as UK’s Costa Coffee and Gloria Jeans Coffee. Launched in 2002, Di Bella Coffee is a family-run business. It has 1,200 wholesale and retail outlets globally and serves 2.2 million cups of coffee a week.

purvita@thehindu.co.in

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