Coffee chains brew growth plan as demand perks up

Café chains in India are set to ride on the growing disposable income of the urban youth, who are increasingly looking for ways to spend fun time with friends.

With chains moving ahead with expansion plans, the number of cafés in the country is expected to rise to 6,200 in six years, from 3,500 now.

The chain café market, currently at ₹1,820 crore, is growing at 20 per cent in value, and constitutes 27 per cent of the overall café market of around ₹6,750 crore, according to management consultancy firm Technopak.

Cafe Coffee Day (CCD), Costa Coffee, McCafe and Starbucks are among the coffee chains operating in the country.

“The youth are increasingly looking for ways to spend fun time with friends, and coffee shops feature high on their list. Cafés are seen as a space to spend time with other people. While younger consumers view it more as a place to hang out with friends, the older ones view it as a place to relax and unwind,” Technopak has noted in a report.

Keeping this in mind, cafés across the country are increasing their revenues by expanding their food menus, adding specialty coffees, and providing quick meal options.

Branching out Expansion plans are afoot at most places. The market leader in terms of retail footprint, Cafe Coffee Day, currently has around 1,480 stores, including multiple formats, across India. The company aims to add 150 stores by 2016.

Though the penetration of international players has been increasing over the years, the agency has noted that brands such as Starbucks, Dunkin Donuts, Costa Coffee and Coffee Bean & Tea Leaf have a limited footprint focussed on metro and mini metro cities.

Starbucks, which started operations in 2012, crossed 60 stores in 2014. Realising the potential of the segment, QSR (quick service restaurant) chains also entered the fray.

McDonalds opened around 30 McCafé, and plans to set up around 50-75 McCafé restaurants by December 2015.

Product offerings Cafés have realised that the food offering is important for roping in customers, especially during offpeak hours, and are increasingly focussing on all day breakfast offerings and combos. Brands are also experimenting with offerings of food and beverages, as well as with other items such as desserts and bakery.

Coffee chains like CCD and Bru World have also introduced international coffee blends. Aztec and Ethiopian have been introduced by CCD, and Costa Rican and Colombian by Bru World Cafe to lure consumers.

The Indian restaurants market was estimated at ₹2.72 lakh crore in 2014, according to Technopak, and is projected to grow to ₹505,000 crore by 2020 at a compounded annual growth rate of around 11 per cent.

COMMENT NOW