At a time when domestic coffee major Café Coffee Day is lining up a huge IPO to garner funds, international retailers like Costa Coffee and Barista are brewing plans to expand with fresh investments into their retail operations.
The two companies are getting ready for a comeback after having shut several outlets in the recent past. Skewed revenue to rental ratios apart from frequent management changes did not bode well for these companies. Besides, the entry of Starbucks, in 2012, took its toll on players like Costa, which had an almost similar premium positioning.
Today, both have become wiser, when it comes to choosing locations and have sharpened their business models to focus on profitability.
Ashish Chanana, COO, Costa Coffee, said: “We had taken a call on our non-performing assets last year and had shut down 20 stores. In the last six months, we have become EBITA positive, but more than chasing numbers, we want to get it right this time with new assets which will drive profitability.”
While Barista, with its new owner Carnation Hospitality is adding 60 new stores this year with an investment of ₹30 crore, Costa Coffee through its franchise Devyani International intends spending ₹25 crore to increase by another 20 stores.
The UK-based Costa Coffee with sales turnover of ₹115 crore and 86 stores, expects to add another 15-20 stores this financial year. “Now each store has a monthly turnover of almost ₹5.5 crore with a reasonable bottom line which is about 10 per cent of the turnover,’’ claims Chanana.
Having undergone several ownership changes, Italian brand Barista is also getting back on track.
“Barista will see a re-birth as the brand will give a new store experience which should increase footfalls and revenues. But real estate will continue to be a challenge for which we will try to reduce input costs by sourcing the coffee beans locally and added efforts on merchandising,’’ said a member of the new Barista management.
Both Costa and Barista had earlier scaled up their operations just before the entry of the largest international retailer, Starbucks, in 2012.