Enkay group brews a new business–Craze coffee bars

Pummy Kaul in New Delhi

The coffee shop concept has bitten one more homegrown company even as big food giants such as Hindustan Lever Ltd and Starbucks are waiting in the wings to enter the nascent but fast-growing coffee retailing industry.

The latest to enter the industry is the Delhi-based Rs 300-crore Enkay Group of Companies (privately-held) which has diverse interests in real estate, finance, tours & travels, restaurants and publishing. The group is now diversifying further into the hospitality business with plans to tap the coffee retail chain market with a chain of coffee shops under the brand name—Craze.

The Coffee retail market’s growth notwithstanding, Enkay’s diversification plans are primarily driven by the recession and slowdown symptoms it is facing in its core areas such as real estate and finance. Admits Mr Pavan Kohli, director, Enkay Coffee Shop Pvt Ltd, ‘‘Food industry, by and large, is not prone to recession and requires less investment. And the coffee chain concept, of late, is catching up fast.’’ However, he added, real estate will continue to be the prime revenue driver for its group.

The company has already floated a new company for the purpose called Enkay Coffee shop Pvt Ltd and plans to open 20 Crazy coffee cafes—each with an investment of about Rs 30 lakh—in Delhi and the NCR region within the coming 12 months. Of these, six cafes located at PVR (Naraina), Connaught Place, East of Kailash, Lajpat Nagar, Rajouri Garden and Gurgoan— each about 250 sq ft-1300 sq ft—will become operational in the next three months.

Mr Kohli is targeting footfalls of 250 people in an area like Lajpat Nagar where the company is opening its first outlet next week and hopes to break even in the next six months. In a year’s time, after gauging the market response, Enkay may consider expanding to other metros.

Positioned as ‘Craze...not just coffee’, the coffee chain is being pitched as a fusion of the Coffee bar concept and continental, Italian and Mughlai food platter and therefore, says Mr Kohli, it does not directly compete with Baristas and Qwikys. The company, however, plans to attract footfalls into its outlets through its aggressive pricing strategy: all the fare is priced 25 to 30 per cent cheaper than Barista. The chain’s beverage partner is Coca-Cola, and the coffee
machines are being imported from La Cimbali of Italy.

While most of the Craze outlets are going to be company-owned, Mr Kohli however, is not ruling out the franchisee option altogether. ‘‘By taking the company-owned route, we have better control over our resources, our investments, training of our people and above all, quality of the end product. In short, we want to have total control over the business,’’ says Mr Kohli.

‘‘We may eventually go for the franchisee mode once we establish our business,’’ continues Mr Kohli. ‘‘As I see it, in a country like India, where the concept of F&B (foods & beverages) franchising is yet to evolve and mature, the franchisee route does not seem to work well.’’
One of its key investment, says Mr Kohli, and one which will eventually set it apart is its centralised kitchen which will cater to all its 20 outlets in Delhi. ‘‘We believe that though outsourcing is a easy way out, it’s not the best way in the long run. Any company which is dependent for growth, service and efficiency on a third party and delegates it without proper inputs and training, is bound to flounder. At Craze, we opted for the more difficult route,’’ says Mr Kohli.

Just two years into existence, the coffee retail industry was pioneered by Qwiky’s owned by NRI Mr Shashi Chimala. A host of other coffee pubs followed: Barista of the Java Coffee Co., Bangalore-based Cafe Coffee Day and Nestle’s Cafe Nescafe to name a few.

Barista, undoubtedly, has been the biggest success story with no less than Tata Coffee picking up a 32.5 per cent stake in the company at Rs 26 crore. Others have elaborate plans too and even HLL and Starbucks are rumoured to be eyeing the market.