Recently when a young author was contacted for a photo shoot by a magazine soon after her book launch, the author promptly said she wanted to be shot at a coffee shop near her place where she spent considerable time writing the book. Similarly, celebrity fitness trainer Rujuta Diwekar, who helped actress Kareena Kapoor achieve that much-hyped size zero figure, spent a lot of time at a Costa Coffee outlet sipping low-cal coffee when she was writing her book, Don?t lose your mind, lose your weight.

Whether it?s catching up with friends or just galvanising after college, finishing that office presentation or grabbing a quick bite, it?s the ubiquitous coffee shop where mall visitors and urban newbies are increasingly spending time in. The cafe culture has gradually, but prominently crept in and the branded coffee players are piggybacking on the trend. The recent announcement by Starbucks to enter the Indian market only underlines the fact that the Indian coffee market is hot and all international players want to cash in on it.

Home-grown player Cafe Coffee Day, which is already more than 1,000-outlets strong, wants to double its count by 2014. By the end of this year itself, it will be adding around 30 more stores. Barista, which was acquired by Italian coffee roaster Lavazza in 2007, opened 45 stores last year and plans to add the same number of outlets every year for at least in the next two to three years.

Similarly, UK-based Costa Coffee, which already operates 70 stores will add 50 stores by the end of 2011. Another international player Gloria Jeans Coffee will be adding an estimated 25 units this year and around 250 by 2012. Similarly, The Coffee Bean & Tea Leaf, which currently has 13 outlets, will be adding four more outlets this quarter and another ten next year.

The macro numbers are appetising, too. The coffee chain market in India, at 6.5% of the total coffee retail market, is valued at R 400 crore, according to retail consultancy Technopak. The cafe market in India is growing at 30% per annum. It is no wonder that Howard Schultz, president and CEO of Starbucks, is on record saying that India is one of the most dynamic markets in the world and has a great potential.

Not Just Coffee

However, more than numbers, what is grabbing the attention of coffee players is the fact that the Indian demography is tilted towards a younger population. Thanks to a growing eating-out trend coupled with increasing disposable incomes, these cafes have become regular hangout zones. ?Unlike a QSR (quick service restaurant) brand, a coffee house is more about being a neighborhood joint,? says Manish Tandon, president, Citymax Hospitality. Citymax is the master franchisee of Gloria Jeans Coffee in India.

Cafe Coffee Day?s marketing president Ramakrishnan K adds, ?Cafe culture always had its roots in India. It?s just that the presentation and marketing were lacking. Today, people don?t want to travel to a destination to hang out. They want a nearby place where they can just spend time.? And that is exactly what coffee chains are doing. Opening a shop at neighbourhood malls, residential areas, campuses and even hospitals.

Interestingly, the barista at branded coffee shops are not just whipping coffee, but a lot more. It started innocently with sandwiches and knick knacks to accompany coffee, but as players scramble to expand their offering, the menus have become elaborate.

Cafe Coffee Day, for instance, recently launched its lounge format and added meal items such as biryani, paranthas and pastas to its menu. Similarly, Gloria Jeans Coffee will be expanding its menu too, and is in the process of rolling it out across outlets. ?It is about addressing the consumer needs. As a coffee shop gets frequented, customers ask for more and even want lunch and dinner options,? says Tandon.

Vinay Gopinath, head-marketing and sales of The Coffee Bean & Tea Leaf, says, it?s really about getting more from a customer rather than giving it to him. ?For an outlet to be profitable, you need to offer big ticket items to the consumer so that he spends and that?s where the ?food? comes in,? he says. Coffee players are constantly innovating to bring back the old and get a new set of customers. For instance, Barista recently launched its membership and gift card Bean ?O? Holic, offering cash back and rewards. For most coffee players, their target group is between 25-35 years and their business strategies revolve around this core group of young professionals.

Room for Growth

As per estimates, annual per capita coffee consumption in India is a meagre 85 gm compared to 6 kg in the US and in some countries like Austria, it is as high as 10 kg. Similarly, an industry head points out that there are around 1,400 coffee outlets in the country at present and easily there is a market for 5,000 more outlets. It?s a little wonder then that everybody wants to be in India to tap this opportunity.

After announcing its intention of entering the Indian market around four years ago, Starbucks finally signed an MoU with Tata Coffee Limited in January this year. The announcement has stirred the market, even though most players are positive that an iconic player like Starbucks entering the market will not only give coffee lovers more choice, but it will expand the market too. Most players say they face competition from Starbucks in other markets too, so the India foray won?t really impact their business. ?We are accustomed to such kind of competition. It?s good for the market and for consumers, who can now make a choice. It will help coffee become more popular,? says R Shivashankar, director, South Asia, Lavazza.

Gopinath of The Coffee Bean and Tea Leaf points out that Starbucks entry will not only expand the market, but will also lead to segmentation of the market. While some players will fall under the premium category, others will be more like mass brands. In fact, a close look at the current scenario reveals that that segmentation is already happening. While Cafe Coffee Day with its strong presence is like a mass brand, Costa Coffee targets working class and not college goers.

Following closely on the heels of Starbucks is Dunkin? Donuts, one of the biggest competitors of Starbucks. The doughnuts and coffee player is also brewing plans to enter India through franchisee route.

Besides, there is room for growth in tier two and tier three cities too, say experts. But for now, players are busy saturating the metros. ?In tier-2 cities, the demand is huge. Since there are supply constraints right now, going to tier-2 cities requires huge commitment from any player,? says Ramakrishnan of Cafe Coffee Day.

But how far will the aroma of coffee spread remain in the hands of real estate as their cost surge is yet to be seen. For now, players are busy tapping the potential, notwithstanding high costs.