The cafe culture in India has predominantly increased post-Covid, what initially started as an outcome of boredom has now become a trend or in certain cases for some even a status symbol. In fact, Indian cafes and bars market size is estimated to be at $17.54 billion in 2024 and is expected to reach $26.17 billion by 2029, growing at a CAGR of 8.33% during the forecast period (2024-2029), as per a report by marketing intelligence platform, Mordor Intelligence.
Interestingly, the company posted a net profit (PAT) of Rs 3.46 crore in FY23, from a net loss of Rs 7.57 crore in FY22, as per the regulatory files accessed by the business intelligence platform, Tofler. While the company’s revenue from operations increased 67.58% to Rs 84.45 crore in FY23 from Rs 50.39 crore during the same period, in the preceding year. The advertising and marketing budget of the cafe chain upped by 161% to Rs 96 lakh in FY23 from Rs 37 lakh in FY22. In a conversation with BrandWagon Online, Rajat Agrawal, CEO, Barista, spoke about his plans to expand business besides the overall growth of the coffee segment in India. (Edited Excerpts)
As per a media report, you said that Barista will double its presence to 800 outlets in the next 5 years. Which are the markets? How do you plan to achieve this? How will this affect the market shares?
We are working to double the store count over the next four to five years and are well poised in terms of taking that as an opportunity in the overall coffee segment market. The market is growing and due to this other brands are also joining the bandwagon to increase presence. Considering that the overall market size is improving, we will be able to leverage and grow our network. The idea is to increase our presence in some cities and also to look at creating a large network reach in those cities where we are not present.
We have seen a healthy momentum of growth in the non-metros as in the coming time, these towns will mature more for a large market share. We are well poised to take on some of these markets and create our network reach not only to expand the city count but also to expand the footprint into the cities where we have already expanded.
As North India has so far seen major expansion, so West and South are the focal areas for us. While North India accounts for 70% of our inventory, going forward we want to ensure that the inventory is quite balanced across regions. The idea is to reduce the dependability of 70% in order to balance the curve into different regions. So we aim to have 50% of store penetration in the North and the remaining in other parts of India.
You earned a revenue of Rs 84.45 crore in FY23, an increase of 67% from last fiscal. What percent of the revenue comes from company-owned stores and franchise stores, respectively? What is the split between different beverage categories?
The RoC filings do not show the network sales because only royalties are counted as part of our company-owned store sales. However, if you were to look at the overall network, we were at almost Rs 190 crore in revenue in FY23. This year we aim to earn revenue of Rs 240 crore from all our network and then to kind of capitalise on growth. We see an upward momentum from this number in the coming financial year.
Broadly top 15 beverages account for 75-80% of our sales. The hot sellers for us have been our old classics such as Cappuccino, Americano, Espresso and Frappe as a category. Some of the new beverages which we have launched are now taking a bit of share. We are also looking forward to replanning our menu, which happens frequently with an intent to create new beverages for our consumers.
Data shows that ad-spends have continued to increase. For instance, it increased by 161% in FY23. What is the plan for FY25?
Largely, our ad spends are on digital assets and that’s how we have been doing it for some time t because we are in a segment where most of our consumers are digital-savvy. I don’t see the trend changing in the near future and thus the major chunk of spending will continue to happen on digital media. Traditional is largely at LSM level which is very marginal.
Our returns have been healthy and have been visible in terms of our growth as well.
The footfall trends in cafes have been growing post-pandemic. Which are these markets, is it tier-1, tier-2 or tier-3 cities? What age cohort visits the cafe more? What are the factors for this growing trend?
In terms of the age group which we get most to interact with are around the age of 25 years on a more frequent basis at different places where we are available. From a growth network perspective, the growth has been pretty much agnostic to the places including non-metro cities. The expansion which we have done in the recent past has been in some of these non-metros and that is where we see a large level of traffic engaging. In many cities, we were the first coffee-shop chain to serve, which has been a welcoming change for the audience and has interacted with us. Post-Covid, the business in terms of the footfalls has increased and a large part of that share is because of our expansion that happened in the non-metros.
If you look at the new-age brands that have come up recently, these started their journeys with the large metros and the cities closer to metros. They are still in the first phase of expansion or looking at these areas for expanding the network. While we have already built a large network and we are already servicing the client in the non-metros. The network which we have created is something which will take time for these new age brands to create because the growth expansion and doing a physical placement of stores has its journey.
What is the average order value in a month? Which is your most ordered product/beverage?
For us, the average order value is around Rs 450-500 and the most ordered beverage is Cappuccino.
How much increase in revenue and profit do you expect this year?
We have already crossed the benchmark so far in FY24 and considering that FY 25 is starting soon, the idea is to grow by at least 25-30%. On that level, we have touched upon in FY24 and are positive that we will be able to grow and fit with the network pipeline we have and also from the company-owned stores.