With global exposure and changing Indian preferences, the ever increasing cafe houses in India are also transforming and providing varied offerings to their clientele By Archana Sharma
With increased income levels, favourable demographics, development of Tier II and III cities and the advent of many international chains, the cafe culture in India has been witnessing a phenomenal growth. According to ‘India Coffee Shops & Café Market Forecast & Opportunities, 2017’, the coffee shops and café market in India is expected to grow threefold and become a US$ one billion market by 2017. Café Coffee Day is the biggest player in the coffee shops and café market in India, followed by many international chains that have also opened up.
According KS Narayanan, CEO, Pan India Food Solutions, coffee consumption in India is becoming largely commercial and cafe culture, a lifestyle for the young. “Coffee culture has taken India by storm and it will continue to do so because of higher incomes and greater urbanisation. It has become a hub for corporates, teenagers, couples, artists, expats and many others,” he said. Pan India Food Solutions holds the franchise in India for US chain, Coffee Bean and Tea Leaf (CBTL) and has about 30 cafes across India, starting from major metro cities to other ones.
Expanding opportunities
With increasing global exposure, people expect a distinguished or a gourmet coffee experience, which many of the international brands are able to provide. However, even the Indian coffee house chains aren’t far behind. As per Ankur Gupta, director, Brew Berrys Hospitality, the rising per capita income, increased literacy and rapid urbanisation has caused tremendous growth and change in demand patterns for Indian café chains as well. “Brewberrys Cafés have comprehensive menu and are globalised to suit the tastes, preferences and demands of the ever growing family of Brewberrys Cafés lovers. As a result, Brewberrys has achieved better penetration rate in Tier II and III cities of India, developing a refreshed cafés culture,” he added. Brewberrys have over 50 cafes and 77 snack bars and is exclusively associated with TCS in all Passport Seva Kendra, with future intentions to reach 250 stores by the end of 2018.
Quoting a study, Gupta stated that by the end of 2015, the Indian youth segment is expected to increase to 55 per cent, a major contributor to the growth observed in the cafe houses in India. “Coffee shops served as social hubs for the youth segment, particularly those with steady, disposable incomes. And now, coffee chains offer a basic emotional need – refuge, with brands acting as a place between home and office, complementing urban development, not just for the premium segment but becoming a necessity for all,” he added.
Also with the Indian middle class consumer ready to spend more and be a part of global lifestyle and culture, coffee parlours in the country are on an expansion spree. “We have seen this trend increasingly being popular in Tier II and III cities of India. The compounded annual rate of growth is expected to be 25 per cent and will continue to grow with similar pace in the next few years,” added Gupta.
India is predominately a tea drinking country, however, Narayanan believes that tea consumption in India is more domestic than commercial. Amongst hot beverages, our cappuccino and latte are most popular with customers appreciating their signature taste and aroma. The signature ice blended drinks are exclusive to the brand as the most popular beverage,” he added.
Not just offering beverages, the Indian cafe houses also had to customise their menu according to the Indian tastes. According to Narayanan, “Apart from the Famous Chicago Cheese Cake, Mascarpone Cheese Cake, some of our high sellers include Paneer Tikka and Chicken Tikka Sandwiches, Masala Aloo Wrap and Murgh Kaali Mirch Wraps, which have been specifically customised to suit the Indian audience. We also keep evolving our menu, keeping in mind the changing preferences of the Indian clientele.” Brewberry’s also offers a menu which is a mix of Continental, Indian and local preferences. “Our focus on the snacks menu is in line with the Indian snacking habits and hence a variety of freshly prepared snacks are included in it,” informed Gupta.
Market development
Coffee consumption in India has rapidly increased over the years, with out-of-home coffee consumption in India fast growing, thereby contributing immensely to the growth of in-home consumption of coffee in the non-traditional markets. “India has cafes strategically located close to offices, colleges, high streets and shopping malls. The current generation is not looking at having plain cappuccino, their choices have evolved and they prefer having new innovative flavours like hazelnut, mocha, caramel etc. The tremendous success of our flavour of the month programme is a testimony to this evolving palate,” stated Narayanan. CBTL develops and launches around 20 to 24 new products every year, based on seasonality as beverage of the month with the innovations bringing together international flavours.
Believing in potential for street cafes for India, Gupta stated, “There is a potential for a café in every street of urban India and with such potential, the café story has just begun in India. Café culture is more about creating a meeting place for people and providing suitable ambience for people to hang out and spend quality time.” Adding to the same, Narayanan stated, “The corporates or entrepreneurs typically hold business meetings and use the coffee shop as a meeting place given the ambience and thereby frequenting a café more than a casual customer for whom coffee is an ‘impulse’ category.”
Many other international brands have also realised the potential of the Indian market, but are facing challenges while expanding further. Italian Coffee brand Lavazza sold its share of Barista Coffee Company, which it bought in 2007, to Carnation Hospitality, a subsidiary of containers and packaging firm Rollatainers, exiting the coffee shop business in India. Barista has over 170 outlets across India and now Carnation hospitality has announced to open over 500 outlets by 2020.
Other chains like British coffee retail chain, Costa Coffee entered the India market in 2005, with Devyani International, and now operate over 100 outlets across India. In 2012, the American Coffee company, Starbucks Coffee Company entered a 50:50 joint venture with Tata Global Beverages and has around 58 outlets across Mumbai, Delhi NCR, Pune, Bengaluru, Chennai and Hyderabad so far.