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Wednesday, February 13, 2008

Caffeine addiction will soon be the new high

Coffee bars will soon be the hot new dating spots, what with international chains like Costa and Starbucks gearing to come into India. UK's Costa will be the first one in, and is going to open its first store in New Delhi. While Starbucks is finalising a franchisee partner.
Thailand-based Coffee World owned by GFA is also set to tantalise tastebuds. So, homegrown brands like Barista, Qwiky's and Cafe Coffee Day have perked up and are on an expansion drive.

A private study says there is potential for five-fold growth in coffee outlets over the next two years. CEO of Barista, Partha Dattagupta told CNBC-TV18, "Maybe 60% of the outlets that we plan to start this year would go into saturation in existing markets. The balance 40% will necessarily take us into new grounds. Gor example, in the West (India), today we are not present in markets like Goa, Surat, Indore or Bhopal, which are on our radar."

Each chain is looking at anything between 30 to 300 outlets across the country and are going to adopt different retail, marketing and positioning strategies. Starbucks expects to hardsell its brand of coffees at a slight premium, while Costa plans to play on price points - taking the competition straight into Barista and Cafe Coffee Day's turf. A franchisee for Costa Coffee, Ravi Jalpuria explains, "Price-wise we are lookng at what's affordable and what people in India can afford."

But most chains still don't have enough of a national presence or high enough margins to justify mass media advertising. Instead, they are relying on in-store cross-brand promotions, film tie-ups, merchandising and live bands that have helped spread the word.

Some like Coffee World has even signed on a brand ambassador. CEO of Coffee World, Anoop Sequeira, "Considering the fact that we are late entrants in India, we certainly had to speak out and to a large extent, the brand, the product and the quality of your service will speak out to the consumer. But, at times, you want to pick up a faster pace of communication, that's where an endorsement fits in and that's why we looked at Esha Deol."

Meanwhile, local players don't want to be caught napping, so, Barista has launched a lounge under a sub-brand called Barista Creme that targets premium customers. Others, like Mocha and Cafe Coffee Day have also introduced coffee lounge formats. Barista is also said to be working on a takeaway model called 'Coffee on Wheels'. The increased competition could also see some local players sell out to larger, global entrants.

Both, Starbucks and Costa have deep pockets and are already on a poaching spree, with Barista's marketing head moving to Costa. This will also ensure better levels of service because Starbucks spends almost 2% of its revenue on employee training. So, Indian coffee chains will need to put similar training models in place to keep customers coming back for more.

Written for moneycontrol.com

PS: When this story was written, none of the foreign brands were in the country yet. Since then, Costa has opened shop at Juhu, Mumbai. Here's looking forward to the rest coming in and preferably in locations across South Mumbai as well. After all, I'm all in favour of gourmet coffees but not at the expense of sitting in traffic for 2 hours to get to enjoy it...all the way in the suburbs!

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