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The brewing business of coffee parlours in India

Coffee parlours are flourishing in urban India - not just for their aromatic beans and casual ambience, but also for the global lifestyle and culture they endorse. And the global players are avidly eyeing the Indian market. According to a global retail consultancy firm, Technopak Advisors, the organised coffee retail business in India is over Rs.8 billion ($17 million), and the potential for coffee retail outlets is 3,000. The retail brands, however, say the figure is between 4,000 and 5,000. Arvind Singhal, chairman of Technopak Advisors, told IANS: 'In the organised segment there are three major players - Barista, CafA Coffee Day and Costa Coffee. A few others are beginning to grow and India has a huge potential for retail outlets.' The good news also is that coffee consumption on the rise. According to industry sources, coffee consumption has shot up from 55,000 tonnes to 80,000 tonnes since the liberalisation of the economy in 1991. Sudipta Sengupta, marketing head of CafA Coffee Day, said: 'It is on the rise and with niche coffee parlours coming in, the figure is only likely to go up.' With the Indian middleclass ready to spend more and be a part of global lifestyle and culture, coffee parlours in the country are on an expansion spree. 'Between 2003 and 2005, domestic consumption went up by seven percent per annum and this has come after a long spell of stagnancy,' said Barista chief Partha Dattagupta. 'The company plans to invest Rs.400 million in expansion. By the end of this financial year we plan to open 100 outlets and expand to at least 40 cities.' Likewise, CafA Coffee Day, promoted by Amalgamated Bean Trading Company, plans to open 500 cafes by June 2007. Britain's Costa Coffee, promoted in India by the Rs.12 billion Ravi Jaipuria group's Devyani International, also plans to invest Rs.1.5 billion in the next four years. 'By 2010 we are confident of opening 290 outlets and we expect our growth to be much faster in the coming years,' said Virag Joshi, chief executive of Devyani International. Competition is going to get fierce with international retail brands Starbucks, Gloria Jeans, Berries Coffee eyeing India - even though they have not been able to fix the pricing. However, almost unanimously, the Indian retail brands say there is enough space for all. 'There is enough space for all of us. We have already carved a niche for ourselves, so we do not need to worry,' Sengupta stressed. 'At Barista we have factored in the entry of big players in our strategic plans. The arrival of international players like Starbucks will stimulate growth in the coffee and hangout culture,' Duttagupta said.

Technopak also believes that the impact on current players will actually be positive since the overall market will expand, and with a likely premium pricing and positioning of Starbucks, the current players will get a good 'price shelter'.

Since 2004 some new names have also come up with the mushrooming of the glittering shopping malls and cineplexes. One such player is Craze Coffee promoted by real estate firm Enkay Group. Pawan Kohli, director of Craze Coffee, said, 'We plan to expand to 20 new outlets by the end of this financial year from the present 13.' Tata Coffee Limited, after selling its stake in Barista, has opened up Mr Bean Coffee Junction in Kochi, Kerala, to understand the market. Others like Cha Bar, Coffee World and Passion have also jumped on the bandwagon. So why are the masses actually flocking to coffee parlours given the fact that India is primarily a tea-consuming nation? Said Joshi of Costa Coffee: 'This has changed over the last three-four years. We have seen the emergence of coffee as the lifestyle choice of the new generation.' Puja Talwar, 24, a civil service aspirant, said: 'These are cool places to hang out with family and friends. One can eat, read good books and listen to one's favourite music.' The coffee parlours, however, are aiming to provide not just that favourite cuppa. Also on offer is a huge range of lip-smacking snacks to complement a cappuccino or an iced mocha. 'Sixty percent of our business comes from food,' said Sengupta. Technopak's Singhal believes 'the business objective is about increasing the average bill size. Only coffee will make the entire business model financially unviable'. Indo-Asian News Service

http://timesofindia.indiatimes.com/business/india-business/Freshly-brewed-Premium-segmentfuels-tea-coffee-growth/articleshow/11029877.cms Freshly brewed: Premium segment fuels tea, coffee growth

MUMBAI: Like many other consumer goods categories, the premium segment is clearly driving the growth of the Indian tea and coffee market as well. According to market research agency IMRB, the premium segment in tea grew faster in terms of reach and volume compared to non-premium tea this year even as instant coffee pushed the growth in the coffee market. Considering a category like tea, which has almost a hundred per cent penetration in India, consumers are now increasingly opting for value-added, flavoured offerings. The IMRB data said premium tea grew 11% in terms of volume as opposed to a 4% growth clocked by the nonpremium segment during the January-October period this year compared to the corresponding period last year. On the other hand, instant coffee which is higher priced compared to conventional coffee, grew its volume by 9%. And as consumers upgraded, the volume of unbranded tea declined by 2% while the strong hold of regional players only increased. "We are seeing that consumers are looking to experiment more with their daily cup of tea. This is where the value-added offerings are being lapped up by people. Tea bags have become commonplace today and niche brands are gaining traction. Expansion in the tea category is clearly coming from this segment," said Damodar Mall, director, food strategy at Future Group, which runs the Big Bazaar stores. The growth in the tea market is being led by the bigger pack sizes unlike the instant coffee space which is largely dominated by the low unit packs. Premium tea penetration is still at 20% currently in India of an estimated Rs 8,000 crore market. In the tea category, local brands have continued to rule the roost as they cornered another percentage point and stood at 38% of the overall market. "Regional brands are competing well as their overheads/expenses are less compared to the national brands," said Piyush Desai, chairman & MD of Wagh Bakri, a strong regional player in the Indian tea market. Hindustan Unilever (HUL) and Tata Global Beverages (TGB), which are the two national players in the tea market, are losing ground to regional players like Wagh Bakri. According to a recent research report by SBICAP Securities, "Local tea manufacturers like Wagh Bakri and Warren Tea in the hinterlands of India are better able to gauge the demand and cater to the regional taste more effectively than national players like TBG and HUL. Increasing distribution reach in the rural markets is becoming more expensive than in urban markets due to accessibility. Over the past two years, TGB and HUL have both lost 0.5% market share to smaller regional players." HUL's Bru emerged as the single largest penetrated brand in the instant coffee market with a 10% reach driven by its growth in the household reach. Nescafe had a reach of 5% with its volumes growing at 14%

during this year, according to IMRB. "The volumes in the premium segment are going up in both tea and coffee as consumers are not restraining from upgrading despite the talk of the slowdown. Instant coffee is growing very well as the in-home consumption reach has now gone up to 16% with a healthy growth rate of 7%," said Manoj Menon, group business director at IMRB International. HUL and TGB comprise 40% of the total consumption in India, while they handle 20% of the total tea volumes from the plantations. They sell at higher prices compared to bulk tea sold at auctions due to branding, packaging and distribution. While HUL has premium brands like Brooke Bond Lipton, TGB, an integrated beverage company, has evolved from a tea plantations company to marketing and brand focused organisation. The company has a strong portfolio of global and regional consumer brands like Tata Tea, Tetley, Eight O'Clock Coffee (EOC), Good Earth, Jemca, Grand, Vitax and Himalayan. GROWTH SIP TEA (ALL INDIA URBAN + RURAL) Tea volume grows by 5% Premium segment grew its reach by 8% Growth driven by large packs Local brands have the highest share in the category at 38% (share grows by 1%) Unbranded tea has 33% volume share-down 2% COFFEE (ALL INDIA URBAN + RURAL) Instant coffee driving the growth for coffee category Instant coffee has an in-home reach of 16% - growing by 7% Conventional (ground) coffee is stagnant in terms of reach For Bru, growth is coming from smaller packs but for Nescafe large packs are driving the growth Almost 87% of instant coffee volumes are from South alone Period: Jan-Oct '11 vs Jan-Oct '10 Source: IMRB