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INTERVIEW

“Cafes have become the new work place”
Monday, 27 November, 2023, 08 : 00 AM [IST]
Indian coffee is evolving. There are prospects for significant growth, with the proliferation of coffee cafes across the country. The trend has been particularly prominent in urban areas and metros, said, U S Mahendar, founder director and CEO, Hatti Kaapi, in an interaction with Nandita Vijayasimha. Excerpts:

How has Hatti Kaapi fared so far since inception with your first store set up in 2009 at Gandhi Bazar, Basvanagudi?
Since the establishment of our first store in 2009 in one of the traditional hustling neighbourhoods of Bengaluru at Gandhi Bazaar in Basavanagudi, Hatti Kaapi has come a long way.

This first outlet set on 30 sq. ft was only vending south Indian filter coffee at an affordable price. This was set up to assess the pulse of the consumers and  gauge how only serving filter coffee as a standalone outlet was going to be accepted.

It was a thumping success as we were able to achieve to sell 3,000 cups a day. This was a take-off point for our expansion. Our idea was to put up a small coffee shop. But it was the information technology major Infosys that called us on to set up an outlet in its campus of  20,000 employees who became our customers, giving the brand the considerable mileage.  This was  the  turning point for Hatti Kaapi.  We became popular overnight because of the filter coffee which is a simple product which resonated with the people. Subsequently, other IT companies called on and we were able to scale-up across their campuses between 2010 and 2011. Then came our entry into the Kempegowda International Airport, Bengaluru, which was an expansion at considerable speed. This was a location where only big names set up shop. This was a catchment area for us to serve not just international and domestic passengers but their friends and relatives who came to pick them up or see them off, which was affordability with value for money. With this success story, we scaled up to airports in Hyderabad, Chennai, Kolkata, Delhi and very soon to be in Mumbai. We did not budget for marketing or promotion but had a strong presence and recall because of the quality of the product that was driven by mouth publicity.

In this competitive landscape of cafes, how easy is to attract the coffee connoisseur interest?
It is the changing lifestyles. There is a perceptible shift towards a more globalised and cosmopolitan culture. Coffee cafes provide a modern and comfortable environment to socialise, work, or relax. In this  competitive landscape of cafes, we have been able to attract customers with the sheer quality, taste and affordable cost of its offerings.

Which of the offerings are enabling you to sustain the operations?
The new launch of seven blends of coffee is on our menu. It was at the recently-concluded World Coffee Conference in Bengaluru, helped us to bring in new variants, came into existence. We have a product for the millennials which is the cold brew in a bottled format. Research surveys say that we need to target the millennials. We have reinvented the menu  with exciting offerings. We have aligned new products with filter coffee which is a core strength.

How do you see the landscape of coffee cafes stirring up the market?
The grab and go takeaway format was convenient for the customers. But now the scenario  is different. The cafes are brimming with millennials. Cafes have become the new work place. The start-ups access a café because it’s cheaper than investing in an office space with free wi-fi. The only expense is a coffee. Over all cafes are seen as convenient work spots with no timelines to exit. Hatti Kaapi too is looking at this model which may not be of the same  size and scale of big global names. We want to do smaller cafes take advantage of real estate in a central and well-connected location. From a café owner point of view they want the outlet to be full and look to woo the educated elite. This is the success formula of the cafes today. We are also trying to encash that.

How much of tech adoption is accelerating the pace of operational growth in this sector and for Hatti Kappi too?
Technology has the potential to accelerate growth opportunities. While we are a 14-year-old brand with tremendous reach, yet it is all about bandwidth. We are going to multiple cities, we are now crossing Bengaluru and the next destination is Mumbai for us. Then we are looking at Delhi among others. We will get to downtown. We are working to innovate across all the verticals. We are working to cater to the new generation with infusion coffees. To garner an online presence we are developing an app, which will give a reach pan-India enabling us to scale up easily. Hatti Kaapi is transforming digitally in terms of our business structure. We are working to create robust content by improving our SEO (Search Engine Optimisation) and enhance our presence on social media.

Has Hatti Kaapi raised funds and if so the details?
Fund raise has helped us to expand. We have Prashanth Prakash from Accel Partners as an investor in Hatti Kaapi to help us take off to the next level.

How receptive are the private equity and venture capitalists to support start-up coffee retail ventures?
With the recent entry of Tim Hortons from Canada into India, this coffee space is an interesting point in India. This country has a captive audience for coffee. Being a large tea nation, yet coffee in India is the sixth-largest producer globally of 4 lakh tonne annually. Our domestic consumption is just growing, coffee is seen as a lifestyle. Just like the concept of Chai Pe Charcha, coffee is a cup of opportunities as lot of deals come through at cafes. Venture capitalists are looking at this space and we are seeing many new entrants getting funded. All that can be said that the fraternity of coffee actually holds immense promise and is attracting investors.

How easy is it to get the qualified workforce to work for you?
India is a nation of opportunity, from Café point of view there is an attrition. Then there is no issue of unemployment. It is a myth. Especially, in the rural and semi rural regions tier 2 cities, there are a lot of college dropouts looking for jobs, which is evident from the success of workforce hiring in Swiggy and Zomato aggregators. Engineering graduates worked in stop gap events. Sustain and not depend on parents without inhibition. Mopped tables and picked soiled cups. With scope for part-timers things are changing. Single delivery basis. Job avenues have evolved and cannot go short of manpower. Willing to mop, they can run a cafe and so we stand a chance as we are sure to lay our hands on workforce willing to work.

How was the brand geared up for the World Coffee Conference to present its range?
That was so phenomenal and happening first time in Asia where Coffee Board did a great job after getting those international players. We did have a coffee conference but we celebrated coffee. The strength of Indian coffee was showcased in the World Coffee Conference. Such kind of conferences will really help the industry. Lot of people are not able to showcase their product otherwise especially the growers, it was a platform to provide exposure and experience that garnered the recognition. Global coffee makers never knew India was advanced. Coffee is so evolved in India. WCC cleared India’s false image. We made an indelible impact on overseas customers. There are enquiries to set coffee stores there. WCC has given lot of openings for new start-ups to existing exporters. For HK brilliant mileage. We were one of the best stores and created lot of impact.

How would you describe the current scene for retail coffee enterprises in India?
Café culture is solidly entrenched to have a meeting in café. This is the reason for new formats to come in. This is not global chains but from the family of coffee growing college dropouts and graduates finding it easy to start a café. That is why there is more visibility in café space today. Quality at growing level. Indin coffee is getting the good status. The ratings better. Indian speciality coffee is sold at a premium, the complete quality at the plantation level is changed. We are getting good price. Two decades ago, it was Rs 6,000 now its Rs 16,000 a bag. Which is a jump of almost three to four folds. Today it is very exicting for the grower, for planter in the community of coffee.

How much of mergers and acquisitions are relevant to this sector to achieve organic growth?
We look at mergers and look at café chains, which have got a good product and made some recall brand if they are not able to scale up. Its not just about investors but making them grow. Hatti Kaapi can look at acquiring smaller brands give a status to it. Better the best. We are open to acquire and not merger.
 
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