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"For us, real estate & manpower are major challenges"
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Monday, 14 April, 2014, 08 : 00 AM [IST]
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fiogf49gjkf0d  Costa Coffee entered India in September 2005 through an exclusive master franchisee tie-up with Devyani International Ltd, making it the first international coffee chain to start operations in India. It currently operates over 100 outlets across India.
In an e-mail interaction with Anurag More, Virag Joshi, president and chief executive officer, Devyani International Pvt Ltd, spoke about the coffee chain business in North India and the challenges faced by the sector. Excerpts:
How big is the coffee chain business in North India? Which are the key players or brands in the North?
The overall coffee chain market in India has seen a blistering pace of growth over the last few years. Around 200 cafes are being added per annum for the last five years. The market is estimated to be worth Rs 1,000 crore and growing at around 30 per cent.
No credible region-specific market size data can be quoted, but one could estimate that North India’s share would be between 30 and 40 per cent of the overall market.
Besides Costa, the key players in the North are Café Coffee Day, Barista Lavazza and Starbucks India.
What are the challenges faced by players in the region, and how are the players coping with them?
There are two major challenges for us - real estate with paucity of appropriate spaces and high rentals and the lack of trained manpower.
While real estate is a constant struggle for retail brands across sectors, we at DIL have leveraged our greater bargaining power, since we have a clutch of marquee brands like KFC, Pizza Hut and Costa Coffee, besides our home-grown brand Vaango.
On the manpower front, we have invested in training modules that are stringent and effective in quickly turning out trained store staff.
We are also focussing on novel initiatives like hiring differently-abled. Devyani
International Ltd was the first to introduce this initiative in 2007. Some other brands have adopted this over the last few years.
Our special employees are extremely efficient, and as an equal-opportunity employer, we give them the same benefits, besides additional support and training.
The attrition level among them is very low. Today, we have over 100 such employees across our outlets, and over the next one or two years, we aim to have at least one or two such employees at every Costa outlet.
What trends are you witnessing in this region?
India has emerged as one of the most-favoured destinations for coffee shops. With the Indian middle class consumer ready to spend more to be a part of the global lifestyle and culture, coffee shops have fast become the preferred hang-out zone for the youth, and the first choice for a meeting place for both business and personal purposes.
While India still remains a predominantly tea-drinking nation, coffee has made major inroads. As per market estimates, the consumption of coffee has more than doubled over the last decade.
There are today around 1,600-1,700 outlets across 40 cities, and these cities alone can accommodate another 2,000 cafes in the next few years. This gives a good idea of the potential for coffee chains in the country.
The dramatic rise of coffee houses, therefore, not only highlights a shift in taste, but a cultural shift as well, where young affluent Indians are more interested in global trends than ever before.
Moreover, out-of home consumption has also played an important role in increasing in-home consumption of coffee, as larger sections of the population are exposed to the beverage in cafes.
Brief us about your expansion plans.
We intend to add about 30 stores every year over the next few years. The strategy is to be in the right place at the right time.
The outlook for the café outlet market in India seems very promising, as the overall consumer spending is increasing in the country.
Rising per capita income, favourable demographics, increased literacy, and rapid urbanisation have caused a rapid growth and change in demand patterns.
The availability of more disposable income is driving consumers to experience high-end products. Cafes are today the preferred hangout for urban youth.
Any plans to introduce new products?
Costa introduces new beverages and food items when the season changes and on special occasions.
To give an example, we have recently introduced Hunger Wraps, in Delhi and the National Capital Region (NCR) and Mumbai, and will soon launch it in all geographies of presence.
Hunger Wraps are available in vegetarian as well as non-vegetarian variants. The vegetarians can enjoy Spicy Potato Wrap, Cheesy Mix Veg Wrap and Roasted Paneer Wrap, while the non-vegetarians can choose from Chicken Tikka Wrap and Mutton Seekh Wrap.
These wraps promise the freshest stuffing tossed with mouth-watering sauces. They are all served with three different dips and wafers.
The new range of wraps can be enjoyed as a quick bite or a meal. For the upcoming summer, we have a brand new range of cold beverages called Costa Ice.
What differentiates your offerings from those of the competitors?
Costa prides itself on its quality, hand crafted coffee made by our expert baristas. Our Mocha Italia blend, with its rich aroma and smooth taste, has made our coffees and coffee-based beverages popular among our customer base.
A recent survey by the United Kingdom-based Right Choice magazine has rated Costa’s Cappuccino as the number one in India.
Along with our beverages, Costa offers a superior range of savouries and desserts to appeal to diverse taste buds.
What is various technologies used by you for production? Is the machinery and equipment made in India, or imported from other countries? If imported, from which countries?
Costa’s proprietary coffee machine, Estoria, comes in different models. It is at the heart of our business, and these are imported from Italy.
Tell us about the research and development (R&D) that goes into your products. Is there anything new you would be launching for the current year?
In India, we have food development team that works closely with Costa UK to develop foods and beverages that suits the Indian palate.
We introduce our international bestsellers as well as locally-developed products in equal measure.
A recent example of a locally-developed product is our wide range of Hunger Wraps, which have got a big thumbs up from our customers.
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