Costa Coffee is amongst the largest café chains globally besides being an early entrant to India. How has the brand grown over the years?
Costa Coffee, founded in 1971 by Italian brothers Sergio and Bruno, is today the largest café chain in the U.K. and with operations in 28 countries it is the second-largest café chain in the world. Costa Coffee entered India in September 2005 with the opening of its first outlet in New Delhi. Since its launch, Costa Coffee has set new benchmarks in coffee retailing in the country. Over the last few years, Costa has created a distinct image for itself with its great coffee and food, friendly and efficient service and stylish and relaxing surroundings. Currently, Costa operates 95 cafés in India spread over Delhi-NCR, Jaipur, Agra, Mumbai, Bangalore and Pune.

What’s the USP of Costa Coffee compared to other biggies like Café Coffee Day, and Barista Lavazza?

While we may be smaller in terms of number of stores, we are the preferred coffee brand in the locations and cities we are present in. We were the first chain to offer an international brand experience in the coffee chain sector in India and enjoy the international brand recall and image advantage. Our coffee, we believe, is a great differentiator. Costa’s hand-crafted coffee, extracted from the Mocha-Italia blend, is today the preferred taste among coffee lovers around the world. A blind taste research conducted in the U.K. last year revealed that 7 out of 10 customers in the U.K. preferred the Costa Cappuccino over the other two leading brands. The other area of differentiation is that we offer the best-in-class range of café food in the country today. While being within the broad contours of Western café cuisine, our range of food is localized to suit the Indian taste profile.

With fewer stores than CCD or Barista, and hardly much marketing, how do you hope to beat the competition?

The coffee chain business is all about maintaining the brand standards, which in our case is very well defined and we deliver these values consistently. Costa’s coffee experience is based on delivering the perfect espresso-based drink combined with great coffee shop food served in a comfortable and chic environment. As long as we continue delivering to this statement, it will always keep us ahead of competition.

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Source : IIPM Editorial, 2012

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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The cafe market in India is turning both febrile and frothy as big guns like Starbucks prepare to move in for their operational launch and existing players position themselves for a landgrab market opportunity.

India is still by and large a country of tea-swilling limeys but the trend towards reaching out for that morning cup of joe is fast catching fire. So, even as North India tightly holds on to its tea bags, the South loves to measure its daily drone with coffee spoons. Statistics reveal that the tea to coffee consumption in India is still 7:1, but Java drinkers are fast making up for the lost opportunity. Still, India is not a major coffee consumption market even though it is the world’s sixth-largest producer and fifth-largest exporter of coffee, exporting roughly 5% or close to six million bags in 2010-11 fiscal. India’s annual coffee output is over 300,000 tonnes, only a third of which is consumed domestically. Over 90% of the coffee production takes place in the developing countries while consumption happens mainly in the industrialised economies.

But of late, India seems to be turning the corner in terms of coffee consumption. “Over the past few years coffee has transitioned from being a traditional beverage consumed mainly in South India to a beverage with a national presence, consumed in several forms and retail formats," says Jawaid Akhtar, Chairman, Coffee Board of India. According to the figures given out by the Coffee Board, coffee consumption has grown in the non-south regions at 42% annually while it has grown at 3.5% per annum in the southern states between 2003 and 2008. With the emergence of an aspirational and young middle class who are more cued in to international tastes, coffee café culture is slowly but steadily picking up in the country. Today, cafés are opening up across all urban centres and coffes joints are fast becoming modern, more suave renditions of speakeasies where the urban educated youth loves to hang and schmooze around and spill the beans on current happenings and events.

Currently, India has roughly 1,800 cafés across major cities, with Café Coffee Day – which opened its first branded coffee outlet in Bangalore way back in 1997 – leading the race with over 1,200 cafés. But with the entry of Lavazza in 2007, Costa Coffee in 2005, and now the impending arrival of Starbucks (in partnership with Tata Coffee) – the gold standard of café culture worldwide with 50 cafés planned for launch by the end of this year – the Indian coffee landscape is bracing up for greater competition where consumers will have a more liberating choice when ordering their invigorating shot of espresso. Even fringe players like Australia’s Gloria Jeans and Dunkin’ Donuts have entered the market and a few more are expected to dip their toes in the swelling tide of the café boom spreading across India.

The bloom in cafés has resulted in the branded café market reaching an inflection point. Coffee-shop sales have now touched $180 million, out of the country's annual coffee sales of about $667 million. Though still small, the branded café market is growing at 25%, and analysts predict it has the potential to reach $800 million, and to 5,000 cafés by 2015. As per capita coffee consumption in India is just over 60 grams, compared with 4.5 kilograms in France and Japan, and 6 kg in Italy and the U.S., coffee retailers undertandably see a huge growth potential and revenue upside in the days ahead.
 
T. Radhakrishnan, Vice President of Tata Coffee, says, “Being the largest Indian coffee producer, we will fulfill Starbuck’s sourcing needs, and help them with insights on the market…going by Starbucks reputation, they will be a big force to reckon with in India, and revolutionise the café market here with their global standards and product offerings.” Starbucks is looking to create different entry-points for different demographics and apart from coffee it plans to whip up a smorgasbord of cuisine for Indian palates. The company is aiming for cafés at Tata hotels, and retail outlets in New Delhi and Mumbai with an initial investment of roughly $80 million. In the course of time Starbucks will move its cafés to malls, railway stations, airports and offices.

Starbucks' operations in India is bound to raise the coffee temperature in the Indian market and could nibble away the business of another premium player in the market, Costa Coffee, which currently runs 95 cafés spread over Delhi-NCR, Jaipur, Agra, Mumbai, Bangalore and Pune. Says Santhosh Unni, CEO of Costa Coffee India: "Competitors like Starbucks are not new to us. We compete with them successfully in most of the countries we operate in.” To maintain its premium product differentiation, Costa Coffee offers a range of café food (localised to suit Indian tastes) along with its trademark handcrafted Mocha-Italia coffee blend. Clearly, the premium coffee café space will be an interesting space to watch out for as the two global biggies battle for supremacy in the Indian market. According to Unni, “The biggest challenge facing us today is the relatively small size of the café market. India being a large country with growing income levels and spending can easily accommodate three to four large coffee retailers with pan-India footprint."

For more articles, Click on IIPM Article

Source : IIPM Editorial, 2012

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

IIPM ranked No 1 B-School in India
domain-b.com : IIPM ranked ahead of IIMs
IIPM: Management Education India
Prof. Rajita Chaudhuri's Website
IIPM in sync with the best of the business world.......
Arindam Chaudhuri on Internet.....
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
Planman Technologies
IIPM Contact Info

IIPM History
IIPM Think Tank
IIPM Infrastructure
IIPM Info

IIPM: Selection Process
IIPM: Research and Publications
IIPM MBA Institute India
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