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Ranjan Paul.
Founder ʹ Square Melon Consulting

Coffee retailing in India was always associated with stimulating and intellectual conversation.
However, the conversations and prices were more stimulating than the brew itself. ͚Coffee
House͛ as the retail outlets of the Coffee Board of India were called, had a dedicated clientele
specially among the student community from colleges and universities as well as a handful of
people who would return to these outlets to relieve and share a bonhomie that existed among
friends in days gone by.

In the recent past, some of these coffee houses are struggling to keep themselves afloat
amongst a dwindling and ageing customer group. They do not attract the newer and younger
customers because this generation does not find the ͚coffee and conversation͛ stimulating
enough.

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Started by the Coffee Board in the early 1940͛s, the Indian Coffee House chain of stores was
pioneers in promoting the coffee culture in India. The Coffee Board opened several stores in
different cities throughout India. But due to a policy change, the Board decided to shut down
the stores and dismissed a large number of its employees sometimes in the mid 1950s. At that
point, Ayillyath Kuttiari Gopalan Nambiar, a well known communist leader took over and
decided to organize the ͚Indian Coffee Board Worker͛s Co-Operative Society͛ in different states.

The dedication and hard work of some of the terminated employees led to the formation of the
first such co-operative in Bangalore in 1957 followed by Delhi in the same year. A number of
such co-operatives were established in different states and operations of the Indian Coffee
House are still run by these co-operatives. Currently, these co-operatives run close to 400 such
stores with the largest number located in the traditional coffee drinking southern part of the
country.
The Coffee Houses at different locations became famous not so much for the skills of the
baristas, but due to the famous and not so famous personalities that frequented these outlets. 


   

ccOne of the first organized players to enter this dormant and culturally restricted
geography in 1996 was Amalgamated Bean Coffee Trading Company͛s (ABC) Café Coffee Day.
What started off as an internet café with coffee on the side, has now become one of the largest
chains of coffee shops in India. With a total of 1016 outlets, CCD has grown beyond the India
and has outlets in several cities across the globe.

According to the company͛s website, CCD has ͙͞ Asia͛s second-largest network of coffee
estates (10,500 acres) and 11,000 small growers, Coffee Day has a rich and abundant source of
coffee. This coffee goes all over the world to clients across the USA, Europe and Japan, making
us one of the top coffee exporters in the country͟.

Overcoming its slow start and unclear positioning in the early days, CCD has grown faster than
any of its competitors. It͛s clear positioning and precise targeting has helped this chain of stores
to open 1016 company owned outlets in India and across global cities.


 
The Amit Judge promoted Barista, now Barista Lavaza, gave up its early lead in coffee
retailing in India to CCD due to its frequent ownership changes and therefore the consequent
changes in its policy and direction. It still is the second largest coffee retailer in India and has
plans to grow its total number of outlets to around 400 in the very near future.

Barista is shifting its original focus of providing an ͚alternative to expensive five star coffee
shops to executives͛ to ͚an affordable alternative to young adults between the age group of 20
to 35 with an international life style͛.

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 The first international player in the coffee retail business, Costa Coffee
established its first store in Delhi in 2005. Costa Coffee, which entered India through the
franchisee route with a tie-up with Devyani International, has really not tasted success in India
as yet. Wrong and expensive store locations and failure to adapt to local culture and coffee
drinking habits have been responsible for the slow growth of this retailer. Current stores
number around 40.

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  The changing socio economic and cultural changes economic mobility of the
younger population makes coffee retailing in India an attractive business proposition. Brands
like Java Green from Reliance, Coffee World, Coffee Bean & Tea Leaf (CBTL) etc are trying to
establish themselves throughout the country. Most of their business models are driven by a
multiple product and product form offering. Many of them are using locations such as airports
and highways as a focused distribution strategy.

À Coffee occupies a unique position among all beverages. Despite slowdowns
and recession in many economies, global consumption of coffee remained firm and in fact
showed an overall growth. Coffee experts are of the opinion that consumption of coffee in India
will double in the next 5 to 10 years. According to others, India will emerge as the top five
coffee growing nations of the world.

Coffee retailing has also given an impetus to the merchandising industry. Some of the major
retailers earn between 4 -10% of their revenues from selling coffee related merchandise. With
the industry growing between 35-40% per year, lots of exciting times are in store for all the
players.


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  The growth in coffee retailing offers a unique opportunity
to an ͚institution͛ like Indian Coffee House. Whereas these outlets have been selling coffee and
food at a very low price and are unable to generate enough cash flow and profits, some of the
newer entrants are either making money or will do so in the near future even after paying huge
sums of money for real estate which is the single largest cost item for Indian retailers. Many of
the Indian Coffee Houses are on the verge of financial collapse but have been kept going by
various means primarily because of their iconic status. While a change in business strategy is
surely going to interfere with and alter the very character of these outlets, some change is
definitely required to make these historic landmarks financially stable and self sufficient.
Drawing a delicate balance between sound financial planning and perpetuating an age old
culture is surely not an easy task. It requires a master craftsman with multiple talents to rewrite
the marketing strategy of Indian Coffee House.

Are you ready for the challenge?