Espresso Bars Gear Up For Competition From Abroad

Financial Express:

With at least 6 international coffee chains expected to enter the espresso coffee bar market within the next 12 months, domestic biggies Barista and Cafe Coffee Day (CCD) are firming up new initiatives to counter the MNC onslaught.

With Starbucks, Gloria Jeans, Barnies Coffee and Illy coffee eyeing the market, the total number of retail outlets in the country is set to double to 1,000 in 2-3 years. According to a Technopak study, the expresso cafe market is expected to grow by 5 times in the next 3 years, going up from Rs 200 crore at present to Rs 1,000 crore.

The domestic majors are planning a slew of new outlets to increase visibility as well as push more merchandise sales, to ward off the increasing competition. Barista plans to open at least 100 new outlets in a year’s time with the total investment pegged at Rs 40 crore, while CCD wants to increase its outlets by 199 by next March, investing Rs 18-25 lakh in each outlet.

Barista has 140 outlets at present to CCD’s 309.

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Sudipta Sengupta senior general manager, CCD, shrugs off any threat stating competition will only add to excitement and weed out the inefficient players. ‘We are catering to the top 30% of the market, and if Starbucks’ global prices are anything to go by, then it will target the top 2 to 3% only’, she added.

Barista’s CEO Partha Gupta said the company’s expansion plans ‘are part of a long-term strategy, which had to be done once the second stage of consolidation of systems, departments and processes was over.’ Barista plans to increase the sales of its merchandise-mugs, travel sippers and chocolates to 8% from a current 3%, and is setting up two central kitchens in Mumbai and Delhi to supply food to the outlets. It’s also planning to extend the food menu to include a host of new variety in the Barista Créme’s, a new concept. It is also planning to open outlets in the Gulf region and Bangladesh in a year’s time.

For CCD too, merchandise sales account for over 10% of total revenues. However, analysts say the existing players will now have to scout for newer markets to ward off the stiff competition. ‘With real estate prices soaring in metros and stiff competition in vicinity, they would probably have to look at tier II and tier III cities for the market expansion, since international chains have deep pockets,’ said an analyst with KSA Technopak.


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