Indian café culture: the rise of Café Coffee Day

Stopping for a latte, cappuccino or mocha has been common place in many western cities for some time, but more recently it is a frequent occurrence in many Indian cities which are experiencing a growth of cafés and as part of developing café culture. In a country traditionally associated with the production and consumption of tea, coffee drinking and western style café culture has been growing rapidly. Growth forecasts for the Indian café market expect revenues to continue to grow at around 20% per year from 18.2 billion rupees ($290 million) in 2014 to 54.3 billion by 2020, and the number of outlets expected to grow to 6,200 at the same time (Arakali, 2015).

One of the most successful coffee chains in India, Café Coffee Day has made the headlines recently in India as its parent company Coffee Day Enterprises (which has broader interests spanning across agri-business, retail, hospitality, financial services and logistics) recently opened its initial public offering (IPO) (Anand, 2015). The entrepreneur driven company has become one of the most popular brands in India representing around 46% of the café chain market (Leung, 2015) selling over 100 million cups of coffee every day, in one of its 1,538 cafes across 219 Indian cities and over 31,500 coffee vending machines in offices and shopping centres across the country (Forbes, 2015). Credited with triggering a café culture in India, strong interest was seen with the IPO reaching $175 million, making it the largest IPO in India for last three years (Reuters, 2015).

It has been suggested that the money raised will go towards addressing some company debt, as well as investing in more of its coffee vending machines which have also proved to be popular (Leung, 2015). Established in 1996 by the entrepreneur V. Siddhartha who recognised there was a demand for the western style of cafes, Café Coffee Day has now become omnipresent on the Indian urban landscape. Café Coffee Day serves a mixture of western drinks and foods, following the pattern of many other international chains, but also a selection of drinks and snacks more familiar to the Indian market.

While Café Coffee Day is a clear leader in the market, other rivals are growing too: Starbucks opened its first store in 2012 and now has around 75 outlets (Starbucks, 2015); Barista Coffee which had around 250 stores has plans for another 550 by 2019 (Khosla, 2014); Costa Coffee has over 100 stores with plans for an additional 1,000 outlets during 2015-16 (Business Standard, 2013); and more recently McDonalds has made efforts to expand its McCafe network across 41 stores, with the plans to launch a further 100 by 2019 (Business Standard, 2015).

All of these café chains, and others which are developing in the market, tend to sell food and drinks which are comparably much more expense than traditional local alternatives. The price of a small cappuccino at Coffee Days is Rs79 ($1.20) or at Starbucks Rs 120 ($1.85), whereas on a traditional coffee stall it a coffee could cost only a few rupees (Balachandran and Karnik, 2015). So why are western style café chains doing so well in a country traditionally associated with tea, and where coffee can be bought at a much cheaper price? Well, places like coffee days are particularly popular with younger generations, students, business people and the rising middle classes. Partly it is a response to the international experiences of a population which have begun to experience these types of places abroad, and want to do so at home. But also for some it is a status symbol to be able to afford the luxurious coffees and spend time sitting in a café environment; a symbol of international culture which many aspire to be a part of. These types of cafés provide spaces conducive to sit, meet friends or colleagues, a place to work, or seek solitude in a calm and often air-conditioned environment, Wi-Fi, electricity sockets and a clean bathroom; essentially a safe and comfortable space to escape the chaos of the city. As the slogan of Café Coffee Days indicates, in India today, ‘a lot can happen over coffee’ (Café Coffee Day, 2015).

References

Anand, K. (2015) Coffee Day IPO: Should you subscribe or avoid? Economic Times of India 13 October 2015. Available at: http://economictimes.indiatimes.com/markets/stocks/news/coffee-day-ipo-should-you-subscribe-or-avoid/articleshow/49334515.cms

Arakali, H. (2015) How India’s Urban Middle Class, Mobile and Open to eating out, could make café coffee days IPO a shoo-in. International Business Times 09 October 2015. Available at: http://www.ibtimes.com/how-indias-urban-middle-class-mobile-open-eating-out-could-make-cafe-coffee-days-ipo-2132794

Balachandran, M. and Karnik, M. (2015) What you need to know about the coffee chain that’s launching India’s biggest IPO in years. Quartz 08 October 2015. Available at: http://qz.com/519173/five-things-you-probably-didnt-know-about-cafe-coffee-day/

Business Standard (2013) Costa Coffee to open 200 more stores in India by 2015. Business Standard 23 March 2014. Available at: http://www.business-standard.com/article/companies/costa-coffee-to-open-200-more-stores-in-india-by-2015-113032300371_1.html

Business Standard (2015) Mc Donald’s to open 100 outlets of McCafe in India. Business Standard 20 April 2015. Available at: http://www.business-standard.com/article/companies/mcdonalds-to-open-100-outlets-of-mccafe-in-india-115042000958_1.html

Café Coffee Day (2015) Café Coffee Day website. Available at: http://www.cafecoffeeday.com/

Leung, D. (2015) Coffee Day tests market taste for IPO. Finance Asia 30 July http://www.financeasia.com/News/400354,coffee-day-tests-market-taste-for-ipo.aspx

Khosla, V. (2014) Barista Coffee on overdrive, plans 550 new outlets in 5 years. Economic Times of India 19 December 2014. Available at: http://articles.economictimes.indiatimes.com/2014-12-19/news/57233860_1_carnation-hospitality-lavazza-spa-sanjay-chhabra

Rai, S. (2015) Two Exciting Indian Consumer brands, café coffee day and IndiGo Airline, IPO this month. Forbes 12 October 2015. Available at: http://www.forbes.com/sites/saritharai/2015/10/12/two-exciting-indian-consumer-brands-cafe-coffee-day-and-indigo-airline-ipo-this-month-2/

Reuters (2015) Coffee Days eyes $1 billion evaluation with biggest Indian IPO in three years. Economic Times of India 07 October 2015. Available at: http://economictimes.indiatimes.com/markets/ipos/fpos/coffee-day-eyes-1-billion-valuation-with-biggest-indian-ipo-in-3-years/articleshow/49257995.cms

Starbucks (2015) Store Locations. Available at: http://www.starbucks.in/coffeehouse/store-locations