Global cafe chains look to steam open India


March 13, 2013

Nupur Anand, DNA (Daily News & Analysis)

Mumbai, March 13, 2013

Taste this: the organised (or upmarket) Indian cafe market is estimated to have notched up sales of $230 million (Rs1,246 crore) in 2012. And the figure is expected to bubble up to $410 million (Rs2,222 crore) by 2017, as per Technopak estimates.

No wonder, 5-7 more foreign players are keen to give the likes of Starbucks, Coffee Bean and Costa a run for their rupee income.

The identity of cafe kings eyeing India remains tightly guarded, but it is believed they are from Europe, South-east Asia, the UK and Australia.

Sunil Chaudhary, assistant vice-president of Tecnova, a retail consultancy that has been approached by a few foreign players, attributes the growing interest in India to “a combination of the Starbucks effect and the expectation that the market will double in five years”. They are all on the lookout for Indian partners, a task that is proving tough, according to retail consultancy firms.

Devangshu Dutta, CEO of Third Eyesight, a consulting and advisory firm, says that in the past one decade, the cafe has emerged as both a preferred hangout point and an informal meeting place in India.

This, he says, provides headroom for growth. “The growing propensity to spend and the growing eating-out habit in urban India is another attraction for foreign chains. Besides tea and coffee, other ‘experimental’ drinks such as bubble tea, a south Asian specialty, will be offered at cafes.”

Foreign chains’ interest extends beyond the cafe segment to the wider quick service restaurant (QSR) market, says Arvind Singhal, chairman of Technopak Advisors. “That’s understandable because the food market is still underdeveloped, compared to other countries. Niches like Chinese food, bread and sandwich are particularly popular.”

Most players are keen on entering the Indian QSR segment via the franchisee route. QSRs account for 18% of the $74 billion (Rs4 lakh crore) informal eat-out sector in India, including restaurants that serve traditional Indian snacks like idli, dosa and chaat, as per Euromonitor estimates.