Viveat Susan Pinto, S Shanthi (Financial Express)

13 July 2026

India’s new-age coffee chains are accelerating expansion despite continuing losses, as investors bet that the country’s under-penetrated branded cafe market can deliver long-term growth.

Third Wave Coffee plans to open 100 cafes this financial year while targeting company-wide break-even. Blue Tokai aims to expand from 240 outlets to 800 by FY30 and is preparing for an eventual public listing. Nothing Before Coffee (NBC), which has grown to 114 cafes across 45 cities, plans to more than double its network over the next two years.

The expansion comes even as profitability remains elusive. Investors, however, are increasingly prioritising store-level economics over headline profits, arguing that India’s cafe market is still in its early stages of growth.

“The earlier failures in the cafe segment were largely capital-discipline failures, not failures of the category itself,” said Vish Narain, managing partner at Pulsar Capital, which is backing Blue Tokai’s international expansion.

“Chains expanded store count before proving unit economics. Investors today understand that India’s per-capita coffee consumption is still in its early stages. They are reading past shutdowns as wrong execution, not wrong thesis,” he said.

Dissecting the Balance Sheets

The numbers highlight the challenge.

Heissette Beverages, the parent of Third Wave Coffee, accumulated losses of Rs 320 crore between FY21 and FY25, while total assets stood at Rs 538 crore at the end of FY25, according to Tracxn. Muhavra Enterprises, Blue Tokai’s parent, reported accumulated losses of Rs 175 crore over the same period, with total assets of nearly Rs 370 crore. Financials for FY26 are not yet available with Tracxn.

NBC accumulated losses of nearly Rs 3 crore over FY24 and FY25 against total assets of Rs 18 crore. Mumbai-based premium chain Subko Coffee, with 16 outlets in India and one in Dubai, posted losses of Rs 45 crore over five years, while total assets stood at Rs 61 crore at the end of FY25.

Third Wave Coffee said around 90% of its outlets are Ebitda-positive and expects to achieve company-wide break-even during FY27. Blue Tokai, backed by Verlinvest, is targeting profitability by March 2028.

NBC declined to specify a profitability timeline but said it has adopted a franchisee-invested, company-operated (FICO) model to reduce cash burn while retaining operational control.

“FICO lets us expand quickly with franchisee capital while keeping operational control,” said Ankesh Jain, co-founder and chief executive officer, Nothing Before Coffee.

Structural Shifts

Experts attribute the investor interest partly to improving outlet economics as operators shift from large dine-in formats to compact grab-and-go and cloud-kitchen models.

“These formats materially cut capex per outlet and shrink payback timelines, making the category venture-fundable rather than just a slow-and-steady, self-funded business,” said Krishna Dev Pathak, investment banker and advisor to early-stage startups.

Lower capital requirements have strengthened unit economics, reinforcing investor confidence despite delayed company-level profitability.

Investors are also betting on a broader shift in consumer behaviour. Anuj Kejriwal, chief executive officer and managing director of Anarock Retail, said rising incomes, urbanisation and changing preferences are gradually moving India from “a tea economy to a coffee economy”. The shift is widening the addressable market for organised coffee chains beyond the metros into smaller cities.

Consumers increasingly use cafes as workspaces, meeting points and all-day dining destinations, prompting chains to diversify into food, desserts, packaged coffee, vending solutions and merchandise.

“The cafe model is now well established as part of consumers’ lifestyles,” said Devangshu Dutta, founder and chief executive of retail consultancy Third Eyesight.

Challenges remain. Rentals in premium locations have surged, coffee prices remain volatile, and labour and supply-chain costs continue to pressure margins.

For now, investors appear willing to fund rapid expansion, betting that disciplined execution and improving unit economics will eventually turn India’s cafe boom into a profitable business.

(Published in Financial Express)

Sagar Malviya, Economic Times
9 January 2025

Starbucks, Barista, Chaayos and Third Wave Coffee are among café chains facing the brunt of a slowdown in discretionary consumer spending. The impact is more severe for these retailers as they opened hundreds of new stores last fiscal year even as losses widened. To be sure, smaller chains such as Tim Hortons and Blue Tokai have bucked the trend.

Experts attribute the expansion rush to the urge among these retailers – both chains and standalone stores – to outpace competition. In certain instance, it led the same retailer to add stores in the same location, impacting its own growth instead of growing the pie.

At Rs 250 to Rs 350 for a cup of coffee, most chains target affluent, discerning coffee enthusiasts with artisanal brewing and experiential consumption, restricting the consumer base.

Devangshu Dutta, founder of retail consulting firm Third Eyesight, said the number of outlets have been expanding since 2022.

This was true for not just the new brands but also existing ones, Dutta said. “Cafe density in larger cities has gone up dramatically in the last couple of years.”

Growth rate fell to just 5% in FY24 from nearly 70% at Barista and Chaayos while Starbucks’ sales growth declined to 12% in FY24 from 70% in FY23. Third Wave saw sales growth slump to 67% from 355% during the period. Cafe Coffee Day posted a 9% increase in FY24, though sharply slowing from 59% a year ago.

Tim Hortons, however, more than doubled its sales last fiscal, its first full year of operations. Blue Tokai also bucked the slowdown trend with a 70% growth in FY24, compared to 73% in FY23.

Blue Tokai cofounder Matt Chitharanjan believes growth in India’s out-of-home coffee market is more than just a caffeine surge—reflecting the country’s shifting economic fabric. “Coffee consumption is strongly linked to income growth and India has reached a tipping point where it will support growth in the segment and should only accelerate going forward,” Chitharanjan told ET. “We have not seen any slowdown in coffee consumption and our positioning is also more product centric instead of just a cafe, which helped in double-digit same store sales growth.”

Tim Hortons, a Canadian coffee chain, which opened its first outlet in India in 2022, plans to have over 100 stores in the next three years. British coffee and sandwich chain Pret A Manger too launched its first shop in Mumbai as part of a franchise agreement with Reliance Brands. It plans to open up to 100 stores over the next five years. Third Wave and Blue Tokai are running more than 250 stores combined while Starbucks had over 330 stores as of March-end.

Tata Starbucks—the equal JV between Tata Consumer Products and US-based Starbucks Corp—said store footfalls have become a concern and the company has tweaked portfolio and pricing to attract traffic. Last year, the chain introduced classic hot and iced coffee starting at Rs 150 for a small cup, about 20-30% cheaper than regular coffee offered at Starbucks and other cafe chains.

“The stress is being seen across the quick service restaurant segment. It’s an overall consumer spending issue, especially in urban areas. And my hypothesis is probably food inflation is higher than what we think,” Sunil D’Souza, MD at Tata Consumer Products said during the December quarter earnings call.

Globally as well as in India, coffee growers have been hit with uncertain weather conditions while geopolitical factors are also affecting supply chains, which in turn, lifted prices to a record high. “The biggest challenge is erratic weather and climate change which has sent coffee prices to a 50-year high, but we will have to see how it impacts our pricing and profit after the current harvest,” said Chitharanjan at Blue Tokai.

(Published in Economic Times)