Coffee Day Enterprises Ltd (CDEL) has forayed into the Rs 1,000-crore energy drink market in the country. The company, which owns and operates 1,700 Cafe Coffee Day (CCD) outlets across India and a few international markets, has introduced energy drink beverage under the brand 'Storm'.
"We have recently launched our own new energy drink 'Storm'. The initial feedback from the customers has been very encouraging. Leveraging our brand distribution learning from this launch, we expect to introduce similar products in the coming quarters," said V G Siddhartha, chairman and managing director, Coffee Day Enterprises Ltd in an analyst call to discuss company's financial performance.
"In the next two to three years, we want to acquire a decent share in this space by banking on the brand power," Siddhartha said, adding that since CDEL is not a franchisee but the owner of this brand, it can introduce such products and that its economics are mind-boggling.
Having sold a lakh cans last month, the company is now targeting bigger volumes this fiscal and beyond. It will also look to increase production capacity.
"We took two years to develop this (energy drink) product. We import some concentrate, mix and blend it and are contract manufacturing it currently. Ultimately, in the next two-three years we may have to put together a big production facility and manufacture it ourselves because these are the products that will do very well for us," said Siddhartha.
CDEL's own production unit will help reduce the company's product cost by 2-3%. he added.
Launched in July, the beverage priced at Rs 100 per can is being sold primarily through CCD outlets across Lounge, Square, Express and Coffee Point formats. The company's cafe network stands at 1,694 outlets across 243 cities in India as of June 2017. It added gross 32 cafes in the first quarter of fiscal 2018 and plans to add 135 stores annually over the next two-three years. It enjoys leadership position in the vending-machines space and currently has 42,788 machines installed (as of June 2017). Of these, over 1,500 machines were added in the first quarter.
The company will leverage on all these channels to sell Storm in the market.
On other similar products, Siddhartha said that cold coffee is another product that is being worked on and the company is looking to put up its own manufacturing unit for the same. This product will be available across all retail formats including departmental stores.
Interestingly, the company has added a host of new items to its menu including biryani that's sold at 25% of its outlets with plans to cover all the outlets over a period. According to a senior company executive, the company is strengthening its innovation engine to offer more options in its menu.
"For instance, a range of summer chillers are being offered with a health and wellness proposition. We are the first in India to launch coconut- and sugarcane-based products. We are also looking at increasing the day-part usage and launch over-the-top sundaes to cater to the post dinner dessert consuming customers. That apart, we are doing a lot of other enhancements in our overall portfolio including biryani. While beverages are available across India, the biryani and equivalent products are available in 20-25% of the stores at this point in time. The plan is to eventually take these products nationally in the same or an enhanced format in the near future," the executive said during the analyst call adding that these products will help draw in more customers for lunch and dinner as well.
The cafe chain operator is also working on setting up good looking, spacious stores and relocating the smaller outlets that were launched 12-14 years ago. "An interesting trend witnessed since last four-five months is that strategically located retail stores are closing down as e-commerce companies are vacating office space. Earlier getting retail real estate was a big problem, but now we are getting decently priced real estate across all the cities we are present in," said Siddhartha during the analyst call.
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