Costa has created an international coffee culture in India

The UK-based Costa Coffee is the second-biggest international coffee chain in the world after Starbucks, with 3,987 coffee shops and machines spread across around 25 countries. It was the first international coffee chain to enter India in September 2005 under a licence agreement with Devyani International, a part of RJ Corporation. Andy Marshall, managing director, international markets, Costa Coffee, has been visiting India every 2 months to keep a close eye on the ever-changing Indian consumer. He spoke to Shailaja Sharma at the chain’s launch of 100th outlet in the country at Carter Road, Bandra, about how the brand is going local to grow on consumers. Edited excerpts:
 
How has been the journey?
We have been in India for nearly 7 years. I describe the first five as learnings because this is a fantastic country with youthfulness and energy which you have to tap into, particularly if you are into an experiential brand like Costa. What you then learn is this is a very diverse cultural background. Thirty-two states mean 32 different ways of doing things, 32 peculiarities. Therefore, we have to come here very regularly because the only way you can develop and lead on an experiential brand like Costa is to get under the skin of what is going on here. There is a big thirst in this country to westernise, but at the same time, they want it done in a very Indian way. And not just in an Indian but localised way. So, our café here in Mumbai will be different from Delhi or Bangalore or Chennai or Pune. Therefore, one needs to keep visiting different parts of this country. What you will see here (cafe) is very different from anywhere else in the world.

Can you share an example?
The Mumbai consumer is younger, more hip, particularly Bandra. The types of things here are very different from what we have done before. For example, we now keep a big range of ice creams and ice cream sundaes. People come out late and the coffee experience goes on till evening, and in the evening, they want something sweet and they love ice cream. We haven’t done that anywhere else. We put a lot of snacking here, a range of snack foods. People don’t come to a coffee shop for lunch or dinner, but when they come for coffee, an Indian also wants something to eat.

In India, the food component to the entire portfolio is much higher. Sixty five percent of our menu is beverage and 35% food. We have something called food capture where it measures the amount of people who buy an item of food with their coffee and it is about 65%. In the United Kingdom, it’s 40%.

Something that we do uniquely here that we don’t do in other parts of the world is how we take an employee from the deaf and dumb community. Fifteen percent of our total workforce is already falling in this group and we plan to take that up to 25% of our workforce. They create a great energy, an aura in their own way. We train our managers in sign language, too.

Do Indian consumers understand coffee?
I think they are now. When we first came here, we had to sort of introduce the Indian community to what makes great premium coffee experiences. I think we were here a bit early originally, I don’t think people were ready for it, a nation of tea drinkers. But we slowly introduced by a lot of education, lot of putting stores out there. We sense in this country, this year for the first time really in all the times I have been coming, a sort of change where people are now treating a cup of coffee as very much about socialising experiences. A cup of coffee stands for meeting your friends, meeting your family. We are now ready to do more.

We are vertically integrated business. So, uniquely in India, compared with other countries, we roast under licence for this market. We do it in the South of India with a small but highly skilled roaster. Our master roaster comes from London to oversee every batch. 

Are you going to open outlets more rapidly?
In 5 years, we have reached 100 stores of which, in the last two years alone, we have opened 65. We can open 50 stores a year from here on. I think we created an international coffee culture here and we plan to exploit that by opening a minimum of 50 stores a year. We will concentrate on key eight cities. Apart from being in Delhi, Mumbai, Bangalore, and Pune, we will add Chennai, Kolkata in the next two years. We need to scale up the supply chain for food as fresh food is more complicated. And therefore, I don’t think we will be planting flags like Cafe Coffee Day by going to tier 2 and tier 3 cities. It is an exciting, hugely growing market and there is place for everybody.

What areas will investments go in?
We are investing in the network, RJ Corporation is doing that. We will be investing about `1 crore per store and opening 50 stores per year. We are expanding to some new cities. Real estate market here is very hot. The rentals in parts of Delhi and Mumbai are at London or New York prices. And that’s a challenge.