On a chilly, wintry Saturday morning in Bangalore, Santhosh Unni, visiting chief executive of Costa Coffee in India, met Priyanka Golikeri in spite of a hectic schedule. The venue for the interview, a Costa outlet near the Ashoka Pillar in the IT city, acquired a sharp touch as it was located right next to competitor Café Coffee Day.
“The location is good. Hence we chose to be here in spite of their presence,” says Unni. Excerpts from the interview.
Q: So here we are, right next to CCD. Doesn’t it imply there’s just too much competition?
A: Quite the contrary. This street has room from many more cafés. When we started this outlet, they (CCD) were already there. Their business has not gone down (after we set up shop here). We have been getting good business as well. This only shows that the demand for cafes on this street has doubled. You take any big city, say New York, for instance, and if you stand at a junction, you will see four different cafes around. There might be four outlets of Starbucks. All the four will have different clientele. Same will happen in India as there is a latent demand for cafes here. This one street has room for many more cafes.
Q: How is the demand growing?
A: Cafés are now used for everything. We realised that an outlet in New Delhi is used as a tuition class with a tutor and student coming daily, grabbing a bite and then sitting with books. There are outlets where we see the same person coming two to three times a day. He might come with friends once, then again with a business partner. But what is important is to not just get new customers and retain existing ones, but increase the frequency of existing customers. So we are starting some consumer-connect initiatives like stand-up comedy, book-reading sessions, art and music events at the outlets to engage more with customers.
Q: How many outlets do you have in India?
A: We have been in India since September 2005. Till 2009, we were cautious as we felt we were early for the market. In 2010, we did a lot of store openings. We added some 30 stores that year.
Today, we are 95 stores strong in New Delhi, Pune, Bangalore and Mumbai. This year, we look to add 50-60 outlets including places like Punjab, Chennai, Hyderabad. But we don’t foresee expansion across towns. We will continue to be an eight-city brand till, say, 2016.
Q: And how many are you planning to open in a year?
A: About 50-60 outlets each year over the next two years. After that, we foresee opening 100 outlets in a year. Industry estimates say India has a potential for 5,000 cafes over the next three years and there are currently just 1,600 or 1,700 cafes. So each chain will be putting up 100 to 200 outlets per year. The nature of this business is such that is necessitates a large number of outlets. Only after having 300 to 400 outlets can we start seeing returns.
Q: Would outlets be in different formats?
A: Our ideal outlet is 1,200-1,500 square feet in size. We currently have 25 kiosks measuring 200 square feet at airports, hospitals and corporate parks. Kiosks are an important aspect as some do more business than an outlet. They can create more consumer touch-points and can pull more people to experience the brand.
Our kiosk at the New Delhi airport sees average footfall of 900 per day which is more than what is seen at this outlet where we are chatting.
What about your menu? Are any Indian items likely to feature?
People don’t come to Costa to have a kachori or a samosa. We need Western style food with Indian profiling of taste. Western products like a panini with an Indian filling. We are clear that we want to have only café food and maintain our Western format. That is why, people come here. The idli-dosa-biryani fare would never feature at our cafés.
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