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Café Coffee Day to spread aroma faster

Sunday, 18 March 2007 - 8:30pm IST
More than his coffee, it is the success of his chain of cafés across Indian and overseas markets that has invigorated Café Coffee Day director Naresh Malhotra.

BANGALORE: More than his coffee, it is the success of his chain of cafés across Indian and overseas markets that has invigorated Café Coffee Day director Naresh Malhotra. It has stimulated him enough to line up an investment of close to Rs 200 crore over the next fiscal to expand his coffee business, both domestically and internationally.


And he is not about to miss any opportunity. Malhotra is exploring every possible way to grow — from organic to inorganic, different formats (highway café, garden café, mall café, vegetarian café, campus (IITs, IIMs, and other) café, and soon a shop in a shop café, for which it has entered into alliance with a retailer) and onboard catering for budget carriers Air Deccan and GoAir.


The Bangalore-based coffee baron revealed that Amalgamated Bean Coffee, which currently owns 400 Café Coffee Day stores across the country, is planning to add 250 more outlets by the end of this financial year.


The coffee firm is also planning to scale up its Coffee Day Xpress numbers from the present 535 kiosks to 800 kiosks, and add around 3,700 coffee vending machines (at the rate of 300 per month) to take it to 10700 vending machines by March 2008.


In doing so, he would be investing Rs 35 lakh in every new café, Rs 3 lakh in each new Xpress kiosk and Rs 50,000 for vending machines. Malhotra is equally ambitious in his overseas plans. He is looking for attractive acquisitions in the Germanic speaking countries to grow rapidly. Organically, he is looking at growing his international coffee chains from the current 5 to 15 in a year.


At present, the Café Coffee Day operates two outlets in Pakistan (Karachi) and three in Austria (Vienna) through its 100% subsidiary firm, which is headquartered in Vienna.


“In Pakistan, we want to open stores in Lahore and Islamabad. We also want to enhance presence in Eastern Europe by opening stores in countries like Switzerland, Czechoslovakia, Germany and Austria,” says Malhotra. Undoubtedly though, India will continue to remain important for the country’s largest coffee chain with turnover of Rs 400 crore.


“Today, we are adding 20 cafés per month. At this rate, we will become to a 5,000-stores coffee chain in another decade or so,” says Malhotra.


Surprisingly, the Indian coffee major is keenly awaiting the entry of Starbucks. That, Malhotra says, will push up the price point.


“Today, I am charging around Rs 35-40 for my coffee. Starbucks would offer it at Rs 180 ($4), we can price our coffee at Rs 135 ($3). It will be good for us. Elsewhere, people don’t mind paying Rs 200 for coffee. In China and Bangkok, coffee is more expensive than beer. Our income levels are same as Bangkok, so if they can pay, why can’t we?” queries Malhotra.


And with an earning before interest depreciation taxes amortisation (EBIDTA) margin, which is thrice that of Starbucks, it is unlikely that Malhotra’s invigoration would wear off anytime soon.


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