Cafe Coffee Day, Barista Lavazza raise prices 7-10%

Leading coffee chains Cafe Coffee Day and Barista Lavazza have hiked food and beverage prices in a bid to pass on the increase in raw material costs.

Cafe Coffee Day, run by Bangalore-based Amalgamated Bean Coffee Trading Company, increased prices 7%, while Barista Coffee Co, owned by Italy’s Lavazza, increased prices 10% a few days ago.

For coffee chains, raw material costs have gone up by as much as 30% in the last one year, but players in the business have been wary of hiking prices to consumers owing to competitive environment of the business. The challenge for these chains is not just to maintain margins, but also to better them year on year.

K Ramakrishnan, president, marketing, Cafe Coffee Day said that raw material costs — coffee, milk, sugar and vegetables — have been rising right through the year, a major part of which has been absorbed by the company.

Packaging, rental and transportation costs have also risen significantly.

“Costs have gone up significantly, but we have absorbed most of it. We try to keep a year’s gap between price hikes,” Ramakrishnan said. The last price hike Cafe Coffee Day had effected was in April 2010, to the tune of 6%.

Similarly, Barista had increased prices 5% in October 2010. Barista takes two rounds of small price hikes in a year, typically in the range of 3-5%, but the recent hike has been higher. This speaks of the pressure coffee chains are struggling with.   

Costa Coffee India is yet to hike prices but is evaluating the rise in input costs, chief executive officer Santosh Unni said.

Cafe Coffee Day operates close to 1, 100 outlets and had announced to reach 2, 000 stores by 2014. Barista that entered the market in 2002 runs over 200 outlets in India. UK’s coffee chain Costa Coffee entered India in 2005 through a master franchisee tie-up with Devyani International Ltd and currently runs around 75 stores in the country. Other players in the business include Gloria Jean’s and The Coffee Bean & Tea Leaf, which have been slow to expand.

International coffee chain giant Starbucks and another major Dunkin Donuts have both announced their India operations recently.