India's retail landscape is poised for a significant transformation, marked by the arrival of approximately two dozen international consumer brands this year. This surge represents the highest influx of global brands into the Indian market in a decade, and it is most conspicuous in the bustling streets of Mumbai, where a constant wave of new store openings and whispers of forthcoming establishments abound. Are we on the cusp of witnessing a contemporary gold rush for international brands within India's dynamic retail space?
Amidst this exhilarating influx, one product category seems to epitomize this phenomenon more vividly than any other—coffee. The preceding year bore witness to the grand entry of the Canadian coffee giant, Tim Horton's, in Delhi first but with the ambition to open 120 new stores in the upcoming three years. This year we were also greeted by news of imminent entries by several foreign retail coffee brands, including Pret-a-Manger from the United Kingdom, Lavazza and Armani Café from Italy, and The Coffee Club from Australia. This was paired with the rapid expansion of established titans like Starbucks, which added an impressive 71 new outlets in the most recent fiscal year, alongside the burgeoning success of local chains such as Third Wave and Blue Tokai. All in all, an extraordinary surge in choices and opportunities for consumers within the Indian coffee retail realm.
This meteoric rise in international coffee and cafe brands prompts a compelling question: Is the Indian consumer clamoring for this abundance? After all, statistics reveal that the average Indian consumes a mere 0.06 kilograms of coffee per annum—a stark contrast to their Nordic European counterparts who boast consumption rates as high as 12 kilograms annually. Indians, by and large, prefer tea, quaffing nearly ten times more tea than coffee on a per capita basis, with an annual tea consumption averaging around 0.75 kilograms. Curiously, the demand for coffee seems to emanate predominantly from Gen Z and millennials, a collective populace of roughly 680 million individuals—equivalent to nearly half of India's total population. Moreover, this surge in coffee's popularity is discernibly concentrated within the premium echelons of the specialty coffee sector, which anticipates a staggering 30% growth trajectory over the ensuing three years.
As the financial prospects of young professionals and students continue to rise, a notable transition towards fitness-consciousness is palpable. Coffee, once a modest indulgence, is now seen as a component of a healthier lifestyle. As Sushant Goel, the founder of Third Wave, astutely notes, "people start focusing on fitness and start drinking more coffee" as their incomes swell. The demand for specialty coffee further dovetails with the quest for social spaces that cater to meetings, work, and conversation, a demand particularly pronounced in urban centers graced by year-round warm climates and exorbitant real estate costs. Starbucks stores in Mumbai, for instance, are perennially adorned with tables bustling with business meetings—a testament to the coffee shop's multifaceted role as a social hub.
While the physical cafe experience undeniably furnishes the complete package, a promising avenue for coffee consumption with untapped potential lies within the corporate sector—both in a B2B capacity and via individual deliveries. Several brands have embarked on this frontier, with Café Coffee Day led the charge years ago by deploying nearly 60,000 vending machines within corporate offices. More recently, mid-market brands like Luckin Coffee and Chai Point have also ventured into this realm, which requires a heightened reliance on technology compared to traditional brick-and-mortar operations. Indeed, from personal experience, having a steaming cup of Starbucks coffee delivered to an office, sans the perils of a disintegrating paper cup, is no mean feat. Chai Point, for instance, has devised coffee machines tailored for corporate offices, operating on a subscription-based model, complete with sophisticated software for inventory management and customer insights. But there is still a lot of space for innovation and new business models in the B2B space and the main brands, for now, seem more interested in their brick-and-mortar expansion.
The thriving specialty coffee chains, whether native or foreign, have the added advantage of tapping into India's abundant coffee bean supply. India proudly ranks as the world's second-largest coffee producer, a commendable feat second only to China. In a bid to capitalize on the alluring margins offered by the premium coffee market, Indian coffee estates are diligently enhancing their production capacity, while simultaneously embracing sustainable cultivation practices and refining their brand identities.
Nevertheless, even as the specialty coffee sector anticipates exponential growth, questions linger concerning the broader Indian populace. Is the coffee craze poised to engulf the entire nation, or will it remain the domain of a select say 100 million enthusiasts? Two pivotal factors will dictate this trajectory. Firstly, coffee must infiltrate the grassroots "stall" channel—a domain hitherto dominated by humble tea consumption. Can coffee genuinely permeate this segment, characterized by its thrifty pricing between 7 and 15 rupees per cup?
Secondly, the coffee experience must transcend the boundaries of the cafe and find its way into Indian households through supermarket shelves. The instant coffee market, for instance, projects an impressive 13% annual growth rate over the next half-decade. Key players in this arena, including Nestle, Unilever/Bru, and Tata, are laboring diligently to render instant coffee accessible to the masses. For example, sachets of instant coffee, containing a one-cup 2 grams dose, can be acquired for as little as 2 rupees per sachet.
In conclusion, the bustling Indian coffee landscape is undergoing a transformation of unprecedented proportions. As the international and local coffee brands vie for supremacy in this booming market, the coffee culture is evolving, driven by the aspirations and preferences of India's youthful and discerning consumer base. Whether enjoyed in the cozy confines of a cafe, embraced by the corporate sector, or savored within the comfort of one's home, coffee's ascent in India is poised to reshape the country's consumption patterns and offer a heady brew of opportunities for both consumers and industry players alike.