PremiumThe growing Indian market for coffee drinkers and café loungers has been a draw for international coffee chains. From London-based Costa Coffee and Di Bella of Australia to Gloria Jean's Coffee (America-Australia), Coffee Tea Bean & Leaf (America), and Dunkin Donuts (America), many have made a play at growing their footprint in India. Only to find it hard to scale up beyond narrow regional presence or having to shut shop.
The only exception that has made serious strides in growing customer following, along with business impact, is the American coffee giant and late-comer to the market, Starbucks. It’s not just the overseas chains that have struggled to build scale in India. Cafe Coffee Day, arguably India's answer to Starbucks, grew its footprint hobbled by two types of challenges: maintaining standards of quality and keeping its balance sheet in the black. The other homegrown cafes like Bru, which was spun out of Hindustan Unilever, started optimistically but faltered and closed down in just five years. The smaller ones like the Kitchen Garden and Blue Tokai are not as ubiquitous as Starbucks yet.
Against this landscape, Reliance Brand has sent up a smoke signal by announcing a long-term master franchise partnership for launching Pret A Manger coffee shops across the country. Founded in 1986, the UK-based company Pret A Manger now operates over 550 shops across the world. Reliance Brand, which also operates and owns the upmarket Jio Mall in Bandra-Kurla Complex, is a business division of the Mukesh Ambani group that has so far been focused on apparel and designer lifestyle brands such as Diesel, Tiffanys and Burberry.
Building a coffee chain in India is no easy task. For starters, coffee drinking is a recent phenomenon, with tea being the primary choice for consumption. But the trend is growing strongly with high single-digit growth year on year and lots of headroom for the future. In particular, according to published research, the pandemic accelerated the purchase of instant coffee and the data also points to growing usage of coffee versus tea amongst younger generations.
There's more to succeeding at running cafes in India. Such as getting the product right, the ambiance right, the employees trained correctly and then the most challenging part which is the location. The hardest part about growing an F&B franchise business is planning for the real estate that is intrinsic to it.
Real estate in India is largely a regionalized business with most large players having a footprint in a handful of states at best. That makes national planning complex and time-consuming. This is also part of the reason why Starbucks took its own sweet time to enter the nascent market. It had thought out its expansion strategy keeping in mind the benefits that come with partnering with a behemoth like the Tatas that doesn’t just own a retail company but also a real estate division, as well as the country’s largest chain of hotels. The results speak for themselves. Tata-Starbucks now operates some 250 stores in close to 30 cities.
The alliance that Reliance has forged with Pret A Manger smells just as sweet. Not only does Reliance run a very large retail business (Reliance Retail) of which Reliance Brands is part of but it also owns malls and has significant stakes in hotels (Oberoi Hotels). Plus, there are inherent advantages to being one of the largest business houses in the country.
All of which suggests that the near future is likely to see a ramp-up in Pret A Manger stores in a variety of locations that could extend to airports and other retail hotspots. While Starbucks has had the first-mover advantage in setting up its base in India, and has managed to make a go of business with its coffee and other beverage offerings, it still needs to get better at food products.
That's an obvious area that Pret A Manger which positions itself as a purveyor of fresh foods and breakfast in addition to coffee can score high on. The bottom line is that the Seattle-headquartered Starbucks may have had an uncontested run thus far but if Pret A Manger gets its location, menu and pricing and, of course, execution right –– and ramps up fast enough – a coffee contest amongst the two largest Indian business houses could be on the cards. May the unconditional winner of this battle be caffeine lovers.