Tea-drinking India warms to coffee house culture
A burgeoning middle class is rapidly developing a taste for the roasted bean - and Starbucks is taking notice
SONYA FATAH
Special to The Globe and Mail
July 17, 2007
NEW DELHI -- Among hot beverages, India is synonymous with just one: tea. But a lifestyle revolution driven by a burgeoning middle class is luring young Indians to cafés where cappuccinos, lattes and mochas are the drink of choice.
South Indian-style coffee - boiled with milk and served in stainless steel tumblers - has long been sipped in India's southern states of Karnataka, Tamil Nadu, and Kerala. But a new coffee-drinking culture has emerged since India's plantation owners have crept into the café business, launching a cultural revolution that has seeped into India's urban centres.
Today, there are about 750 cafés across India, two-thirds of which are owned and operated by Café Coffee Day, a company that plans to have 1,400 cafés across India in five years' time, as well as 10 in Pakistan and 10 in Austria.
"I expect this market to grow 40 per cent annually for the next three years," says Jagdeep Kapoor, director of Samsika Marketing Consultancies. "That is going to be huge."
In the next two decades, analysts expect there will be as many as 5,000 cafés in India.
It's taken a decade for India's largest chain to create a café culture.
There were only a handful of Café Coffee Day outlets in the late 1990s, all in India's six largest cities. But the chain, which is owned by the Bangalore-based Amalgamated Bean Coffee Trading Co. Ltd., has mushroomed since 2001, now boasting 401 cafés in 72 cities and aiming to cross the 500 mark by the end of the year.
India is also attracting global attention. Starbucks Corp. is eyeing New Delhi or Mumbai for its first outlet. Italian coffee company Lavazza is already here, after acquiring Barista Coffee Co. Ltd.
Starbucks is keeping mum about its strategy in India, as it navigates strict Indian laws on foreign ownership in the retail sector.
"We are looking forward to offering the finest coffee in the world, handcrafted beverages, legendary service and the unique Starbucks Experience to customers in India, first in either Delhi or Mumbai, in the near future," T. May Kulthol, a company spokesman, said in an e-mail.
But other players in the coffee sector are watching the global giant closely, amid speculation it may buy an Indian chain to gain a quick footing.
"They are scared of us. We are not scared of them," scoffed Naresh Malhotra, director of Café Coffee Day. "Let them come in. It will make for a greater awareness for coffee."
Café Coffee Day must also worry about another giant, Tata Coffee Ltd., which sold its share in Barista to the Italians and is developing its own brand, Mr. Bean Coffee Junction. From its first test location in the southern city of Kochi - near India's famous plantation country - Tata plans to expand the concept to five stores in Bangalore, Chennai and Hyderabad.
"If these stores are a success, then we will go in for a franchise model and rapidly expand," said M.H. Ashraff, managing director of Tata Coffee.
The company is the country's largest coffee conglomerate, producing 10 million kilograms of coffee from its estates, spread over 7,000 hectares in Karnataka state. Café Coffee Day's parent company, Amalgamated Bean, sources coffee from the 5,000 acres of coffee plantations it owns in the south.
The market, analysts say, has space for all. With a forecast of a 6- to 9-per-cent annual real growth rate in gross domestic product over the next two decades, the value of the Indian consumer market is expected to triple as a result of productivity increases, growing openness of the Indian economy and demographic changes, according to a report released by McKinsey & Company.
India's big cities are expected to boom in the next three decades. Analysts forecast that the country could have as many 35 cities with a population of over one million, and 300 smaller metros, with 100,000 to one million people each.
Coffee plantations were started in Southern India around the 18th century when the East India Co. discovered it could profit from growing the plant in its eastern colonies. Some even trace coffee's heritage to a few centuries earlier.
Today, most of India's coffee - about 60 per cent of it - is grown in Karnataka, in the country's south, along the slopes of the Western Ghats range.
Analysts say the café culture change is less a reflection of a coffee drinking culture and more about a lifestyle revolution.
"On-premise consumption has increased substantially. There is a lot of young culture - a lot of college students and a lot of student kids would like to hang around and there was no such wholesome place available," Mr. Kapoor says.
Coffee in India
Popular Indian lore says that
Baba Budan, a revered Muslim holy man from India, discovered coffee on a pilgrimage to Mecca in the 16th century. He smuggled seven coffee beans out of the
Yemeni port of Mocha wrapped around his belly. On his return home, he settled on the slopes of the Chandragiri Hills in Kadur district, or what is now Karnataka. The hills of this famous coffee-producing region were later named after him.
Indian latte
Kaapi is a sweet milky coffee made from dark roasted coffee beans and chicory, popular in the southern states of Karnataka and Tamil Nadu. The most commonly used coffee beans are Peaberry, Arabica, Malabar and Robusta grown in the hills of Kerala, Karnataka and Tamil Nadu.
578,000 - Number of people employed in Indian coffee industry
201,498 - Mega-tonnes of Indian coffee exported in 2005-2006
