Restaurants

Blazing the coffee trail

Naresh Malhotra Director Café Coffee Day

While tea leaves are an able ally for fortune telling, the coffee trail set ablaze by Amalgamated Bean Coffee Trading Company's Café Coffee Day has created discernible fortunes for cultivators and employees across its outlets. Naresh Malhotra, its director, demystifies its success story

Before the neologism 'Bangalored' became a global term, a small coffee shop cum cyber café by the name of Café Coffee Day (CCD) opened its doors in the bright garden city. Today, it has a national presence with 303 cafes in 68 cities across the country. Naresh Malhotra, who has been the director of CCD since 2001, has been responsible for brewing its success story and feels that he has merely scratched the surface of the market's potential. "When we started out, industry watchers cited that 500 outlets would be too optimistic for the market, but we believe that there is scope for up to 5,000 outlets," he says. The company is poised to break the 500-café mark by mid-2007.

The game plan

In 2001, an extensive market survey conducted by CCD revealed that its café format appealed to the demographic group of 15 to 29 year olds, which led to an immediate revamp of the logo and brand positioning. Today the café leverages ground promotions and initiatives such as branded merchandise, Café Beat Magazine, live music and touch screen jukeboxes to lure in the target set. It employs brand communication to target its audience and tie-ups with other similarly positioned brands such as Levi's are used as a revenue stream. Another strategy adopted was a co-branding arrangement with Air Deccan by creating a virtual Udipi restaurant in the sky with CCD as the single point vendor to supply a range of food and beverages with discounts on purchase at all airport outlets, available to all Deccan passengers.

On the horizon

While expansion is hinged on a fully integrated approach, Malhotra reveals that after the chain touches the 500-outlet figure, the next step is logically the magical 1,000 mark. "We will witness a 100 per cent growth rate per annum for the next four to five years and I don't see the pace flagging," he adds. This, while his sights are firmly fixed on the European market too, with a presence in Vienna already (with two outlets) and plans on expansion in Austria while eyeing Middle East, Eastern Europe, Eurasia, Egypt and South East Asia.

He feels the segment in India is hampered by exorbitant real estate values, which in turn hits the revenue streams, a concern shared by many within the industry. "It's paradoxical that our realisation is six times more in Europe than over here," he says, a due diligence revealing that the difference in investment in overseas outlets work out, in some cases, less as compared to the cost of real estate in India .

The group is seeking growth in cities that have over one lakh population. "The B- and C-class cities have seen phenomenal growth. I also see pilgrimage centres and highways as areas of future growth, and the group is contemplating highway cafes and drive through cafes to attract customers, and are also in talks with petroleum companies," he reveals. “I don't see any ease in demand, in fact, I see every neighbourhood having at least two cafes," he avers, a revelation that the neighbourhood café will be ubiquitous as the local grocer, an experience which does not warrant the need for wheeled transport, but a leisurely stroll.

Malhotra believes…

The entrepreneur is optimistic of its position in the segment; it has held its own in a destination such as Vienna. Competition is welcomed, he adds, because it creates a bigger market and a bigger slice of the pie for each player. With India and China having a demographic profile skewed towards the youth, it is a profile that no segment can afford to ignore. He says, "We will witness rapid growth in the coming two years, but service standards have a long way to go to compare with those in South East Asia."

While the real estate prices in India will not lower in the near future, Malhotra predicts that this growth phase is here to stay for the next ten years no matter what segment in the F&B sector. Malhotra concludes by saying that the proliferation of international brands in the market is inevitable, but only entrepreneurial-driven and proactively run chains will ultimately succeed.