The growing Indian market for coffee drinkers and cafe loungers has been an attraction for international coffee chains. From London-based Costa Coffee and Australia’s Di Bella’s to Gloria Jeans Coffee (US-Australia), Coffee Tea Bean & Leaf (USA), and Dunkin’ Donuts (USA), many have pretended to be expanding their presence in India. It’s hard to move beyond just a narrow regional presence or shop closures.
The only exception that has made serious strides in business influence as well as a growing customer following is American coffee giant and late-to-market, Starbucks. It is not just foreign series that have struggled to scale in India. Café Coffee Day, arguably India’s answer to Starbucks, has been beset with two kinds of challenges: maintaining standards of quality and keeping its balance sheet in the black. Other home cafes like Bru, which had branched out from Hindustan Unilever, started off optimistically but faltered and closed in just five years. Smaller ones like Kitchen Garden and Blue Tokai are not yet as ubiquitous as Starbucks.
Against this scenario, the Reliance brand has sent a smoke signal by announcing a long-term master franchise partnership to launch Pret A Manger coffee shops across the country. Established in 1986, the UK based company Pret A Manger now operates over 550 stores across the world. Reliance Brands, which also operates and owns the upmarket Jio Mall in the Bandra-Kurla Complex, is a business division of the Mukesh Ambani Group that has so far focused on apparel and designer lifestyle brands such as Diesel, Tiffany’s and Burberry.
Building a coffee chain in India is not an easy task. For starters, drinking coffee is a recent phenomenon, with tea being the primary choice for consumption. But the trend continues to hold strong with high single-digit growth year over year and plenty of headroom for the future. Notably, according to published research, the pandemic accelerated the purchase of instant coffee and the data also points to an increased use of coffee versus tea among the younger generation.
There is more to be successful in running a cafe in India. Like getting the product right, getting the environment right, training the employees right 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 regional business, with most of the big players having a footprint at best in a handful of states. This makes national planning complicated and time-consuming. It’s also part of the reason why Starbucks took its own sweet time to enter the nascent market. It had thought of its expansion strategy keeping in mind the benefits of partnering with a giant like Tata, which has not only a retail company but also a real estate division, as well as the country’s largest There is also a chain of hotels. The results speak for themselves. Tata-Starbucks now operates around 250 stores in about 30 cities.
Equally lovely is the smell of the alliance that Reliance has entered into with Pret A Manger. Reliance not only runs a large retail business (Reliance Retail), of which Reliance Brands is a part, but it also has malls and a significant stake in hotels (Oberoi Hotels). Also, being one of the largest business houses in the country has inherent advantages.
All of this suggests that Pret A Manger stores are likely to see a ramp-up in various locations in the near future that may expand to airports and other retail hotspots. While Starbucks has had a first mover advantage in establishing its base in India, and has managed to do business with its coffee and other beverages, it still needs to get better at food products.
It’s an obvious area that Pret A Manger that positions itself as a carrier of fresh foods and snacks in addition to coffee can score high. The bottom line is that Seattle-headquartered Starbucks may have run an uncontested run so far, but if Pret A Manger gets its location, menu, and pricing right, and of course, execution is right — and ramps up fairly quickly — A coffee contest between the two biggest Indian business houses could be on the cards. Be the unconditional winner of this fight caffeine lover.