UK-based Costa Coffee ranks among the leading coffee house chains in the world with nearly 4,000 stores and distribution points. Competing head-on with rivals such as Starbucks, Costa’s future action will be centred in Asia, where it intends to set up base in markets such as Singapore, Thailand and other parts of Southeast Asia. It is currently present only in India and China. In this interview with Viveat Susan Pinto, Andy Marshall, MD, international markets, Costa, lists his priorities for India as well as Asia. Edited Excerpts:
How important are India and China for Costa given that your attention is now here?
Whilst we have been present in India and China for almost seven years now, these markets will form the backbone of what we do internationally as we go forward. We took a bet on India and China, when we stepped here seven years ago and are pretty satisfied with the way we've moved in these markets. We will touch 200 outlets in China in the next two months. We have already touched 100 outlets here in India.
You have opted for a franchise model in Asia as opposed to a 100 per cent ownership in countries such as the UK. Any particular reason for this?
We have a franchise model in India, yes, but in China, it’s a 50:50 joint venture agreement. We have two JV partners in China. As far as UK goes, we have a 100 per cent ownership model, but it is not as if we are not open to the latter in Asia.
Your pace of growth in India has been tad slower than China despite you stepping into the former first. What has been the cause for this?
Don't forget there are two JV partners in China. So the market is divided between the two. In India, we have one partner. If you look at it partner by partner, we would be growing at roughly the same pace in the two markets. But going forward, yes, I do see China overtaking India in terms of pace of growth. Why is that? Because of the level of development in China. It would be fair to say that China has developed ahead of India. This boils down to the premium that Chinese are willing to pay for their coffee experience. Pricing is key to the coffee business model. I find that Chinese are willing to pay nearly $4 for coffee there as opposed to $2 here. These things make a huge difference.
Costa is a premium coffee chain, with the average ticket size by Indian standards anywhere between Rs 200 and Rs 300 for two people. Is that market beginning to take off?
Yes, I think so. There is a section of the population which is salaried, educated and wants a slightly premium coffee experience. I find there is a sizeable chunk of this population residing in the cities and it doesn't mind paying that extra buck if required. This market is what excites us.
With your archrival Starbucks set to step into India, does that worry you?
I am not frightened by that. For the Indian consumer, it’s a great opportunity. The sector is opening up, there are so many players. That brings with it ample choice. Indians are increasingly wanting to step out and socialise over a cup of coffee. In my view, these are exciting times.