Barista plans expansion, stamps down rumours of winding down brand

The country's oldest coffee chain unveils a franchise-led expansion and diversification plan

The company has been getting ready for Barista 2.0 says Puneet Gulati, CEO of Barista. With a franchise model in place, a new tagline that says ‘No one blends like Barista’ and a line of products aimed at millennial consumers, the coffee retail chain that has changed hands four times since it was first set up by a group of young entrepreneurs back in 2000 is looking at a fresh start for its brand. The big roadblock however will be keeping its efforts consistent, convincing consumers that it is here to stay and most importantly point out analysts and marketing experts, fight the giants in the marketplace today: Café Coffee Day (CCD) and Starbucks.   

“We were waiting to organise ourselves so that we create the Barista 2.0 story. That’s the reason people may have felt that there was some kind of slump, four to five years back,” said Gulati. He is referring to the years when the chain had just found a new owner under Carnation Hospitality, a company under auto component maker Amtek group. Carnation is its fourth owner, buying the brand from Italian coffee makers Lavazza when they decided to walk away from the business in India. Given the inexperience in consumer retail of its new owners and the rapid strides with which Café Coffee Day and Starbucks had spread their footprint in the country, it was seen to be the end of the road for Barista. 

However, the company says it was merely getting ready for the big stage. And perhaps taking a leaf out its competitors’ books, Barista has decided to expand the brand via a franchise model. Gulati says that they started aggressively franchising the brand out to partners and over the last 2-3 years, the company has added about 10-12 franchisees per quarter. By the end of 2018-19, the group would have added 40 new franchisees and added 7-8 stores to the owner-operated list. 

Bringing franchisees on board is fraught with risk, given the challenges that several retailers have faced with quality and consistency. This is particularly true of the quick-service-restaurant (QSR) category where the art has been honed to near perfection by brands such as McDonalds. 

Is Barista ready for such rigour? The franchisee-model was built in a four-stage process by taking feedback from brand loyalists and non-Barista customers, Gulati says. It was through this engagement that the company came up with the new tagline too, implying that more than the food, the space and the location, the brand is about the brew. And franchise owners are being briefed thoroughly on the brand value and service ethic to further the same.

The company has heightened its pace of expansion this year, even signing a new digital media agency to push the brand more aggressively on social media where it reaches out to the core customer, the millennial. It has also launched a new sub-brand for smoothies and shakes called Quenchers and a line of premium chocolates that will be retailed outside its own stores as well, called Choc-o-affair. It also plans to bring out branded coffee and cookies soon. And like all the chains today, it is focusing on the food it serves as much as it does on the brew.

“We provide 100 per cent Arabica coffee and that (taste) has been liked by almost everybody I speak with and various researchers. That is one very strong brand positioning we have taken. Now to reinforce that positioning and to ensure that the millennial is also on board, we have created the sub-categories. One is the Quenchers, apart from the coffee offerings we have also moved into the smoothies and shakes and we are also doing it on a very exciting take away bottle,” he said. Since its launch in the summer of 2018, the group claims that Quenchers is growing at 17-18 per cent.

 

Apart from the product and brand overhaul, Barista cafes are also going through a makeover. Brighter colours and a new look, the company believes will help present the old brand in new light and offer consumers a fresh perspective.

Gulati sees potential in the coffee retail business despite the presence of the big brands and their wide footprint across the urban-metro landscape. The top 10 players together may have around 2,200- 2,300 stores in a category which is churning out around between Rs 18-19 billion worth of topline. Gulati categorises Barista as a speciality coffee chain and claims it has 10.5-11.5 percent market share and the category is growing at about10 per cent annually. The metros are seeing a growth of 8 per cent, while tier-1 and tier-2 cities are growing at 25-30 per cent. CCD is the market leader.

While building its retail network, the company is also keen to provide more opportunities for purchase for the Barista brand. Hence the move to take chocolates (to start with) into retail outlets outside its own. The company will also sell packaged coffee and cookies. For communication, the medium will largely be digital, says Gulati because that is where Barista's target customers are. 

The message will be different for different products but the idea running through all the campaigns would be to keep the focus on the brand’s association with purity and quality, an association that it is currently building via the communication for its coffee blends. The company expects its FMCG (fast moving consumer goods) distribution outlets will grow from 175 in 2017 to 1,400-1,500 in 2020, while Barista stores would number 250 in March 2019 from the existing fleet of 200 stores.