'There may be a shakeout'
Q&A: Nabi Saleh, Executive Chairman, Gloria Jean's Coffees
Specialty coffee chain Gloria Jean’s Coffees, which silently entered India two years ago via a master franchise agreement with Citymax Hospitality, a company controlled by the Dubai-based retail group Landmark, is looking to ramp up operations now. From the current nine outlets, the intention is to scale up to 25 and then 100 by the end of 2013. This will see the privately-held coffee chain, which has 917 outlets globally, go to 16 cities from the current four. Nabi Saleh, the New-South-Wales, Australia-based executive chairman of Gloria Jean’s Coffees, talks to Viveat Susan Pinto about the company’s plans in India. Excerpts:
What took you so long to ramp up operations here despite a presence since the last quarter of 2007?
We are not into growth for growth’s sake. We believe in the franchising concept like most other fast-food and coffee chains, but we choose to scrutinise our partners carefully. We are fine if they take their time when setting up operations in a country. We have master franchise agreements in 35 countries. We understand how it works. There is no point in rushing in to set up stores only to shut half of them down later. This is, at the end of the day, a retail business. You have to guarantee foot falls. How do you do that? With a first-class service offering that targets the right consumer.
How different is Gloria Jeans from other coffee chains?
The big differentiator is that we do not outsource our back-end operations to third-party vendors like other coffee chains do. Operations such as sourcing, roasting and blending are all done in-house. We have a team in place that directly sources single-origin coffee beans from growers across the world. At the moment, our team is sourcing from over 26-27 coffee-growing nations across the world.
To us, coffee is our hero. So everything emanates from there. We have something called a coffee university, where we train our staff rigorously. Even our master franchisers are invited to participate in our programmes at our university. There is a certain degree of localisation we permit to suit the palate of people in the region. But there is a broad template we follow over and above that. That is our signature style.
Who is your target audience in India? It is the up and coming middle class. We could have people from above or below this catchment walking into our outlets, too. That is not an issue. But we have positioned ourselves in a manner we feel would appeal to upper middle class Indians.
But how competitive are you on pricing in India?
We are quite competitive. A Gloria Jeans cappuchino, for instance, costs anywhere between Rs 49 to Rs 55 for a 230-millilitre cup. Competition provides lesser volume, 180-millilitres, I understand, for the same price. A consumer would land up spending anywhere between Rs 49 to Rs 110 depending on what he or she purchases at our outlets. It’s not a such a bad deal, if you ask me.
This includes coffee and the food that you purchase alongwith it. In India, our partners are offering Indian and continental food. The menu here has 43 items, which is constantly being beefed up at the same time. Consumers like it when there is something different on offer.
How long does your franchise agreement last with Citymax Hospitality in India?
Fifteen years. The agreement allows for setting up 500 outlets. But we could always cross that number depending on how the business prospects are in the country. We are aware that international coffee chains are making a beeline for India. Some are here including us along with local players such as Cafe Coffee Day. But, for now, there is room for all. There could be a shakeout in the future given the rush to expand among players. But if your model is time-tested and full-proof, it will last.