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Younger Indian consumers now prefer cafes over quick-service restaurants

Large chains like Tata Starbucks, Costa Coffee, and Barista have highlighted India as a top growth market, growing in double digits

cafe chains in india

BS Web Team New Delhi

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Cafe chains in India are currently expanding more quickly than quick-service restaurants (QSR) because younger, aspirational consumers more frequently choose to gather and hang out in cafes despite expensive menu prices, reported The Economic Times (ET), citing executives.

Large chains like Tata Starbucks, Costa Coffee, and Barista have highlighted India as a top growth market, growing in double digits.

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On the other hand, new global entrants like British chain Pret a Manger and Canadian chain Tim Hortons, as well as new-age specialty coffee chains like Blue Tokai, Third Wave, and Slay are leveraging a thriving coffee culture.
 
“We have achieved sales and transaction numbers exceeding our expectations, indicating strong demand,” said Tarun Jain, chief executive of Tim Hortons, which is in its first year of operations in India.

Growth of coffee culture

Tim Hortons has expanded into India in partnership with AG Cafe, a joint venture owned by investment manager Gateway Partners and fashion and retail conglomerate Apparel Group. By 2026, the company intends to open 120 stores.

Meanwhile, India was named one of Tata Starbucks' core growth markets in a management commentary following the company's fourth-quarter earnings. The company crossed sales of Rs 1,000 crore in 2022-23.

The Tata Group and Starbucks joint venture added 71 new stores in the latest fiscal year, which was its fastest annual expansion, bringing the total number of stores to 333. In comparison to competitors like Cafe Coffee Day (CCD) and Costa Coffee, the company is expanding quickly despite its premium pricing.

Taste for cafe chains

Chain cafés have become popular among investors as well.

While Blue Tokai Coffee Roasters raised $30 million in a funding round led by A91 Partners in January, Third Wave Coffee Roasters raised $20 million from WestBridge Capital last year. Local partnerships are also being strengthened by international chains like Carvel and Cinnabon.

Coffee Day Enterprises, the company that owns the domestic Cafe Coffee Day chain, reported a 75 per cent increase in revenue year-on-year (YoY) in FY23, despite the chain's reduction of its store count to 469 outlets due to high debt and alleged financial mismanagement.

Cafe chains vc QSR industry

According to Statista Research, the country's coffee cafe franchise market is thought to be worth Rs 5,000 crore and is expanding at a rate of 8-9 per cent annually.

In comparison, the QSR industry -- which has a much bigger base of an estimated $16.72 billion, or about Rs 1.38 trillion, in 2023, according to market research firm Research and Markets – continues to slow down amid increasing growth pressure.

In the previous two reported quarters, the majority of QSR chains in the nation either reported flat same-store sales growth or a decline of up to 5-6 per cent, it added.

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First Published: Jul 06 2023 | 1:18 PM IST

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