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Coffee Cafes are spreading beyond Gen Z and Millennials in India

Largely a tea-drinking nation, India is also slowly but steadily falling in love with coffee cafe culture. Once k.....

February 4, 2024
Posted by: Admin
Categories: Retail Sector

Coffee Cafes are spreading beyond Gen Z and Millennials in India

Largely a tea-drinking nation, India is also slowly but steadily falling in love with coffee cafe culture. Once known to be student meet-up points and dating joints, coffee cafes are now becoming popular amongst various age groups cutting across professions, genders, and societies.

The country has seen a sharp rise in coffee cafés comprising, both specialty and chain outlets. As per the research by The India Watch, India has currently close to ~2650 coffee café outlets. Out of this, chain outlets comprise 89.8% (2380). Others are mainly branded specialty outlets.

Annually, the coffee café business in India is clocking revenue of over INR 3000 crores, growing at a CAGR of 41.6% in the past 4 years, from FY 21 to 24. After being hit hard during the pandemic, the sector is recovering fast with major brands aggressively expanding.

The market has a healthy mix of indigenous (Café Coffee Day, Blue Tokai, Hatti Kapi, Barista, and Indian Coffee House) alongside international brands (Starbucks, Costa Coffee, Gloria Jeans, Coffee Beans Tea Leaves, Di Bella, Tim Hortens).

What is driving growth in India’s coffee café business

Till the '90s & 2000s, coffee cafes were limited to big hotels, and resorts apart from a few branded high-end coffee shops. However, in the 2000s, amidst the growing influence of globalization on average Indian households, coffee businesses have grown at a notable pace. Multiple factors are fueling the growth of the segment

Millennials and Gen-Z are some of the biggest patrons of café culture in India. Meanwhile, other age groups have also started liking cafes as a place to hang out, socialize, meet over a business discussion, etc.

In a largely tea-drinking nation, coffee is becoming popular. It is no longer just limited to Karnataka and Tamil Nadu (where once it was mostly consumed). In the past we have seen, how tea-drinking countries such as the UK, Russia, and Japan have embraced coffee with open arms. India is now on a similar trajectory.

Corporate vending machines in modern offices and readily available instant coffees in retail outlets have introduced a wide portion of the Indian consumer class to the idea of coffee.

Many cafes are no longer just limited to coffee and finger foods but offer a wide range of fast foods, desserts, and other food items. Given they are generally cheaper than many fine-dining restaurants, their relevance as places to eat out is also picking up. In the light of nuclear family culture, the uptrend will further go.

The growth of café culture in India can also be linked to some extent with the country becoming a bastion of start-ups. Many start-up ideas are born in coffee shops. For early starters, cafes with their unique ambiance, gastronomic indulgences, and free internet are the place to work in initial years.

The growth of powerful food delivery systems such as Zomato, Swiggy, Uber Eats, etc. now makes it very easy to order coffee online and get it delivered to their place.

In the early 2000s, the concept café mostly revolved around limited espressos, lattes, and cold coffees. However today a wide range of specialty coffee products is available. Many cafes these days have their micro-roasters installed.

Challenges in Coffee Café Business

There are poignant challenges in running a coffee café venture in India, despite a significant jump in popularity of such places in the last decade. This is the reason many cafes are poorly run and barely make any substantial profit.

Higher cost: commercial real estate prices have soared in recent years, especially in popular urban neighborhoods and high streets. This can greatly burden a café owner, wherein he/she might have to pay 20-25% of the revenue towards rentals.

Manpower: Hiring the right human resource including baristas chefs, serving staff, support staff, accountants, etc. is not very easy.

Serving portion challenge: It is important to have the proper knowledge and utensils to serve the right portion. Not doing so can affect the profitability.

Feasibility Services to Start a Coffee Café in India

Successfully running a café business in India requires putting the right strategy in place, gaining deep insights about the consumers & market, and managing challenges effectively.

Without doing the right groundwork and starting the business based on sheer hunch might be counterproductive. A good approach is to prepare a feasibility study or a market study to make informed decisions. This will greatly reduce risk and enhance the chance of profitability.

A feasibility study can also help in the case of fundraising. If you are looking for feasibility or a custom market research solution, feel free to drop us an email at info@theindiawatch.com