The Italian connection SRAVANTHI CHALLAPALLI

R. Shivashankar, Director, South Asia

It's turning teenager and has added an Italian name in recent years, but to most people in India, it's still the Barista of the leisurely cappuccino and sandwich. Thirteen years in India have seen it go through much change in management, the most recent being in 2007 when the Turin, Italy-based coffee roaster Lavazza acquired it.



Barista is now entering a new phase, says R. Shivashankar, Director, South Asia, whose job it is to increase the India business' contribution to the €1.2-billion (Rs 6,870 crore) Lavazza. Its turnover a little over Rs 200 crore, Barista will be remembered as the pioneer and “true introducer” of the café culture, he says. Birthday resolutions include turning the company around through cost control, new products and expansion – adding 50-100 more stores, quite a few more upmarket ones – in the next three years; it has 160 now.

Steaming up the market

Shivashankar credits Barista with playing a significant role in the growth of coffee consumption in India, which, he says, has grown at a CAGR of 5 per cent. It also had a lot to do with coffee, essentially a South Indian drink, spreading to other parts of the country, which is a tea-quaffing nation. (For every seven cups of tea consumed, only one cup of coffee is had. The per capita consumption in India is 80 gm, compared to 6.5-7 kg in some parts of Europe.)

The café business, Shivashankar says, has slowly but surely created a need for coffee both at home and away from home. With the Indian coffee retail market set to grow at 40 per cent per year there is a major change in consumer perception over the years and its popularity now. He also claims credit for Barista providing holistic experiences and keeping things fresh with new menus and customer engagement activity that runs the gamut from Scrabble contests to tarot readings.

Harish Bijoor, brand strategy specialist and CEO, Harish Bijoor Consults, who has extensive experience in the coffee business, observes that in many ways, the café revolution's story here has been one of inventive re-engineering to suit Indian desires and aspirations. He credits Barista with adding “ambience cues to the café that then became a trend”. “It opened up a new adda for the young and the well-heeled. It got youngsters who would otherwise hang around and meet outside a hot Priya Cinema, to walk in and date at a cool joint called Barista.”

However, its undoing lay in its correcting its price and offerings to match competition, in the form of Café Coffee Day. “The low-cost bug bit Barista a bit too early in its life-cyle,” says Bijoor. While the image remained reasonably intact, profit-lines sank. “You just cannot be a low-cost cafe player and continue to offer high-cost stuff in terms of location, ambiance, food, beverage and more. In many ways, what bit Air Deccan hard and tight, bit Barista as well,” he remarks.

Barista Lavazza's other business in India is that of vending coffee beans and machines through Fresh & Honest Café. This accounts for the larger part of the business, at 60 per cent. K. Sivakumar, Chief Operating Officer, says this business has nearly 75 per cent share of the four- and five-star Horeca (hotels, restaurants and cafes) categories. “It's a freshly-brewed, real coffee experience at the touch of a button,” he says.

As the company grows older, it's slated to take on a more global role. A €20-million factory to roast and grind coffee beans is coming up at Tada in Andhra Pradesh. It will serve the Indian sub-continent at first but is envisaged to be Lavazza's manufacturing hub for the Asia-Pacific region in the near future. Lavazza, in fact, has plans for India becoming its second largest revenue generator, next only to Italy. Currently, India contributes only 3 per cent. Barista Lavazza claims a 15 per cent share of the organised café retail market of 1,600 cafés in India. It has operations in Sri Lanka, Oman and the UAE.

Intensifying-Italian

In the days ahead, the focus will be on offering a larger, and more Italian, experience in its cafes, says Nilanjan Bhattacharya, COO, India and SAARC at Barista Lavazza. The cafes occupy three formats: Espresso bars are the starter – and most widespread – versions; Crème are more high-end, and Espression, Lavazza's international format of café, offers premium fine dining and Italian cuisine, replete with its own kitchen and a global, Lavazza look and feel. The second one in India opened just last week in Bangalore; there is one in Delhi.

Along with the Italian taste and feel, there'll be a lot of Italian brand as well, say the executives. Bhattacharya says the Lavazza brand will be consolidated in multiple ways through brand equity, coffee quality, stores and service quality.

In fact, Lavazza has said it will do away with the Barista brand ultimately. “A crime”, says Bijoor, because the name carries fond and affectionate memory tags. Also, bringing a piece of the Italian café into India cannot be a low-cost venture, and that would make Barista a niche player in the Indian market, he adds.

Ask about the growing competition in the café arena, from the other home-grown teenager Café Coffee Day (which now has over 1,200 outlets) to Costa Coffee and Gloria Jean to the latest entrants Dunkin Donuts and Starbucks, and Shivashankar says Barista will co-exist. The outlook for coffee and cafés is extraordinarily bright, there are some very big players coming in and coffee consumption is bound to go up, he says.

Harish Bijoor says the dominant players in this space, over the next couple of years, will be Dunkin Donuts and Starbucks, in that order. As the market steams up, it will be interesting to see where Barista settles. Says Bijoor: “In a country the size of India, and in a country with a set of aspiring consumers as ours, every brand will enjoy its own space. If Barista plans a growth of 30 cafes in the span of the next three years, that in itself is writing a self-fulfilling prophecy of being a niche player in a market that will grow at the pace of 400 cafes a year over the next three years.”

BL