'India is low on coffee knowledge'

‘A lot can happen over coffee’ — Cafe Coffee Day’s catch-phrase is no clever line but a statement of truth, believes K Ramakrishnan, president-marketing of India’s largest coffee chain. With 1,180 outlets and umbilical links to the Rs1,000 crore Amalgamated Bean Coffee Trading Company, CCD is synonymous with youth hangouts.  It is now striving to sensitise the “nation of tea-drinkers”

to the pleasures — and highs — of coffee-drinking. Its plan is simple: open an outlet each day to reach a target of 2,000 hangouts by 2014. In an interview with Shailaja Sharma, Ramakrishnan explains how the ambitious plan will materialise into reality. Excerpts from an interview:
 
Q: How well has your strategy of saturating a market by opening huge numbers of outlets worked? Any failures and lessons?
A: No one’s God, so you will make mistakes. But if you don’t make mistakes, you won’t gain either.

We strongly believe there is a need for a hangout at arm’s length in any location. This is because today people want hangouts in their own location or area, which are getting smaller and smaller.
They don’t have the time, energy, or mind-space to leave their homes, take a train or drive to a distant place to hang out.

Therefore, there is definitely a need for people to have places an arm’s length away to hang out.

In fact, there are so many locations where we have cafes on either side of the road — and both are doing very well. There are malls where we have more than one outlet, and one where we actually have three cafes.

This works because once people have gone from the ground floor to the first floor, they may not like to go down again to find a hangout. So, multiplication and addition of a number of malls is not a matter of choice for us.  It  is the reason we are expanding like this.

Sure enough, there will be places where we make mistakes, there will not be enough walk-ins, or it will take longer to break even… we are okay with that. The retail business works like that. At any point in time, there are at least 20% of the outlets that will not work.

Q: When you reach your target of 2, 000 operational outlets in 2014, what would the pace of expansion be thereafter?
A: Nobody ever thought a city like Mumbai can take 157 outlets. If you had asked somebody about the possibility of a number like that ten years back, they would go ‘you’re joking’. There is definitely enough scope for growth, because every city will expand even further.

For example, in Mumbai, say if 2, 000 new colonies come up ahead of Panvel, those many people there will need new hangouts.

Q: What kind of number will satisfy a player like you when there are multiple aggressive competitors entering the cafe business?
A: I’m sure the number is pretty big. I don’t foresee a situation where we have to limit this industry to numbers for the next three to four years, at least. We look at expansion opportunities by means of verticals. One important vertical for us is high street.

Then, we will look at transportation hubs like airports, metro stations, shop-in-shops — most Shoppers Stop and Crossword bookstores have Cafe Coffee Day outlets — educational institutions, corporates.

We are currently present in premium institutes like the IIM and Amity. We have in excess of 100 corporate cafes, and this vertical itself has sub-verticals. There are exclusive cafes inside corporate offices like Infosys, Wipro, TCS; then multiple offices in the same building with a common area where we have a café. The third way is through a food court in corporate campuses.

Hospitals are a new and emerging vertical. There is always a group of people waiting at hospitals, so there is a need for outlets there. The facade of a hospital today is becoming 5-star. Tourist hubs are important verticals too. We have outlets at religious places like Hrishikesh, Haridwar, Shirdi, Tirupati, Vaishno Devi.

Another part of the tourist hub vertical is places like Lonavala, Mussoorie and Ooty.  Highways are another important vertical. So, we see exponential growth. In retail, location is everything. And in the food and beverage space, you will find us being the first to move to most of the places.

Q: How much coffee does an Indian consumer understand?
A: While our company’s roots and lineage have a lot of coffee in them, we are more in the cafe business than in coffee. People come and spend their time in our cafes, and we provide a good ambience - there is air-conditioning, good music, good service and beverages.

At this point, 60% of the store is coffee, but there is a good 40% that is tea, smoothies, and we are shortly going to be launching a new range of tea. So we are neutral to the beverage. We know that we are about providing the right hangout and surrounding it with beverages. But that beverage need not be coffee.

Q: The second way of looking at it is, there is 60% coffee in our cafes and we have expertise in coffee. So how we can hold on to that expertise and build knowledge?
A: India is low on coffee knowledge. While cold-coffee is loved, consumption of black coffee is very low. We are working on this in many ways. We hold coffee festivals to tell people how coffee is made at home. We also hold demonstrations. We constantly do research to improve and we have some of the best blends in the world.

The south Indian palate is different from the east Indian one. To use and extend our lineage, we want to make these blends available in packs for people to use. If you look at it, there is still a large part of India that has still not entered a cafe with the assumption that ‘I don’t drink coffee’. So, how to make people realise that there are options for them other than coffee? That is something we are working on.

Q: Do you intend to start selling your own food and beverage products through other retail stores?
A: It’s a vision that we have that our coffees and cookies should sell out of other retail chains as well. Sometime in future we will look at that. At this point in time, we are just building knowledge.

Q: All cafe chains in the country put together would be around 1, 500-1,700. Over the decade, can we expect the number of outlets to double?
A: Easily. By end of the decade, India should be having 5, 000 outlets. And hopefully, we will still have the mindshare there.