The market for cafes in India is growing by 25 per cent every year and this number is expected to grow fourfold over the coming years.

From highway rest-stops to urban centres, coffee chains have sought to setup-shop in all locations throughout the length and breadth of the country, spawning a culture of coffee drinking. Now, meetings over coffee, a date, or perhaps, a meet-up with friends has become a commonplace practice at such cafes.

Coffee drinking is no longer limited to being an act of consumption, today, it’s also an experience.

The defending champion

With a 15-year head start in the Indian coffee market, Café Coffee Day (CCD) dominates over 60 per cent of the market in terms of outlets and industry share. With a plan to open over 2000 cafes by 2014, CCD is working on deepening its engagement with customers and expanding its network. On the other hand, is Starbucks, as a new entrant, it would be unable to ascertain consumer taste, price sensitivity and market dynamics so early on in the day.

Starbucks will have to pull all stops in terms of location, pricing and a menu mix, in order to lure its potential customers from competitors; a daunting task for a brand internationally renowned for niche-marketing itself as a ‘premium coffee chain’.

At present, CCD’s presence at every nook-and-corner possible, from petrol bunks to educational institutions gives it a first-mover advantage over its future competitors in India.

Uphill task

With real estate costs escalating, and most locations being tapped already, along with an effectively priced menu by the market leader, Starbucks has some major breakthroughs to make in order to expand. To retain its customer base, CCD has been on an innovation drive over the past 15 years and needs to continue doing this, highlighting itself as a brand targeting the youth (the majority), and as one which provides value for money. In order to expand further and cover the existing gaps in the market, CCD needs to venture into untapped locations such as religious spots, and should setup more kiosks in university campuses. Apart from this, offering facilities like wifi connectivity across different formats, and adding more items on the menu (especially in the Indian-style naming convention) in keeping with the local palette would give an edge to CCD over other players.

Trend forecast

Based on market trend predictions, the number of cafes will increase by 2000-2500 in the next few years, and many brands have their eye on India. While Starbucks may take over the premium segment, the popular market will continue to be dominated by CCD.

(Mayank Popli is pursuing an MBA atDelhi University’s Faculty of Management Studies.)