The Battle for India’s Coffee Drinkers in Buzzing Economy

A showdown in India over coffee is creating new opportunities. It is also demonstrating how the country is changing, with rising incomes in some places and great disparities in others.

Finding the right place to have a coffee and meet with friends for a chat is important to many urban Indians. And the fight is on for these customers.

Older establishments like the legendary College Street Coffee House in Kolkata (http://en.wikipedia.org/wiki/College_Street_Coffee_House) – owned by a cooperative society – compete with new rivals modelled on the popular American chain Starbucks (http://www.starbucks.com/). This fierce competition takes place in an economic environment of rising food inflation of up to 16 percent this year and economic growth surpassing seven percent.

Coffee is the second most popular drink in India after tea. Its consumption has been steadily growing over the years, rising from 50,000 metric tonnes (MT) in 1995 to 94,400 MT in 2008 (Coffee Board of India). Once mainly drunk in the south of India, the taste for coffee has spread around the country with the rise of fast-paced modern lifestyles. The caffeine (http://en.wikipedia.org/wiki/Caffeine) jolt of a cup of coffee is attractive to people on the move and working hard.

India also holds its own as a coffee growing and exporting nation, accounting for about 4.5 percent of world coffee production and the industry provides employment to 600,000 people. The state of Karnataka accounts for 70 percent of country’s total coffee production followed by Kerala (22 percent) and Tamil Nadu (7 percent).

India has the domestic demand, and it has the product. And now a bitter battle for the nation’s coffee drinkers is underway. The difference between what is on offer at the cooperative-run coffee houses and the newer establishments is stark: at the older places, service is old-fashioned – waiters in white suits deliver coffee and food to tables – with a no-frills menu on offer. Coffee comes in simple forms: black, white, cold, hot for eight rupees (US 0.18 cents). At newer establishments, coffees come in many varieties and permutations, flavoured and with added extras. Menus also can be varied and establishments can include things like internet access.

The appeal of the older establishments is price.

“It’s good here because it’s cheap,” College Street Coffee House customer Arindam Chouwdhry, 19, told The Guardian newspaper. “We can’t go to these new places. We are from the middle class only.”

And turnover is brisk, according to manager, Deepak Gupta. “We serve up to 1,500 cups a day. Business is good.”

Owned by the India Coffee House chain (http://en.wikipedia.org/wiki/Indian_Coffee_House), a worker’s cooperative society with 400 outlets across the country, the Coffee House was established in the 1950s with the mandate to serve cheap food and drink and act as a meeting place. It attracts workers, intellectuals and political activists. But with the huge economic changes in India over the past decade, traditional coffee houses are facing fierce competition.

In the state of Kerala, home to avid coffee drinkers, 15 of the cooperative’s 50 branches are now losing money. In the capital, Delhi, a further 10 coffee houses have closed. Things are so bad for these traditional coffee houses that the most famous branch of the Indian Coffee House has not paid its rent for years and is waiting to be closed by the municipality.

“The younger crowd seems to go elsewhere,” said its resigned manager, Janak Raj.

In many countries, coffee houses have become essential tools for economic development. They not only offer a stimulating drink, but a place to hang out, meet friends and business partners, catch up on news and access the internet. This role in economic development can be found as far back as the coffee houses of Europe during the beginning of the industrial revolution: deals were struck and people could meet the like-minded to hatch business ideas.

Coffee houses and cafes also reflect the economic and social changes in Indian society. They have come to be status symbols, showing what economic power you have achieved. And as services and quality change, they show how the level of prosperity changes.

New competitors to the cooperative coffee houses’ are offering a more modern environment to lure in a trendier crowd. Café Coffee Day (http://www.cafecoffeeday.com/index.php), which claims to be India’s largest chain coffee shop, with the motto “where the young at heart unwind”, has air conditioning, mirrors, comfortable chairs and posters on the walls for decoration. And the price is different as well: choco-frappes go for 95 rupees (US $2.11).This price means the customers need higher incomes to afford to go there.

“McDonald’s is the cheapest hangout and everyone can go there,” said a customer, Sima. “This is much nicer and only a bit more expensive so we come here. But only a few people can go to Barista’s.”

The chain Barista’s (http://www.barista.co.in/users/index.aspx) is 10 years old with 230 outlets. It is growing fast with 65 more new outlets opening this year. According to its head of marketing, Vishal Kapoor, Barista’s does not simply offer coffee, but “an overall experience.”

They bill themselves as “crème” cafes: places where salads and smoothies are on offer beside the coffee.

“It’s very exciting what is happening in India,” Kapoor said. “The classic coffee houses are part of an era that is ending.”

“People use the cafes as places to meet for privacy. “It is a kind of private space,” says Ruchika, a bank worker.

Nonetheless, despite its success, Barista’s is still too expensive for most Indians.

By David South, Development Challenges, South-South Solutions

Published: April 2010

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Afro Coffee: Blending Good Design and Coffee

 

The importance of good design and a strong brand in the success of a business cannot be emphasised enough. That extra effort and thought can take a business from local success to regional and even global success. As consultants KPMG make clear, “For many businesses, the strength of their brands is a key driver of profitability and cash flow “. Yet the majority of small businesses fail to think about their brand values or how design will improve their product or service.

The case of Afro Coffee from Cape Town, South Africa shows how a small and humble café can raise its ambitions and its profits. It re-vamped its modestly successful café into a brand with global ambitions. By undertaking a thorough and comprehensive brand development inspired by the colourful vibe of Africa, Afro Coffee has built a consistent image from the design of its café and shop to its wide range of branded teas, coffees and fashion wear – all sold in the café, on the web and through distribution deals with other shops.

“It started out as a café in downtown Cape Town,” said founder Grant Rushmere. “Our concept was to harness a Pan African view of contemporary urban Africa. The pop art nature of African design inspired us to create our own brand of coffee instead of the usual Italian coffee that most cafes use. Our goal was to refocus people to the origins of coffee – that it in fact originated in Africa before being discovered by the Arabs and from Yemen, exported around the world. Many people don’t know this, so we attempt to capture and celebrate this African spirit in our packaging and all we do.”

Afro Coffee had started out as a simple café. But after a major re-design and adoption of a new concept, the café has become a global brand and expanded into a branch in Europe. By infusing the spirit of Africa and its design aesthetics into all aspects of the café and its products – coffee, tea, fabrics, fashion – Afro Coffee has been able to develop a seamless image that is unforgettable.

Rushmere was joined by two Austrian partners to help with building the new brand and facilitating its global launch. “Design and branding have been a passion of mine,” said Rushmere. “and these are realized through the Afro Coffee brand and the fun merchandising we develop. One of my partners has an international network of advertising agencies and the other has developed and owns a world-leading brand. With their experience, I will continue to guide the development of Afro Coffee.”

Afro Coffee’s website includes a video tour of the café and introduction to the ‘Afro dude’ character and a short cartoon video adventure. To help develop customer loyalty, the café has live bands three times a week from across Africa.

“Our mission is to communicate the joys of Africa through our Afro Cafes and our Afro-branded products. The fact that the African people are so wonderfully not self-conscious at all, with their humour and freedom and their style and design. Hopefully we can convey this spirit and enhance the lives of people who consume our product and sip coffee listening to Afro Tunes at our cafes. For South Africa, we try to show just how cool Afro culture actually is and instil a sense of confidence into people to make them realize what they already are – lofty ideals but we’ll have a go!”

As the brand developed, a range of teas were produced using only African teas like Rooibos, a non-caffeine root. The next to come was fabrics based on West African religious clothing. They became table cloths and were so popular, they moved into combining them with leather to make Afro Bags – all part of expressing the lifestyle that inspires the brand.

Distribution deals have been done to distribute the teas and coffees throughout South Africa and in Europe. The clothing range is now available on their online store (www.afrocoffee.com).

Its African-infused design for its coffee stand won the Design Indaba 2007 Award, South Africa’s design magazine and exhibition. Also designed by Peet Pienaar, it is inspired by Ghanaian woodwork and Kenyan coffee. The stand is a giant stiletto shoe stacked with tins of teas and coffees and an over-sized radio that doubles as a counter top.

Afro Coffee is proof a small business can grasp a bigger concept and in turn become a bigger success. It has been so successful, it has opened a new branch in Austria, begging the question: maybe this once-humble café is on the road to being an African Starbucks?

By David South, Development Challenges, South-South Solutions

Published: July 2007

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Like this story? Here is a dirty secret: this website is packed with stories about global South innovators. We spent 7 years researching and documenting these stories around the world. We interviewed the innovators to learn from them and we visited them to see how they did it. Why not use the Search bar at the top and tap in a topic and see what stories come up? As for my work, I have been involved with start-ups and media ventures since the early 1990s. While most tech entrepreneurs were either still in their nappies in the 1990s (or just a drunken night away from being conceived in the 2000s), I was developing content for this new thing they called the "Internet". In the years since I have learned a great deal about innovation and digital and have shared these insights in the stories on this website as well as in the 5 issues of Southern Innovator magazine. So, stick around and read some more!    

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