Costa gears up to combat Starbucks

Costa Coffee, which has been slow in expanding its India footprint, is stepping on the gas that's because the world largest coffee chain, Starbucks, is getting ready for its grand Indian debut, reports Farah Bookwala of CNBC-TV18.

There's a war brewing in India's Rs 1,000-crore cafe market as the UK-based Costa will take on new entrant, US-based Starbucks. With three months to go for Starbucks' India debut, Costa is shoring up its defences. 

Costa will set up 100 more outlets across top eight cities over the next two years with each multi-format outlet costing Rs 60-70 lakh.

Santosh Unni, CEO, Costa Coffee India, says that we have to a certain extent pushed the pedal in the last two years and we will continue to do that because we believe that we've reached a stage where at least in the cities that we exist - which is Mumbai, Delhi, Banglore and Pune - the market is now getting ready to accept format such as ours.

This aggressive stance is new to Costa, which, over the last six years, added only 100 stores across India, while mass-market coffee chain Café Coffee Day added 1,200. But Costa says it understands the Indian consumer better than Starbucks.
 
"We have a plan in place and we will continue with that plan and I believe that should take us through and give us the advantage that we already have of being in this market for 6 years before anybody else," says Unni.

Analysts say this expansion will help Costa, but add that Starbucks is not a threat.

Arvind Singhal, President, Technopak Advisors, says that even if there are three coffee shops right next to each other like Satrbucks, Costa or Lavazza or anybody else, there are enough customers for each of them so at this time, Starbucks entry is not likely to pose any threat to any of the players in India including Costa.

With Barista scaling down its presence, Costa has become the No. 2 player in India and it is betting on this expansion to not just take on Starbucks, but also maintain a 20% growth in like-to-like sales.