Coffee cafes have long been the go-to place for a quick caffeine fix or a cozy spot to work, socialize, or unwind. However, the coffee market has recently faced significant challenges, pushing even the most iconic brands and local favorites to rethink their strategies.
Well-established Café chains like Starbucks, Barista, Chaayos, and Third Wave Coffee are struggling due to reduced consumer spending, evolving consumer preferences, and fierce competition. The impact is harsher on the retailers because they opened hundreds of new stores last year despite increasing losses. In some cases, this resulted in the same retailer opening multiple stores in the exact location, which slowed their growth rather than expanding the market.
However, smaller brands like Tim Hortons and Blue Tokai have surprisingly avoided these challenges. Let’s examine what’s happening in the world of coffee businesses.
Sales Growth Trends of Different Coffee Brands
Growth has slowed across several major coffee brands. Barista and Chaayos saw their growth rate fall from nearly 70% to just 5% in FY24. Starbucks’ sales growth declined to 12% in FY24 from 70% in FY23. Third Wave’s sales growth dropped to 67% in FY24, down from 355% the previous year. Cafe Coffee Day posted a 9% growth in FY24, a sharp drop from 59% the year before.
Brands Defying the Trend
Tim Hortons more than doubled its sales in its first full year of operations. Blue Tokai bucked the slowdown with a 70% growth in FY24, slightly down from 73% in FY23. Tim Hortons, the Canadian coffee chain that opened its first outlet in India in 2022, aims to have over 100 stores in the next three years. Similarly, British coffee and sandwich chain Pret A Manger, which launched its first store in Mumbai through a franchise agreement with Reliance Brands, plans to open up to 100 stores in the next five years.
Target Market and Pricing
Most coffee chains price their cups between Rs 250 and Rs 350, aiming at wealthy coffee lovers who appreciate special brewing methods and unique experiences. This narrows their customer base. Since 2022, the number of coffee outlets has increased, with new and established brands expanding. As a result, the number of cafés in larger cities has risen significantly in recent years.
Coffee Market in India
The Indian Coffee Market was valued at USD 478 million in 2022 and is projected to grow to USD 1,227.47 million by 2032, with a CAGR of 9.87% from 2024 to 2033. India’s domestic coffee consumption has risen significantly over the past five years, driven by the expanding middle class and growing awareness of coffee culture.
Furthermore, roasted coffee and instant coffee were the most popular segments consumed by Indians.
Key players operating in India’s coffee market
| Araku | Blue Tokai | Bloom Coffee Roasters |
| Bru | Café Coffe Day | Continental AG |
| Country Bean Coffee | DAVIDOFF | KC Roasters |
| Narasu’s | Nescafe | Sleepy Owl Coffee |
India’s Coffee Market Segmentation:
| By Product Type | Whole Bean, Ground Coffee, Roasted CoffeeInstant Coffee |
| By Form | Coffee Pods, Coffee Capsules, Coffee Powder |
| By Generation | Gen Alpha, Gen Z, Millennial, Gen X |
| By Distribution Channel | Hotel/Restaurants, Coffee Shops, Supermarkets/Hypermarkets, Specialty Stores, Convenience Stores, Online |
Changing Market Dynamics and the Impact on the Industry
The overall slowdown in the coffee market, combined with the growth of smaller chains, indicates broader changes in India’s café culture. Several factors are contributing to these changes, including the economic slowdown, rising inflation, and shifts in consumer spending habits.
The quick-service restaurant (QSR) sector, which includes coffee chains, has also felt the effects of this slowdown. Experts argue this is a broader issue related to consumer spending than just the coffee market. With fewer people willing to spend on premium coffee experiences, brands adjust their pricing and offerings to appeal to a larger audience.
For instance, Tata Starbucks, the joint venture between Tata Consumer Products and Starbucks Corp, has been adjusting its portfolio and pricing strategies to counteract declining footfalls. Last year, the chain introduced classic hot and iced coffee at Rs 150 for a small cup, which is about 20-30% cheaper than regular coffee offered at Starbucks and other café chains. This shift in pricing strategy reflects the changing consumer preferences and the need to cater to a broader, more price-sensitive audience.
The Indian coffee market is experiencing significant change. While large chains like Starbucks and Barista are struggling with slowing growth, smaller brands like Blue Tokai and Tim Hortons are thriving. This shift in the market reflects changing consumer preferences, with a growing demand for affordable, high-quality coffee.
As the industry adapts to these changes, innovation, affordability, and an emphasis on sustainability will clearly shape the future of India’s coffee market. The café culture in India is evolving, and only the brands that can keep up with these changes will succeed in the long run.
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FAQs
What is the growth potential of the Indian coffee market?
The Indian coffee market is projected to grow significantly, reaching a market size of 1.23 billion USD by 2032. This growth is driven by increasing demand for specialty coffee and a growing young population.
Which coffee brands are leading the market?
While global giants like Starbucks and Barista have a strong presence, Indian brands like Blue Tokai are gaining traction. Their focus on high-quality beans, unique blends, and a strong brand identity is resonating with consumers.
What factors are driving the growth of the Indian coffee market?
Rising disposable incomes, changing consumer preferences for premium coffee experiences, and increasing urbanization are contributing to the expansion of the Indian coffee market.
What are the challenges facing the Indian coffee market?
Challenges include intense competition from international brands, price fluctuations in coffee beans, and the need for consistent quality control across the supply chain.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.
