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Australian coffee retailers Di Bella Coffee and Good Co. Coffee are rejigging business models to strengthen their India operations.
Di Bella has priced its coffees a notch lower than Starbucks’, but higher than Café Coffee Day. The company is now concentrating on its outlets at office buildings and high streets instead of malls where rentals are very high.
Phillip Di Bella, the owner and founder of Di Bella Coffee, is optimistic about making money in India.
“We have got into a licence agreement with new Indian partners and have changed the business model. The challenge is high rentals which we have decided to keep at less than 10 per cent of sales like we do in Australia, and may extend it a bit since wages are cheaper in India.”
Increasing prices to compensate for the high rentals is unlikely to work in India, said Di Bella.
High rents“Starbucks may be expanding fast here, but not making money as they are paying high rents in the metros. Rentals have to be kept at below 10 per cent of sales or else the company will go bankrupt like what happened in the case of Gloria Jeans Coffees in India.”
Gloria Jeans is the largest premium coffee retailer in Australia.
Di Bella Coffee, which entered India in 2011, plans to open seven new outlets this year in Mumbai after closing down several outlets in the city.
“Since rentals in office buildings are less, we will have a majority of our outlets in corporate parks and will also set up roasteries at some of our outlets. We have marked an investment of ₹15 crore in India and hope to break even in the next two years,” added Di Bella.
Good Co. Coffee, started operations in 2013, has decided to stay out of the metros and restrict its retail outlets to tier 2 cities. It is now focusing on the wholesale business through vending operations in offices in metros.
“We have flipped our business model and have launched the wholesale business to compensate for the decline in retail. Today, we have been supplying to corporates, hotels and restaurants and there is also the trading business where we export green beans from India back to Australia and New Zealand,” said Sachin Sabharwal, Managing Director, Good Co. Coffee,
No more retailThe company is no longer expanding its retail operations in Mumbai and has five outlets across Bangalore and Dehradun.
Recently, Italian coffee roaster Lavazza exited the coffee shop business and restricted itself as a wholesaler in India.
It sold its retail business under Barista to Carnation Hospitality, a subsidiary of containers and packaging firm Rollatainers, for an undisclosed amount.
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