Core offerings drive 60-65% of business: Barista eyes expansion to 500 outlets by 2024

In an exclusive tête-à-tête with Rajat Agrawal, CEO of Barista Coffee, we spoke about the brand's ambitious strategy, positioning, retail model, and more.

Over the past two decades, coffee in India has shifted from being a beverage enjoyed by some people to becoming a source of energy and relaxation for many. 

Today, consumers are not only more knowledgeable about their coffee preferences but also actively seek diverse options such as Dalgona, Mocha, Irish, Cold brew, and Non-dairy variations. 

Barista has been a key player in driving this transformative trend since 2000. Currently operating around 350 outlets nationwide, the 23-year-old brand is now preparing for its upcoming expansion phase, with ambitious plans to reach a total of 500 stores in India by the year 2024.

Even amidst the hurdles posed by the pandemic, Barista managed to open approximately 160-170 outlets, adding 50-60 outlets each year. 

Notably, around 60% of these stores were established in Tier II and III cities. In Punjab, Barista stands as the largest coffee chain with nearly 100 stores.

With the growth in North India, the company is now looking to focus on other parts of the country.

The Indian coffee chain positions itself as a cafe Quick Service Restaurant (QSR). Rajat Agrawal, CEO, Barista Coffee explains, “The positioning of the cafe aligns with a quick service restaurant to approach a larger scale. To scale our business, we can’t position ourselves boutiquey and hence we have to place ourselves as QSR, or else we will not be able to scale. 

Barista’s journey towards scalability is anchored in preserving the inviting ambience of a coffee shop while accommodating diverse preferences and geographical contexts. “Opting for a more boutique or niche trajectory would impede rapid expansion due to challenges in securing suitable real estate,” Agrawal explains.

Tailored strategies for Tier-II and III markets

When approaching Tier-II and III markets, the brand adopts a pricing strategy, reducing prices by 5-10% depending on the city. 

Agrawal clarifies, “The price reduction is not done to lose premium-ness, as the rentals, sourcing cost, payrolls, and food cost ratios are low so we are looking to give those benefits to customers. We need to value and give credit to the spending capacity in each town. The premium-ness of coffee shops in metros is the same as in non-metros as well.”

The company reports that while metros see coffee shops being used for business meetings, social gatherings, and family events, Tier-II and III towns prioritise social gatherings over business meetings.

The company derives a substantial 60-65% of its business from staple products, primarily cappuccino and americano. A further 15% of its revenue stems from ventures into innovative offerings.

Customer distribution

The company reveals that in metropolitan areas, the customer distribution stands at an even 50-50 ratio, while in non-metropolitan regions, this ratio shifts to 70-30, with a dominant 70% engaged in social gatherings and 30% in business-related interactions.

Demographically, 75-80% of the coffee chain's customers fall within the 25-45 age bracket. Jain notes, “In a coffee shop business there’s a lot of repeat customers, the 30-40% business comes from the regular TG. We are a 23-year old brand, and customers are actually aged with the brand, and they have stuck to the coffee.”

Retail strategy

Among its 350 stores, 20% are located within shopping centres/malls, while the remaining 80% are situated in high street markets, airports, and hubs. 

Agrawal explains, “ The reason is largely that in our category the mall inventory is growing at a certain pace, it was non-existent in the last 8-10 years. If we look at any business opportunity in malls, we need to figure out the right set of audiences that can engage with a coffee shop.”

Historically, brands would typically establish themselves in high-street markets, primarily due to the limited range of categories that thrive within malls. 

However, as the mall culture gains traction in these regions, an increase in mall-based inventory is expected to follow suit.

A culinary journey: Barista Diner

In early 2018, Barista introduced the 'Barista Diner' concept. While conventional cafes usually have limited food options, Barista Diner curates a large-scale food menu. With five diner outlets in Punjab and Delhi-NCR, the brand aims to further expand this format, focusing on food over beverages. 

“Our intent is to grow this inventory further, and the positioning of it is different due to its food-centric format. The idea is to focus more on food than beverages. We will develop its inventory over the next few years and develop a network,” Agrawal adds.

Online sales surge post-pandemic

Online delivery gained momentum during the pandemic due to social distancing measures. Currently, 14-15% of Barista's business comes from online sales, a significant increase from pre-COVID times. 

Agrawal explains, “This was pretty low pre-COVID, but now a lot of constant innovations have worked, and there’s rapid growth. We’re seeing this percentage increasing month on month.”

Strategic cafe expansion

To expand its brand presence, Barista has opened cafes in tourist locations like Udaipur, Dal Lake (Srinagar), and Pahalgam (Kashmir), aiming to foster a unique brand identity by tapping into the diverse global clientele that frequents these locales. Notably, the brand has also established two cafe outlets in Goa and is also eyeing pilgrimage destinations.

Diversified ventures

Barista's FMCG vertical, launched two years ago, offers products like cold brew, ready-to-drink drip coffee, instant coffee variants, cookies, and chocolates. Leveraging its physical stores, the brand promotes these products. The brand's vending business, initiated in January 2023, serves the B2B, MNC, airport lounge, and HoReCa segments.

International expansion

Barista's aspirations extend beyond India's borders. The brand currently operates 26 stores in Sri Lanka and envisions opening 24 more outlets within the next two years. Additionally, plans are in place for a cafe launch in the Maldives. Barista is also actively pursuing opportunities in Middle Eastern nations, Bangladesh, and Nepal.