Costa Coffee Experiences Growth in India Business Driven by Increased Customer Engagement

For British coffee chain Costa Coffee, the expansion in India remains a top priority despite global economic uncertainties that have prompted many businesses to reassess their growth strategies. The Indian market, where coffee consumption is on the rise, particularly among millennials and Gen Z, is expected to see Costa Coffee significantly increase its presence. CEO Philippe Schaillee highlighted that the company plans to open 40 to 50 new outlets annually, aiming to elevate India into one of its top five markets within five years.

Growing Coffee Market in India

India’s coffee market is experiencing a remarkable growth rate of 10% to 12%, which is double the global average. This surge is largely driven by younger consumers, particularly millennials and Gen Z, who are increasingly shifting their beverage preferences from traditional tea to coffee. Schaillee noted that this demographic is drawn to coffee not only for its taste but also for the perception of it being a healthier source of energy. As more Indians embrace coffee culture, Costa Coffee is well-positioned to capitalize on this trend, especially given its status as one of the top ten markets for the brand globally.

The CEO emphasized that the growing interest in premium and specialty coffee among Indian consumers is a significant factor in the company’s expansion strategy. He stated, “More and more of the population is starting to increase the incidence of all the beverages they drink, starting to shift from tea to coffee.” This shift presents a unique opportunity for Costa Coffee to enhance its market share in a country traditionally dominated by tea drinkers.

Expansion Plans and Competitive Landscape

Despite a slowdown in the local food and beverage sector during the latter half of last year, Costa Coffee remains committed to its growth trajectory in India. Schaillee confirmed that the company will continue to open 40 to 50 new outlets each year, maintaining its ambitious expansion plans. Costa Coffee operates in India through its franchise partner, Devyani International, and faces competition from global brands like Starbucks and Tim Hortons, as well as local players such as Cafe Coffee Day and newer entrants like Blue Tokai Coffee Roasters.

The company’s strategy includes diversifying its product offerings to cater to a broader audience. This approach aims to make quality coffee more accessible while ensuring that the brand does not compromise on its standards. Schaillee pointed out that Costa Coffee’s focus will be on maintaining quality rather than lowering prices, which could detract from the customer experience.

Impact of Global Market Trends

While Costa Coffee has a relatively low exposure to the U.S. market, global trends such as rising coffee prices have posed challenges for many players in the industry. Schaillee acknowledged the impact of green coffee inflation, stating that the company has passed some of these costs onto consumers. However, he emphasized the importance of allowing partners to decide how to manage these price adjustments.

In India, where Costa Coffee sources most of its products locally, the company plans to introduce more combo packages that include food items. This strategy not only enhances the customer experience but also provides opportunities for discounts, making the brand more appealing to price-sensitive consumers. The focus on combo offerings is part of a broader strategy to attract a diverse customer base while maintaining the brand’s reputation for quality.

Targeting Younger Consumers

Historically, Costa Coffee has attracted a younger demographic, particularly millennials, who tend to have higher purchasing power compared to Gen Z. This trend is evident in India as well, where the company aims to strengthen its appeal among these age groups. By focusing on quality and a diverse range of products, Costa Coffee hopes to solidify its position in the competitive Indian coffee market.

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