Italian coffee major Lavazza, which owns the Barista coffee chain, is looking at a three-fold rise in its revenue contribution from India, to 10 per cent of its global sales, over the next three years.
"Today India contributes about three -four per cent of Lavazza's turnover. We want to grow it to 10 per cent in the next three years," Lavazza Director for South Asia R Shivashankar told PTI here.
The Turin-based Luigi Lavazza-run chain had reported a turnover of ^1.2 billion (Rs 6,870 crore) in 2011. Barista's India sales currently stand at a little over Rs 200 crore, going by the three per cent revenue share to the Group's overall sales, which come from 90 global markets.
The company plans to expand its retail footprint as it chases a growth rate of 25 per cent here. "We have about 160 stores in the country. We will keep increasing that number on gradual basis. Maybe in the next two to three years we will add about 50-100 stores. The investment cost roughly for 50 stores will be Rs 15 crore. It will be across all formats but predominantly in the normal size stores," Shivashankar said, adding it normally takes two years for a store to break even.
The Italian company had bought Barista in April 2007. It opened its own brand store Espression in Delhi last year, positioned at the premium segment.
"We want to open Espressions in every metro but it depends on the right place and right property. Within the next six months to one year, we will open more Espression stores - preferably two in every metro. We are quite happy the way the Connaught Place (Delhi) store is doing," he said.
Unlike competitor Cafe Coffee Day which is targeting small towns, Lavazza still bets big on large cities. "We are more focused on larger towns than smaller towns. There is so much opportunity in big cities. We could next look at cities like Pune and Ahmednagar," he said. The company believes there is a huge opportunity in India as the coffee consumption is quite low here.
"Coffee consumption is growing at five per cent year-on- year. Coffee to tea ratio is about 1:7. Coffee consumption in India is still 80 grammes per capita as against six kg per capita in Italy. The potential is very large and a lot of youngsters have started to take to coffee," Shivashankar said.
Lavazza enjoys a market share of 15 per cent in the country where there are 1,600 retail cafe chains in the organised sector. Asked if its market share could be clipped by the entry of US coffee giant Starbucks, he replied in the negative.
"A big player like Starbucks opens up the market. The growth that we are talking about will come faster."
Lavazza, which also operates coffee vending firm Fresh & Honest, will open a new plant at Sri City on the border of Andhra Pradesh and Tamil Nadu.
Shivashankar said the investment cost for the plant is Rs 120 crore and will produce 2,000 tonne roasted coffee. The company recently tied up with private carrier Jet Airways for the JetPrivilege programme, and Shivashankar said the deal will prove beneficial for the coffee chain.
"Jet Airways is a big tie-up. Jet has three million card holders and if a large percentage of that starts walking in each day then it is good news (for us)," he said. Last year, the company had partnered with IPL team Rajasthan Royals as the official coffee partner but this year it is yet to renew the contract.
"This year we haven't firmed it up. We are still talking but nothing has been firmed up yet," he said.
Asked if the company would increase prices following the hike in service tax rate, he said, "We normally take price hikes twice a year. We will be doing another one in couple of months and we will review of the entire cost. It could be a five -seven per cent hike because we also factor in inflation."
