Consumers in India are willing to pay more for their cup of coffee despite all-time high prices, says Philippe Schaillee, global CE0, Costa Coffee
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New Delhi: Consumers in India are willing to pay more for their cup of coffee despite all-time high prices as the country's GDP and incomes grow, Philippe Schaillee, global chief of British coffee chain Costa Coffee, told ET in an interview."Tea drinking nations are gradually pivoting to coffee, especially as GDP and incomes grow. A very significant percentage of these are younger consumers," Schaillee said.India has now moved to a "scale market from a seed market," the chief of the British chain said, adding that coffee consumers are getting younger worldwide, including in large markets such as India.He said GenZ, in particular, is directly influencing company strategy, as coffee is seen as an 'aspirational' drink. Coffee prices of Arabica and Robusta, which are at an all-time high, dented by "a combination of worse-than-expected harvests impacted by climate change and global trade disruptions," has led to steep increases in consumer prices of ready-to-drink coffees and powders and has severely hit margins of companies."I have never seen such levels of pricing in two decades and that's concerning, but I expect and hope prices will normalise in the second half of next year, as global disruptions ease," said Schaillee, currently on an India visit. The chain, which operates over 200 stores in India, is 'balancing prices between entry-level and premium products" to keep consumer demand ticking.The UK chain is owned by The Coca-Cola Company but operated by Ravi Jaipuria-owned Devyani International (DIL) in India. Jaipuria's group company Varun Beverages is PepsiCo's single largest bottler in India. Responding to ET's query on whether this could be a potential conflict of interest, Schaillee said: "Absolutely not. Devyani operates as an independent foods and beverages retail business."The Coca-Cola Company acquired Costa Coffee in 2019 for $4.9 billion to broaden its portfolio beyond carbonated drinks amid changing consumer preferences.Costa Coffee operates almost all its 200-plus stores in India in large urban cities and that focus will stay for now, before it begins to tap smaller markets. "I am from Belgium. In India, a tier-1 city is the size of Belgium. That's where we see consumers most predisposed to coffee consumption," he said. It reported revenue of Rs 152 crore in FY24, compared to Rs 101.8 crore in the previous year, growing 49% year-on-year, according to the latest annual report by DIL, which has exclusive franchise rights for the UK-based cafe chain in India.The chain's gross profit stood at '116.6 crore, up 45% from the year-ago period, the report said.The company did not disclose net profit.
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