Costa Coffee’s India franchisee sees profits fall amid ‘subdued’ trading

Devyani International now operates 154 Costa Coffee stores in India | Photo credit: Costa Coffee 

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Devyani International Limited (DIL) opened fewer Costa Coffee outlets in India during its last quarter amid subdued consumer spending and growing competition from both domestic and international operators.
 
UK-based Costa achieved strong 36.3% year-on-year sales growth to reach Rs 397m ($4.7m) for the quarter ended 31 December 2023. However, the Coca-Cola-owned coffee chain opened eight new stores compared to 23 in the previous quarter, with DIL now operating 154 Costa Coffee outlets in India.
 
DIL opened the first Costa Coffee store in India 2005 with an outlet in New Delhi. The coffee chain is the smallest operator in Devyani’s core hospitality portfolio, with its larger KFC and Pizza hut franchises ending the period with 647 and 570 stores respectively.
 
Underling what it described a ‘challenging macro-economic environment’, DIL reported an 87% year-on-year profit decline to Rs 9.6 crore ($1.1m) in the quarter ended 31 December 2023. However, new outlets led 6.6% year-on-year total revenue growth to Rs 843 crore ($101.6m), the quick service group said an earnings statement.
 
“We have witnessed subdued consumer sentiments. However, we believe that the weak consumer sentiment and depressed consumer spending is temporary and short-lived, and we are optimistic about witnessing a recovery over the next few quarters,” said Ravi Jaipuria, Non-Executive Chairman, Devyani International Limited.
 
In October 2023 Costa Coffee CEO Philippe Schaillee identified India as one of the coffee chain’s ‘priority markets’. However, DIL faces uphill struggle to reach its target of opening 50 Costa stores a year in a market that is becoming increasingly competitive.
 
In January this year, Tata Starbucks set a goal to scale from 390 outlets to 1,000 by 2028 with a focus on smaller format stores and further penetration of India’s Tier 2 and 3 cities. Meanwhile, Canada’s Tim Hortons is targeting 120 stores by 2026 and the UK’s Pret A Manger planning to reach 100 sites in 2027.
 
India’s domestic coffee chains are also surging ahead, with Creaegis-backed Third Wave Coffee raising $35m in September 2023, value-focused abCoffee obtaining $2m to scale its store network in October and Haryana-based Barista opening its 400th store in January 2024.