Coffee retail is a strange beast in India. Many have come, stayed, downsized. None have had it easy. Some—like consumer goods company Hindustan Unilever’s Bru World Cafe chain—even shut down. But Third Wave Coffee Roasters, headquartered in Bengaluru with 15 stores across three cities, believes it can beat the odds.
Let’s look at these odds.
Exhibit A: Cafe Coffee Day.
Third Wave wants to expand to 100 outlets by March 2021. The best coffee chain expansion story in India has been Bengaluru-based chain Cafe Coffee Day’s (CCD), which currently has over 1,200-1,300 cafes—notably 500 cafes down from 1,700 cafes in the year ended March 2019. The primary reason? A sharp drop in profits (We’ve written a story about CCD’s problems before).
Exhibit B: Barista.
Yet another thing Third Wave wants to do is increase sales. By building more kiosks and focusing on delivery.
Now, Delhi-based Barista, one of India’s oldest homegrown coffee chains, started in 2000, had to shut 40 stores down to around 141 by 2018, as per Financial Express. This, despite a renewed focus on adding kiosks and diners. Today, Barista claims to have 249 outlets, of which four are diners.
Exhibit C: Starbucks and Blue Tokai.
These aren’t two cafe chains you’d expect to be mentioned together. And yet, both focus on two different halves of cafe culture—something Third Wave is big on.
Starbucks, the world’s biggest cafe chain with over 24,000 stores across 75 countries—it has 170 stores in India—and a $100 billion valuation, is in the business of selling a cafe experience. One that Third Wave has dedicatedly emulated.
“[Third Wave co-founder] Sushant [Goel] was very bullish on the fact that we are not going after Blue Tokai. We are going after Starbucks, where you give an experience as a foot in the door,” says Venk Krishnan, an angel investor in Third Wave and the founder-CEO of IT services company NuWare Tech Corp.
But Third Wave is also a niche cafe chain that buys green coffee beans and roasts them on its own, much like Blue Tokai. The idea is to sell the product beyond its cafes—to offices and discerning customers who know their coffee. Delhi-based Blue Tokai remains small, with 28 stores in India.
Starbucks, meanwhile, which runs as Tata Starbucks in India—a joint venture between Kolkata-based Tata Global Beverages and Starbucks Corp—is often credited with large coffee house culture. It runs up to 3,000 sq ft establishments where people often attend work meetings while sipping coffee. The Starbucks brand value is a dream Third Wave aspires to.
“But the model for us is actually not the cafe business.