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HomeIndulgeCoffee Bean Business: The Bitter-Sweet Struggle of India's Coffee Brands for Profit

Coffee Bean Business: The Bitter-Sweet Struggle of India’s Coffee Brands for Profit

Coffee has always been a go-to for many things, including chilly winter mornings, private talks, and midday breaks. However, we are aware that consuming too much caffeine may not be good for our bodies and that it won’t help us go asleep at night. A great many people of all ages have flocked to coffee shops of all sizes, lured by the aroma of or love for a great cup of coffee.

But have you ever pondered how much profit is actually made by the business? Think of any of the major coffee player in India, such as Starbucks, Third Wave, Blue Tokai, Subko, or anyone else. Chances are these brands have consistently highlighted their superior mix of coffee, but nailing the recipe for success is not always straight forward.

Blue Tokai, which is backed by the likes of A91 Partners and actor Deepika Padukone’s Ka Enterprises, saw its profits jump more than 70% to Rs 127 crore year-on-year for FY23. However, the Gurugram-based company also saw its net loss rise 3.5 times to Rs 43 crore in the year ended March 2023, as the company expanded its footprint significantly in a market where it’s vying with venture-backed players like Third Wave Coffee and large firms such as Starbucks India and Cafe Coffee Day.

Speaking of Starbucks, the Seattle-based powerhouse had reported a net loss of Rs 94.84 crore in FY22 even though its revenue from operations was at Rs 636.11 crore. And it’s not for want of trying either; in FY23, Tata Starbucks’ advertising and promotional expenses increased 84.45 per cent to Rs 34.05 crore, up Rs 18.46 crore a year ago.

Six-year-old Third Wave Coffee is also no stranger to this phenomenon. The coffee chain that offers a curated food menu and handpicked coffee, with cafes across different Indian cities as diverse as Hyderabad, Coonoor, Bengaluru, Delhi (NCR), Mumbai, Chandigarh, and Pune. It claims to have about 109 stores, with the firm is looking to add another 50-60 outlets this year across metro and tier-I cities. But Third Wave Coffee too has struggled to nail down the profitability formula; they registered a 2.7X growth in operating revenue to Rs 31.75 crore in FY22, but the company’s losses soared 3.3X to Rs 14.5 crore in the same period (FY22), as per TheKredible. It is yet to report FY23 numbers.

Mumbai-based Subko Coffee is hugely popular among coffee connoisseurs, with several celebrities such as Gauri Khan, Tiger Shroff, and others investing in the company between June 2022 to December 2023. The company is growing at a rapid clip and this could be evident from its growth in the last fiscal year. Its revenue spiked 94% to Rs 13.57 crore in FY23 from Rs 7 crore in FY22, but it too is putting growth over profitability, with the firm’s losses standing at Rs 9.86 crore in the same period.

While the profits blow hot and cold like their beverages, we have yet another heritage brand Nescafe who is willing to pump in revenues to make a mark in the ever evolving Indian markets. It is said that Nestlé will launch Nespresso in India in a bid to tap into growing consumer demand for premium coffee beverages.  

Nestlé will open the first Nespresso Boutique in Delhi later this year and roll-out further stores in other key cities from 2025. With the ‘aim of growing the premium coffee category’ in India, Nestlé will sell both at-home and professional Nespresso coffee pods and machines supported by an e-commerce channel. 

The India coffee market is driven by several factors such as increasing demand for coffee from the youth population, particularly in metro cities such as Mumbai, Pune Bengaluru Hyderabad, Delhi NCR, Kolkata, and Chennai among others, and rise in the middle-class population in India, changing lifestyle in India, growing influence of global beverages. Will coffee brands both homegrown and international enjoy the sweet taste of profits any time soon? Only time will tell. Until then, I’m off to get another cuppa of caffeine.

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