Costa Coffee, owned by the Coca-Cola Company and run by Devyani International, is riding the wave of a burgeoning coffee culture in India, largely led by young consumers and Gen Z. The British coffee chain has not only revamped its stores in India, but is looking to offer experiences and use its coffee shops as spaces for more than just coffee consumption.

“I think there’s tremendous consumer interest in the category, especially among young consumers in India. They want to know more about coffee origins, speciality coffee, and various ways of brewing. They are interested in visiting many cafés to experience handcrafted coffee from baristas and to learn more about it. So, I think the whole experience of coffee is very clearly starting to come through among young urban consumers,” Vinay Nair, General Manager, Emerging Markets and India, Costa Coffee, told CNBC-TV18.

Costa Coffee, currently operated by Devyani International in India, has 192 stores across the country and plans to add 50 to 60 new locations each year. As the company looks to expand its presence in India, its focus is on making itself more relevant to today’s consumer. One key aspect of this, Nair says, is understanding beverage trends and applying them to a category like coffee.

“I think that’s the big benefit we’ve had since being part of the Coca-Cola system. We’re now creating special drinks for Diwali. Our understanding of what the right beverages are, which comes from Coca-Cola and their experience around Diwali, is that they’ve got to be celebratory, indulgent, about friends and family, and you’ve got to create the right beverage for that occasion. We’ve done it two years in a row and we’ll continue to do it,” Nair adds.

Another area of growth that Costa Coffee has identified is forging partnerships to widen its reach. Nair cites its partnership with PVR INOX, its presence at the Olympics, or even FIFA at a global level, as examples of this strategy. The idea, he says, is to take Costa Coffee to the right places and give it access to more consumers. On this front too, Nair adds that being part of Coca-Cola brings a major advantage, opening more doors for the company.

“PVR INOX has been long-time partners with Coca-Cola, allowing us to have conversations and really build on the partnership and years of relationship that the Coca-Cola system has. This also translates into new partner conversations across the country, giving us the ability to go into the right places and the right channels,” Nair adds.

At the Paris Olympics, Costa Coffee India sent three of its baristas to represent the company at the sporting event.

“How does this really help the business? One, we’ve had the opportunity to go back and talk to our consumers about it. We have photos of our very proud participants in most of our stores. There’s so much curiosity, with customers asking, ‘What is Costa Coffee doing at the Olympics?’ And then we talk to them about the baristas behind the counter,” Nair adds.

Coffee shops as creative hubs

This ties into Costa Coffee’s plans of making its cafés more than just coffee shops. The baristas who went to the Paris Olympics will run masterclasses for consumers in their stores. Along with introducing more experiences and making the cafés spaces for events, this will help draw more consumers in.

Nair sees their coffee shops as hubs of creativity, noting that some groups hold quick painting classes, jam sessions, or have doodlers who sketch caricatures of other customers. Costa Coffee helps facilitate these activities by offering food and beverages at special pricing.

“The local store managers are empowered to do that. It’s something that we really want to build out because it creates a lot of interest in the coffee shop as a venue for what I like to call micro-events and communities coming together. This links back to the growth trajectory and the optimism we have about the coffee opportunity in India,” Nair adds.

Expanding beyond metros

Nair adds that Costa Coffee is also focusing on expanding its geographical presence and is seeing interest from smaller markets. It opened a store in Dehradun, starting with the airport and high streets.

“We are starting to establish a larger footprint in markets like Cochin and Thiruvananthapuram in the South. We are now in Pune in the West. So, it’s a combination of urban, Tier 2 markets and travel occasions like highways,” Nair says.

However, while coffee shops as an industry have been rapidly growing with changing consumer preferences and an increasingly aspirational consumer base, pricing and value have remained points of contention, prompting even the likes of Starbucks to introduce smaller, lower-priced menu offerings. Costa Coffee India, however, will focus on offering a combination of packaging, pricing, and range options rather than simply focusing on price.

“I think it comes down to another learning from the Coca-Cola system around revenue growth management, which says that we give the right bundle of quantity, price, and range to consumers for different occasions rather than just focusing on price. We are a premium speciality coffee business. Our stores are experiences, and our baristas and their handcrafted coffees reflect that. We will use some of the principles of revenue growth management to ensure we are offering the right coffee bundle to our consumers,” Nair explains.

According to Devyani’s annual report, Costa Coffee’s revenue from operations in India grew by 49% to ₹151.8 crore, while gross profit grew by 45% to ₹116.6 crore. However, average daily sales per store declined from ₹35,085 in FY23 to ₹32,710 in FY24. Nair attributed this to the addition of new stores, which typically take time to build consumer bases.

“When you look at ADS, it’s really a bundle of current and new stores. So typically, when you open a lot of new stores—and we are expanding, adding 50 to 60 stores a year—it also means you’re readjusting for that. Our like-for-like was marginally positive. To me, coffee continues to be an area of tremendous excitement,” Nair concluded.