While tea is India’s favourite beverage, coffee also forms a large part of our lives. Especially in South India, coffee is preferred over tea. With the café culture in full swing, outlets like Starbucks are opening in numbers across metropolitan cities. Due to this dramatic shift towards coffee, a coffee shop is a profitable business opportunity. This guide will walk you through the primary steps of starting your coffee shop business in India.
The Expanding Coffee Industry in India
Filter coffee is one of the most popular coffee types in South India. A large part of the coffee industry is dominated by brands such as Nestle, Sunrise, and Bru. However, outlets such as Starbucks have brought about awareness around freshly brewed coffee. Therefore, local coffee breweries and high-quality instant coffee start-ups have rapidly gained momentum.
According to Statista, the revenue collected by the coffee industry is expected to surpass $874 million in 2022. With a slow but steady CAGR of 3.07%, the coffee industry is only set to grow bigger. Out of the total coffee consumption in India, the urban market accounts for over 73% of total consumption.
Apart from having a steady domestic market, coffee has a lucrative export market as well. In 2021, India was the largest Asian coffee exporter. Karnataka is the hub of coffee production. The state produces over 52% of the total coffee. Once processed, instant and raw coffee have a larger customer base in Western countries. Out of the total coffee produced in the country, around 70% is exported. In 2021, the total coffee export value reached a staggering $719.50 million.
Popular Cafe Chains in India
India has several popular café chains. Each of these cafés brews its own coffee from scratch.
They roast and develop a unique house blend. Given below is a list of leading cafes in the country.
- Café Coffee Day
- Indian Coffee House
- Gloria Jean’s Coffees
- Coffee Day Express
Apart from big brands such as these, regional café bars are gaining popularity. Therefore, coffee shops are one of the most attractive hotspots in an urban setting.
Starting a coffee shop franchise is another great business option if you have sizeable capital. Franchises offer some of the highest profits, an established customer base, and benefits of a popular brand. In a competitive market like India, a franchise could give your coffee business a head start. You can acquire a franchise of any of the above-mentioned brands.
Creating a Business Plan for your Coffee Shop
To start your coffee shop business, you will need a robust business plan. This will enable your brand to grow and run smoothly. Creating a business plan also helps finalize a business model that will work the best for you. Therefore, you can start creating one using this standard business plan template. Modify the sections that aren’t relevant to your plan. Given below are some of the extremely important sections.
Coffee is a specialized beverage that has a diverse flavour profile. With so many types of coffee available, you need to learn about the different varieties, roasts, and blends to create a distinct menu for your café. This can be achieved through arduous research about coffee or undertaking professional training.
Professional barista training offers insights into making a range of coffee drinks. While training is not essential to start a coffee shop, it helps. Once you understand the process, you can create unique menus and a strong brand voice. Qualified knowledge about the coffee industry will also positively reflect on a business plan.
Industry and Competitor Analysis
Most of the coffee industry is focused on at-home brewing companies like Nestle and Bru. However, regional outlets occupy a large part of the outdoor café market. Located in schools, hospitals, and offices, coffee shops have strategically placed themselves for the most visibility.
Conducting an industry analysis will help you identify such key factors and any potential gaps you can fill. For example, your region does not have a coffee shop that offers a drive-thru. That is a potential demand gap your business can fulfill.
The next step is taking a look at your competitors. Apart from the international coffee brands, sort all the regional shops as potential competitors. Identify the primary business model of these shops. Who is their target audience? What is their product range? How many outlets do they have? A SWOT analysis can help you in this regard.
Taking notes from your competitors will help you capitalize on their weaknesses and learn from their marketing strategies.
Finding a superior quality coffee bean supplier is crucial to your business. Coffee beans are the raw materials that your business depends upon. Ensuring high-quality beans will ultimately determine the quality of your beverage. Therefore, try to look for local coffee producers and source your coffee beans directly from them.
Coffee is best grown in a temperate climate. Therefore, the best coffee beans are cultivated in South India (Karnataka, Maharashtra, Kerala, and Tamil Nadu). Tying up with suppliers from this belt can help you gain an edge over other competitors.
The business with the most premium coffee always has an upper hand. Starbucks is a great example. They outsource their coffee from a range of global sources like Africa, Brazil, and South America. That helps them stay ahead of the competition.
The most important part of your business plan is the cost breakdown. A well-thought cost analysis can help you secure a loan quickly. You need to factor in every detail when developing your financial plan.
Starting with the rent of a store at a prime location, kitchen equipment, furnishing, raw material, POS software, marketing, licenses, and a trained workforce. On average, you can start a coffee shop business under Rs. 30 lakhs in India.
A coffee shop requires plenty of equipment for operation. The type of equipment will vary based on the size of your shop. However, here is a list of some of the most important equipment you will need:
- Espresso Machine
- Espresso Grinder
- Coffee Grinder
- Coffee Brewers
- Decanters and Satellite Servers
- Frappe and Smoothie Blenders
- Hot Water Dispenser
- Cooking Equipment (Ovens and stoves)
- Ice machines
- Cutlery and disposable coffee cups
- Scales, thermometers, and timers
These are the kitchen essentials for a coffee shop. You may require more equipment for service and storefront displays such as racks, mugs, and organizers.
Different Types of Coffee
India primarily grows two types of coffee beans – Arabica and Robusta. Arabica beans are superior in quality. They are less caffeinated compared to Robusta and account for over 80% of the global production. In India, Arabica beans are grown in hilly regions.
Robusta beans, on the other hand, are easy to grow. They are grown in lower altitudes. They have a unique woody flavour that is used in Italian Espresso mixes. In total, you can find 16 different varieties of coffee spread across 13 different regions in South India.
The duration, type of roast, and brewing technique determine the flavour and quality of coffee. There are four basic types of roasts every barista should know about. Each roast has a specific roasting temperature and duration:
- Dark (European Roast)
Similarly, there are five basic coffee brewing techniques:
- French Press
- Cold Brew
- Instant Mix
- Single Serve Pods
- Standard Drips
Combining the different types of roasts along with brewing techniques helps in developing various kinds of espresso mixes. This is where professional training can help while starting a coffee shop.
What Licenses Do You Need to Start a Coffee Shop in India?
A coffee shop is part of the Food and Beverage industry. Therefore, you require several licenses to set up and run a coffee shop. Initially, a standard FSSAI registration will suffice. However, once your annual turnover crosses Rs. 12 lakhs, you will need a State FSSAI license. Here is a list of all the licenses required:
- FSSAI License: Mandatory for all food business operators.
- Company Registration: Must be registered as sole proprietorship or LLP.
- GST Registration: A GST number must be obtained through a chartered accountant.
- Health Trade License: Issued by the local municipal corporation or state department of health.
- License for Eating House: Required by all eateries. Issued by the Police headquarters.
- Insurance: Public liability, product liability, fire, and asset insurance are needed.
- NOC for Fire Safety: Fire safety certificate from the fire department.
- Trademark Registration: Required for custom logo.
Marketing Plan for a Coffee Shop
Several factors affect the marketing of a coffee shop. Firstly, choosing the right location for your shop is extremely important. Places like a university campus or near an office complex will attract the optimum target audience. Promoting your business directly to your target group is easier and more effective. Therefore, scout for prime locations in the city.
Creating a campaign around your signature beverage and pricing is a good way to begin. Do you have a unique coffee blend at your café? Where is your coffee sourced from? Questions like these can help you come up with a focal point for your marketing campaign.
Apart from banners, newspaper ads, and flyers, social media marketing is one of the best ways to get noticed. A marketing agency can come in handy. Having a strong online presence can help you better connect with the local youth and attract them to your business. By partnering with popular blogs, influencers, and YouTubers, you can utilize the power of influencers and social media marketing.
Building a brand takes time and patience. With the help of the right marketing channels, this process can be sped up. Coffee is considered an elite beverage in India. The demand for premium coffee and fancy cafes will only increase. India has one of the youngest populations. Therefore, it is the perfect market for coffee shops. If planned strategically, coffee shops can quickly become profitable.