Costa Coffee's India business has demonstrated strong growth in fiscal year 2025, with revenue from operations jumping 30.76% to ₹198.5 crore. Profit also saw a significant rise of 28.4% to ₹149.7 crore. This growth was primarily fueled by an expansion in the number of stores, increasing from 179 to 220 during the fiscal year.
Despite the impressive revenue growth and increased store count, Costa Coffee's gross margin in India experienced a slight decline, falling to 75.4% from 76.8% in the previous fiscal year. This marginal decrease is attributed to inflationary pressures on key input costs, specifically coffee beans and other raw materials. The brand contribution margin also saw a decrease from 17% to 16.1%, with average daily sales (ADS) per store declining from ₹33,000 to ₹27,000. This translated to a reduction in same-store sales growth (SSSG) from 8.7% to 4.1%.
Devyani International Ltd (DIL), Costa Coffee's franchise partner in India, acknowledges the country's high-potential market, driven by a growing preference for premium coffee among millennials and Gen Z. DIL is promoted by RJ Corp Ltd, which is also a promoter of Varun Beverages Ltd, the bottling partner of PepsiCo. The coffee market in India is expanding at a rate of 10% to 12% annually, which is double the global market growth rate. Costa Coffee is strategically expanding in India, with plans to add 40-50 new outlets each year. The company is particularly focused on key metro cities as part of its growth strategy. Costa Coffee is focusing on segments where consumers are interested and willing to pay a premium for specialty coffee. The expansion strategy includes locations such as flagship stores on high streets, shopping malls, and select highway petrol stations, in partnership with Devyani International.
Costa Coffee is optimistic about its prospects in the Indian market. The company aims to be among the top five global markets for Costa Coffee within the next five years. Currently, India is among the top 10 global markets for the British coffee chain. To achieve this goal, Costa Coffee is focusing on quality growth rather than just quantity. The company is also adapting to local tastes, experimenting with store formats, and leveraging digital platforms to enhance customer engagement and loyalty. India is the second market after the UK to roll out Costa Coffee's new store design, with vibrant interiors, flexible seating, and enhanced digital experiences.
Costa Coffee faces competition from both international and local players in India's cafe market. Global competitors include Starbucks, Tim Hortons, and McDonald's McCafé, while local chains like Blue Tokai, Third Wave Coffee, and Barista are also expanding their operations. Despite the competition, Costa Coffee welcomes the rivalry, believing that the emergence of specialty coffee players accelerates growth in the segment. Costa Coffee, founded in London in 1971 by Italian brothers Sergio and Bruno Costa, is present in 41 countries around the world, with over 2,800 coffee shops in the UK & Ireland and over 1,100 globally. Coca-Cola acquired Costa Coffee in 2019 for $4.9 billion, with the aim of diversifying its portfolio beyond carbonated drinks.
