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“We went against tide, added 25% more outlets in lockdown”
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Monday, 07 December, 2020, 08 : 00 AM [IST]
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 Coffee, especially in India, is a very regional beverage. The five southern states and one UT account for almost 80% of the domestic consumption. There are top 3-4 brands followed by at least 30+ regional brands in the filter coffee and instant coffee space. In an email interaction with Nandita Vijay, S Shriram, VP, sales and marketing, Levista Coffee, elaborates further on the coffee market in south and rest of India – during and post-pandemic - and more. Excerpts:
How would you describe the coffee consumption scene in the country?
Coffee consumption in India is largely classified in two parts: Out of home consumption at cafes, restaurants and workspaces or offices and at home consumption. While the former has taken a huge hit in the last six months, the at home consumption has tremendously increased. People are on WFH (work from home) mode or the less fortunate have been displaced from their jobs. Either way, there is increased consumption at home for a few categories such as milk, tea, coffee, biscuits, snacks among other snacks. However, tea and coffee consumption per capita at home has doubled or trebled as external consumption is now within the confines of homes.
In the current economic downturn, what kind of impact has it made on the coffee sector? What are the visible trends?
With an imminent scare of even contracting flu, cold beverages have been out of reach for most consumers worldwide and in India. This in turn has a positive impact on hot beverages such as coffee, tea, malt and milk among others. We have seen so many regular consumers of coffee sipping more cups now at home than before. In many categories, consumers have tried new brands. This is either due to unavailability of their favourite ones or simply to try what’s in the offing. The company has been positively benefitted due to this trend and our volumes speak for it.
What are the challenges to grow, process and market coffee?
Coffee, especially in India, is a very regional beverage. The five southern states and one UT account for almost 80% of the domestic consumption. There are the top 3-4 brands followed by at least 30+ regional brands in the filter coffee & instant coffee space. The biggest challenge is to convert a hardcore loyalist to a newer brand. Since it is all about individual taste buds, consumers stick to their favourites. With respect to cultivation and processing coffee, the crop is an expensive one to rear and needs adequate sunlight, water and shade to grow coupled with high maintenance. Therefore, it is not easy to grow coffee and manage the entire chain from sowing to serving.
How has the company fared since its inception in 2017?
In 2017, the company was launched as a gourmet coffee brand to cater to the elite. However, over time the opportunity in the mass market was something we could not afford. Since 2018, the company started focussing on the larger consumer space. From a fairly nondescript beginning, we have come a long way today in not just winning hearts but also a sizeable market share.
What are the key strengths of the brand?
The biggest strength of our mothership variant, the Levista Instant Coffee, is that it tastes almost close to a traditional south Indian filter coffee. True to our tagline, those who try our coffee once shall definitely stick on to the brand in times to come. Our own growth story is testimony to this – proof is in the powder!
Which are the fastest growing markets for your brand?
Needless to say, we are focussing on Tamil Nadu and Karnataka at the moment to penetrate deeper all the way in to the deep interior pockets. However, we shall have a significant presence and would cover the entire southern markets by end of 2021. Meanwhile, we have taken the route of exclusively marketing through modern retail stores such as More, Reliance and Metro as well as online players such as Amazon, Flipkart, Big Basket, etc. to reach out to coffee connoisseurs all over the world. The company is also now available across Singapore, Malaysia, the UAE, Sri Lanka, Maldives and is seeing great traction which gives us hope that we will expand to more markets soon.
Would you be able to share the market reach of coffee brands and how is your brand positioned to garner a sizeable market opportunity?
We are not fully sure of the exact market share of other brands. However, market estimates suggest that packaged coffee consumption is pegged at Rs 2,200 crore per annum in India. This fiscal, we hope to garner around 3% of this market, if we continue the same trend as H1 FY 20-21.
How has Covid-19 pandemic impacted your cultivation and marketing efforts besides international market forays?
Covid-19 did impact our cultivation and production due to disruption of manpower. However, the company was quick to rebound due to its strong processes in these areas and we have been back to near normalcy since July 2020. On marketing & distribution, we went ahead against the tide and spread our network since May 2020 adding 25% more outlets since the national lockdown began. That many other brands had a supply chain challenge helped us to stock better than before at retail stores who were surprised by the offtake and placed repeat orders with us. With word spreading around about our great coffee, we have added lakhs of new consumers this half year. We had massive expansion plans within and outside India which have been put to abeyance for the time being. We shall pursue this, perhaps from January 2021 onwards.
What are your growth plans for the future?
For now, we continue to focus and penetrate deeper in to Tier 3 / 4 towns in Tamil Nadu and Karnataka besides strengthen our presence in modern retail outlets. We plan to enter newer micro markets in the next six months even as we stabilise our presence in our home markets. In FY 21-22, we hope to be present in the general trade across 15-20 states in India besides a large presence internationally as well.
SLN Coffee, having a six decade presence, would it have any intention of mergers and acquisitions?
We are always open to M&A but these are motherly statements. As and when we get a suitable opportunity, we will of course evaluate them independently.
What is your view on coffee retail space? Would such initiatives be on your cards?
Coffee retail or cafés as such have been deeply impacted due to the ongoing pandemic. Several café have shut down due to lack of business coupled with high maintenance costs. But this situation will return to normal. Cafés cannot be will be wiped out overnight. Coffee shops have prevailed for decades in some form or the other: from community spaces to dine-in, table service, self-service and now recently, takeaways. The model will evolve, but this time, faster and more efficiently than before.
What is the competition encountered in the market and how does the brand stand apart on the retail shelves?
As the adage goes, two salesmen were sent to virgin markets to sell, one found nobody wore shoes or drank coffee. The second felt that since no one wears shoes or consumes coffee, everyone has a market opportunity. This anecdote cannot be better placed for the brand. While South India will reign in as the market leader for coffee consumption, the rest of India, put together can perhaps be a bigger coffee market in the next 10 years. Instead of garnering market share from the current Rs 2,200 crore, we can create our own Rs 100-200 crore market in the next 3-5 years. With our 60 year legacy in coffee cultivation followed by over 2.5 decades experience in coffee trading and marketing, we are better placed than many others to not just build market share but to convert non-coffee lovers to sip a cuppa, one mug at a time!
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