India’s café sector is witnessing mixed fortunes as established players like Starbucks, Barista, Chaayos, and Third Wave Coffee grapple with slowing growth, while smaller chains such as Tim Hortons and Blue Tokai continue to expand. Rising competition, increased café density in urban markets, and high coffee prices have created significant challenges for the industry.
Established café brands, which expanded aggressively in recent years, are seeing growth slow. For instance, Barista and Chaayos experienced a drop in growth rates to 5% in FY24, down from nearly 70% in FY23. Similarly, Starbucks’ growth declined to 12% from 70% in the previous fiscal year, while Third Wave Coffee’s growth fell sharply to 67% from 355%. Café Coffee Day managed a modest 9% increase in FY24 compared to 59% a year earlier.
In contrast, smaller players like Tim Hortons, which entered India in 2022, and Blue Tokai have reported robust growth. Tim Hortons more than doubled its sales in FY24 and plans to expand to over 100 stores in the next three years. Blue Tokai, known for its artisanal coffee, maintained strong performance with a 70% growth rate in FY24.
The café market in India remains largely premium, with prices for a cup of coffee ranging from ₹250 to ₹350, catering to affluent consumers. However, the segment faces pressure due to increasing costs driven by erratic weather and geopolitical issues affecting coffee supply chains. Global coffee prices reached a 50-year high, further straining margins for café operators.
Despite these challenges, the Indian out-of-home coffee market is projected to grow at a CAGR of 15-20%, reaching $3.2 billion by 2028, according to Redseer Strategy Consultants. As consumer preferences evolve and income levels rise, the market offers potential for both new entrants and established players to adapt and thrive.