In 2014, Italian coffee roaster Lavazza exited the coffee shop business in India, handing the business to Carnation Hospitality – a wholly owned subsidiary of Amtek Group. Lavazza CEO Antonio Baravalle had pronounced the decision as a result of the global business guidelines of the group not been able to manage the coffee shop business directly. Barista had also been tackling with management issues and increasing competition from the likes of Starbucks and Cafe Coffee Day at the time.
Today, just a year after acquiring Barista, the debt-laden auto-component maker Amtek Group is planning on selling the Italian coffee chain.
Barista’s FY15 numbers have not been disclosed by Carnation yet, but its net loss for FY14 doubled to INR 20 Crore from INR 10 Crore in FY13. Barista Lavazza had recorded losses of nearly INR 18.6 Crore for the two year period between March 2011 and March 2013 and revenues had dropped from INR 95.5 Crore to INR 80.3 Crore.
In 2015,more than 170 Barista Coffee stores are loss making.
While it is clear that CCD presents a strong competition and dominance in the market segment of middle and upper class youth with its quality and affordable pricing. Starbucks, on the other hand, covers the premier upper middle class and business professionals’ consumers. It has proven as a heavy disadvantage to Barista as per the Indian market standards.
Barista had many promotional activities such as sponsorship in sports, local music events and book launches since it’s inception in India. At a global level, Barista has had some really successful marketing campaigns but failed to penetrate the Indian market. Their long term planning for brand management appears to have faded and whilst its competitors grew and have been flourishing, Barista’s consumer engagement activities have deteriorated significantly since after 2012 (shall we say since Starbucks entered the Indian subcontinent).
In 2002, Barista received the Times Group and Business Standard ‘Brand of the year’ award (under the ownership of Tata group and Sterling Group). Barista Coffee was also awarded Super bands for two consecutive years i.e., 2006 & 2007. The brand had created a strong image which had decreased over past 5 – 7 years.
Whether it was the constantly changing leadership or decreasing promotional activities or strong competition from key players like CCD and Starbucks, it would be interesting to see if the current leadership can find a suitable successor (for the coffee shop business) or do they decide to dissolve the business and liquidate the assets. Bullish or Consolidating! While the former option is going to bring a couple of challenging years for the new owner to regain consumer interest, the latter will create an opportunity for both CCD & Starbucks to acquire some local consumers across Indian subcontinent.
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