Samit Khanna says the company has reached portfolio-level profitability and is targeting 50 to 70 outlets and a topline of Rs 120 to 150 crore over the next two years
As India’s cafe market becomes increasingly crowded, Greek specialty coffee chain Coffee Island is betting that consumers are ready for a different experience. Instead of following the American coffeehouse model that has largely shaped the organised cafe industry, the brand is bringing a European coffee culture to India, centred on specialty coffee, flavour-profile-led beverages, fresh food, community-driven spaces and customer loyalty, as the company looks to build a ‘frequency brand’.
In an interview with BW Retail World, Samit Khanna, Co-founder of Vita Nova, the company behind Coffee Island’s India operations, said the company has reached portfolio-level profitability after opening ten company-owned stores across five cities and is now preparing for its next phase of expansion. Coffee Island is targeting 50 to 70 outlets and a topline of Rs 120 to 150 crore over the next two years, while continuing to favour a company-owned operating model over franchising.
Khanna also said nearly 30-35 per cent of the brand’s monthly sales now come from loyalty programme members, food contributes about 30 per cent of sales and the company is evaluating strategic capital to accelerate growth after establishing a scalable business template in India.
Building A ‘Frequency Brand’
Khanna highlighted India’s cafe market is still at a very early stage despite the growing presence of organised chains. “The number of outlets per consuming million is significantly lower,” he said, adding that the top ten cafe brands together operate around 1,500 to 2,000 stores.
“Even if you were to move 100 per cent on this… we still need more brands to kind of make a difference,” he said, arguing that India’s growing Gen Z consumer base is fundamentally changing coffee consumption and making it a much higher-frequency category than traditional QSRs or casual dining.
According to Khanna, while global brands introduced Indians to coffee, consumers are now moving beyond the beverage itself towards specialty coffee and diverse flavour profiles. “The good thing that few of the global brands did was introduce India to the concept of coffee, not necessarily to the concept of the variety or the speciality that possibly more and more Indian consumers are getting used to,” he said.
It is this shift that Coffee Island is trying to tap through its European coffee heritage. Rather than serving coffee by cup sizes, Khanna said the company has built its offering around bean profiles and flavour intensity. “We offer consumers not by size, but by the way the coffee is blended in terms of the bean profile, the intensity that you like,” he said, adding that the menu comprises house blends developed in India alongside Kenyan and Ethiopian blends curated specifically for Indian taste preferences.
Beyond the product, Khanna said the company is looking to create “more of a frequency brand”. “Our vision is to actually become the most loved coffee brand in the country,” he said, adding that the company is building multiple consumer touchpoints around that objective.
Specialty Coffee, Experience To Drive Growth
Khanna pointed out that India’s specialty coffee opportunity is being shaped by changing consumer behaviour rather than just cafe expansion. Drawing a parallel with the at-home coffee market, he said it is “close to around a USD 1.5 billion market” and growing at “8-10 per cent”, while the specialty beans and coffee segment is witnessing a “25-30 per cent jump” compared with instant coffee, which is growing at “8-9 per cent”.
“People are genuinely looking for an aspirational product… aspiration exists. It is just that can you provide the access and affordability to make that aspiration execute,” he said. Khanna noted that the same trend is playing out across organised cafes. “People are genuinely looking to connect on a social environment play with great products, aspirational yet affordable,” he said, adding that demand is no longer limited to metros.
“It is happening across metros and even tier 2 and 3 towns… it is still at the cusp where I think it is still early days.” He added that the top ten cafe brands, which currently operate around 1,500 to 2,000 stores, “should easily be around a 2x number if not more” over the next three to four years.
Urbanisation is another structural driver, Khanna said, adding that there is a social consumption happening because of Gen Z and Gen Alpha, supported by millennials who have money.
Reflecting those shifts, Coffee Island is redesigning its cafes around experience as much as coffee. “Stores have become very experiential,” Khanna said, adding that the brand is creating spaces around subcultures while also expanding its food and beverage innovation.
“We have doubled down on food,” he said, noting that food’s contribution has increased from the traditional industry range of 15 to 20 per cent to “almost 30 per cent”, supported by seven straight months of sequential sales growth. He added that the company is also expanding its beverage portfolio beyond coffee with products such as protein coffee and Ube-inspired drinks while continuing to innovate around fresh food offerings.
Scaling Profitably
Khanna said Coffee Island’s expansion strategy is built around profitability rather than unplanned capital-led growth. “We have reached a profitability state at a portfolio level,” he added, noting that the company has opened ten stores and has been “growing sequentially” for the past seven months.
“Our templates are staged in a manner that now we are confident of having a good real estate and a payback of around a three to three-and-a-half-year mark,” he pointed out. Having established what he called the “0 to 1 journey”, Khanna said the company is now ready to scale. “The last one year has given us the confidence on the sourcing… our NPS is sitting at 80… looking at our profitability of our stores, we feel that now we have figured out a PMF of a scale-up,” he said.
Despite receiving franchise enquiries, Khanna said the company is sticking with a company-owned, company-operated model for now. “We do get a lot of inbounds for franchise stores but as a rule we are sticking to company owned, company operated because we have seen a lot of brands go down south because they have expanded on the back of franchise operations,” he said.
Customer retention is emerging as another key growth lever, according to Khanna. “Almost 30 to 35 per cent of our monthly sales is now coming from loyalty programmes, from our high-frequency customers,” he said, attributing it to a loyalty platform and app that were launched “from day zero”. “We want to double down on this because it allows us to engage with consumers, get insights and, if we lose a customer, there is a reason for us to recover it back,” he said.
Sourcing Mix And Room For Growth
Despite volatility in global coffee prices, Khanna said Coffee Island has been able to manage sourcing through its global supply network and direct relationships with producers. “Last year has been a little bit of an up and down in terms of pricing,” he said, adding that the brand sources responsibly through direct trade and works closely with farmers at origin.
Currently, Coffee Island’s sourcing mix is “more 70-30”, with Indian beans contributing the lion’s share through two house blends developed in collaboration with the company’s global R&D team and coffee expert Sunalini Menon, while global beans from Africa and other origins support its innovation pipeline. “Our innovation pipeline for this year will allow us to launch two new international flavour profiles,” he added.
On the competitive landscape, Khanna said several early entrants failed to adapt to changing consumer preferences, creating room for newer brands. “A lot of brands… have not necessarily adjusted to the Indian landscape,” he said, adding that some early movers have become “redundant”. According to him, this has led to “vacating of space, both retail as well as in consumers’ minds”, allowing brands that are focused on innovation and evolving consumer expectations to bridge the incumbency gap.
Looking ahead, Khanna remains optimistic about the long-term opportunity for organised cafe chains in India. “India still needs five to six brands which are at least 500 stores each,” he said, while cautioning that achieving such scale will require careful execution given the country’s expensive real estate.
