Coffee Day partner London Bubble to open shop-in-shops to generate revenue amid debt pressure

Bengaluru: Coffee Day Enterprises, India's biggest coffee chain, will allow waffle-making startup London Bubble Co (LBC) to open nearly 150 shop-in-shops at its cafe chain, hoping to generate incremental revenue amid increasing pressure to repay debts.
With a revenue sharing model, LBC will piggyback on Cafe Coffee Day’s (CCD) wide store network to strengthen its footprint amid the pandemic which has hurt the hospitality sector.

"Waffles have emerged as a popular dessert among millennials. LBC’s expertise with waffles combined with our credentials in brewing fine coffees will bring in fresh footfalls to the outlets,” said Vinay A Bhopatkar, CEO of CCD that runs about 1200 outlets.

According to the agreement, the coffee retailer will not be allowed to have a competing portfolio that LBC sells including waffles, chocolates, pre-packed ice-creams and dairy-free milkshakes.

“CCD was in search of revenue generation with their existing assets. We were the right brand to give them additional revenue as we have complementing products in coffee and waffles. For LBC, it will be a chance to enter new cities,” said Mustakeen Sheikh, CEO and promoter of Realta Hospitality, which acquired Mumbai-headquartered LBC with 74 flagship outlets amid the pandemic to help sustain operations. “Joining hands with CCD helps us save 87% of our capital expenditure since the food and beverage segment has been badly hit post pandemic,” added Sheikh.

Hospitality sector continues to be one of the hardest hit within discretionary categories even after Covid-19 lockdown restrictions were eased. CDEL has been facing pressure to repay debts, forcing closure of several of its cafes since the demise of its former chairman VG Siddhartha in 2019.

Last May, CCD entered into a similar contract with Kolkata-headquartered Wow! Momo Foods for selling momos at their cafes to keep business afloat amid nationwide lockdown.

India's organised quick service restaurant market has doubled over the past five years and now has over 100 brands with more than 7,000 outlets. Amongst cafe chain players, CDEL has the highest market share but is on a declining trend after undergoing a restructuring in 2019 that saw the coffee giant closing 560 cafes and 125 kiosks to exit 35 markets.

"The Covid-19 pandemic aggravated the situation for the company. This naturally led to a contraction in its category value share. The market share vacated by CDEL is being grabbed by Starbucks and McDonald’s," wrote Edelweiss Securities in a recent investor note.