Devyani International Ltd (DIL), largest franchisee of Yum Brands in India, has formalised an extension of its partnership with UK-based cafe chain Costa Coffee. DIL entered into a revised development agreement for its existing Costa Coffee business on August 14, 2021, following which DIL has been granted development rights across India in a phased manner.
This agreement has initially granted DIL development rights for a period of five years and extendable from time to time subject to meeting of development and contractual obligations, a company spokesperson said in a statement.
While Coca-Cola acquired Costa Coffee globally three years back, in India, Costa Coffee has been operated by rival PepsiCo’s exclusive and biggest bottling partner RJ Corp-owned DIL since 2005. India is among the few markets where Costa Coffee is aligned directly with a PepsiCo bottling partner.
However, in India, Costa Coffee remains a small business, unlike scale players such as Starbucks and Cafe Coffee Day. The number of Costa Coffee stores in India also reduced from about 70 in 2018, to 44 as on June this year. DIL presently runs two formats of Costa Coffee stores—full retail at high-street locations and malls, and branded kiosks at airports, hospitals and food courts at highways.
Coca-Cola had bought out Whitbread Plc-owned UK cafe chain Costa Coffee in a global $5.1-billion buyout in 2018. Costa Coffee is UK’s biggest coffee chain, and Coca-Cola’s global buyout of the cafe chain set it in direct competition with rivals such as Starbucks, and is seen as a bid to hedge its risks in a sluggish soft drinks market and broaden its portfolio beyond sugary drinks.
DIL is also among the largest operators of chain quick service restaurants KFC and Pizza Hut, and operates 735 stores across India, Nepal and Nigeria as of June 30, 2021. Its business is broadly classified into three verticals that includes stores of KFC, Pizza Hut and Costa Coffee. DIL’s other businesses include Vaango and Food Street.
DIL will be listing on the stock exchange on Monday, following its initial public offer (IPO) earlier this month to raise Rs. 1,838 crore.
For the year ended March 2021, DIL reported revenue of Rs. 1,135 crore, which was 25% lower compared to the previous year.
In an interview last fortnight, RJ Corp chairman Ravi Jaipuria said DIL expects to turn profitable this financial year if there is no third wave of the Covid-19 pandemic.
The quick service restaurant chain operator is betting on bullish consumer sentiment and strong brand pull to turn profitable. An India Foodservice Delivery Report (IFDR) released last week estimated that by 2024-25, the gross merchandise value (GMV) of the food services delivery market would increase to $36 billion from $5.3 billion in 2019-20, riding on an increase in average order value, frequency and penetration.