Costa Coffee eyes Indian tea cups

Coffee is being sold as a cooler, hipper drink than staid old tea

The UK's Costa Coffee has its sights on India and has signed a franchise agreement it hopes will have locals swapping tea leaves for coffee grounds.

Costa, which already has operations in the Middle East, Cyprus and Ireland, will open a store in downtown Delhi.

The launch in early September is the first of at least 300 shops that are set to open across India.

Firms like Costa want to tap into India's economic growth and increasing number of potential consumers.

Local blend

While the country is still struggling to cut its number of poor, especially in rural areas, India has seen an expansion of an urban middle class which has greater access to disposable income.

Mark Phillips, Costa's managing director, said that India was a "rapidly growing economy which has been tipped to become one of the four largest economies in the world".

Economic growth should still top 6% this year, even though expansion will not be as high as first thought, analysts said.

Costa, which is owned by the UK's Whitbread group, has agreed a contract with a local partner and is also working with Devyani International, a drink and food group that also looks after Pizza Hut and KFC outlets in India.

The first store will open in Connaught Place, Delhi, and will be able to seat 60 people.

As well as its more traditional menu items, Costa will also offer food specially tailored to suit the Indian market, with sandwich fillings such as chicken tikka or cottage cheese tikka.

Cappuccino or cuppa?

Costa may have its work cut out trying to tempt Indians away from their daily cuppa, though.

India's 14,000 tea estates cover about one million acres and produce 850,000 tonnes of leaves a year.

Although India is the world's largest producer of tea, it exports less than a quarter of its crop.

However, signs are that the $1.5bn tea industry is going through a difficult patch, with prices dropping in weekly auctions, export figures slumping and domestic consumption also on the slide.