Mid-Day to diversify into cafe chains

Mid-Day being so popular with the youth will help scale up this business in a space where there are very few organized players, a person with direct knowledge of the development said Jagran Prakashan Ltd (JPL), the publisher of Hindi daily Dainik Jagran and owner of the print business of Mid-Day Infomedia Ltd, is planning to open a chain of Mid-Day cafés, two people with direct knowledge of the development said.

“Mid-Day being so popular with the youth will help scale up this business in a space where there are very few organized players,” one of the persons said.

According to him, the group plans to launch cafés under the Mid-Day brand across India, starting with the metros. “Cities from where Mid-Day is published will be targeted first.”

Mid-Day, an afternoon daily, is published in Mumbai, Delhi, Pune and Bangalore.

The second person, a senior executive of the group, confirmed this is one of the plans that the management is considering, but what form and shape the venture will take is yet to be determined. “It’s on the drawing board. The board and management are working on it,” he said.

Both did not want to be named as the plan is not yet public.

Manajit Ghoshal, chief executive of Mid-Day, declined to comment for this story.

In July, Blackstone GPV Capital Partners (Mauritius) V-Q Ltd, a New York-based private equity firm, invested Rs225 crore in JPL. This cash, experts said, will help the company establish an all-India presence for the café chain.

This is not the first time a media company has ventured into the close to $185 million coffee chain market in India. Channel V, the music channel of Star India Pvt. Ltd, launched its first [V] Spot café early this year. Given the success of the first outlet in New Delhi, the channel plans 30-40 cafés in the next few years in bigger cities, said Prem Kamath, general manager, Channel V. Another 60 smaller format [V] Spot cafés will open in tier-II and tier-III cities, he said.

Ramanujam Sridhar, chief executive of brand-comm, a brand consulting and advertising firm, said cafés are a natural extension of the Mid-Day brand. “There are some things Mid-Day is known for—crosswords and leisurely afternoon reading. As a concept, cafés are a natural extension, and could be popular, depending on how different they are in terms of offering and ambience,” he said.

According to a report by Technopak Advisors Pvt. Ltd, the café market in India was $185 million in 2010 and has been growing at a compounded annual rate of 25% over the last five years.

On average, at least 200 stores have been added every year over the last five years, led by Café Coffee Day with $105 million revenue, Barista Lavazza ($45 million) and Costa Coffee​ ($18 million).

“International chains like Gloria Jean’s, The Coffee Bean & Tea Leaf​ are relatively recent entrants and have a limited footprint,” the Technopak report said. “With Starbucks and Dunkin’ Donuts set to open the first set of stores in the next six to nine months, the café market in India would further evolve.”

Café Coffee Day caters to people in the age group of 16-24. “Pubs close at 11 pm in most places down south, but Café Coffee Day outlets are open till 1.30-2 am, which makes them very popular,” Sridhar of brand-comm said. “Barista, on the other hand, has an executive style positioning. It’s a place where job interviews are conducted, ideas are brainstormed, and is priced higher than Café Coffee Day.”

Food and beverage is a high-margin business in a country where more than half the population is below 35 years of age.

Arvind K.Singhal, chairman of Technopak Advisors, said there are around 2,000 cafés in India in the organized sector, and around 3,000-5,000 could be added over next five years.

“I see no reason why Mid-Day should be restricted to coffee alone. They could offer specialty teas as Indians consume more tea than coffee,” he said, adding a number of the existing cafés had not lived up to their full potential and there was room for others.

Facing intense competition from Mumbai Mirror, published by Bennett, Coleman and Co. Ltd, Mid-Day has lost readership, and diversification into a café chain could recharge its brand value, analysts said.

Jagran fell 4.64% to Rs.104.85 on BSE Ltd on Monday. The benchmark Sensex fell 1.84% to 16151.45 points.

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