Costa Coffee is introducing its hot and cold coffees at select properties of PVR INOX as the India business of the British coffee chain is battling intense competition here and the country’s largest multiplex chain is enhancing its combined F&B business after the merger.
“We would like to inform that Devyani International Limited has entered into arrangement today with PVR INOX Limited, premium cinema exhibitor in India, for introducing Costa Coffee’s handcrafted hot & cold coffees at some of the PVR INOX properties,” the parent company informed the stock exchanges on Wednesday. Devyani International Ltd operates the coffee chain in India.
The move comes as PVR INOX, the newly merged multiplex giant, is enhancing its combined Rs 1,500-crore F&B business as part of its target to achieve Rs 225 crore in cost and revenue synergies over the next year or so.
“We see this another move by PVR INOX to premiumise and diversify its F&B offerings to consumers. The chain is already one of the large F&B retailers in India. Its F&B revenues were around Rs 400 crore in April-June quarter of FY24 and Rs 1600 crore in FY23 (pro forma),” said Abneesh Roy, Executive Director, Nuvama Institutional Equities, in a stock update.
F&B typically contributes 30 per cent to a multiplex’s revenues. It is the biggest driver of profits as revenue from ticket sales must be shared with producers and distributors, which is not the case with F&B sales. A moviegoer at PVR spent an average Rs 120 on F&B. The metric, known as spend per head (SPH), stood at Rs 100 for INOX.
PVR INOX Executive Director Sanjeev Bijli told Business Today in April 2023 that he estimates the combined entity’s SPH to be closer to Rs 120 and says the aim is to boost F&B’s contribution to overall revenue to 35 per cent.
The two erstwhile rivals officially merged on February 6, 2023, and began integrating the companies from March. PVR INOX is now the country’s largest cinema multiplex chain with almost 1,680 of India’s estimated 9,000 screens. The entity plans to open 150 new screens in FY24 with a capex of Rs 500 crore.
The intimation to the stock exchange does not mention the number of PVR INOX properties Costa Coffee will be served at. “If this is rolled out across the network, this could add a decent scale to Costa Coffee’s revenues. However, it will be at a much lower gross margin,” Roy said, adding that Costa Coffee’s annual revenue in FY23 was Rs 100 crore.
Competition has heated up in India’s coffee chain market with the entry of several new chains such as Third Wave Coffee and British sandwich and coffee chain ‘Pret A Manger’, backed by Mukesh Ambani in India. Tata Starbucks is the most dominant player in the space with 275 stores across 30 cities.
Parent firm Devyani International specialises in the development, management, and operation of quick-service restaurants and food courts for renowned brands such as Pizza Hut, KFC, Costa Coffee, and Vaango.