Indian Hospitality Corp in talks to buy coffee chain Barista

Indian Hospitality Corp (IHC), which is led by Barista's first CEO Ravi Deol, is in talks to buy India's oldest coffee chain Barista, as per a report in The Economic Times The deal seems to be stuck over the price as Barista, which is owned by Italy's Lavazza, is looking to sell the 180-outlet chain for over Rs 80 crore, much more than what UK-based IHC is keen to shell out.

Barista was established in 2000 by Turner Morrison in India and Ravi Deol served as the first CEO, setting up 128 stores and three in Sri Lanka.

Thereafter, Tatas bought a significant stake in Barista only to later sell it to Lavazza in 2007 along with the Fresh & Honest coffee-vending machine business from serial entrepreneur C Sivasankaran's Sterling Infotech Group.

It lost the first mover advantage in the coffee chain business as Café Coffee Day went about aggressively expanding to emerge as the largest player in India. Besides Café Coffee Day, Barista-Lavazza competes with the likes of Costa Coffee and the recent entry of world leader Starbucks.

Lavazza was previously reported to be looking to sell the coffee chain in India.

For IHC this would mark another significant buy in the food space.

IHC had started as a blank cheque firm and listed on the London Stock Exchange’s junior market AIM in 2006, raising $103 million in the process. It built its business around airlines catering, hospitality and QSR chains, starting with the acquisition of Mars Restaurants and its sister concern Skygourmet Catering for approximately $110 million. This brought the hotel brand Gordon House besides restaurants under Not Just Jazz By The Bay, Tendulkar’s, All Stir Fry and Just Around The Corner.

IHC, however, faced the heat of economic slowdown in Indian aviation and hospitality industry. The company exited the airline catering business by selling 74 per cent to Gateway Group for around $39 million in cash in October 2010 and the remaining 26 per cent later.

It delisted from AIM and in 2012 made its biggest move yet by acquiring UK's Adelie Food Group, which supplies quiches, salads, sandwiches and assorted ready-to eat food to retail chains such as Starbucks coffee and Sainsbury's supermarkets, for $350 million from PE firm Duke Street Capital.

A possible acquisition of Barista would not just add to its exposure to food business but also help it push products from Adelie as smaller-format F&B chains, such as coffee chains, are one of the prime movers of such ready-to-eat food products in India.

The organised café market in India, which grew almost six times in the last five years to $230 million, is likely to hit $410 million by 2017, maintaining a compounded annual growth rate of 13-14 per cent, according to a report by consultancy firm Technopak Advisors.

Café business comprised some 11 per cent of total organised food services market in the country as per the report.

(Edited by Joby Puthuparampil Johnson)

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