Dubai: Huge crowds and live music heralded the arrival of Caffe Nero in Dubai last month - another coffee chain in an already busy market.
The Italian brand, an exclusive franchisee of Al Tayer Trends in the UAE and the Middle East, opened at Dubai Mall amid much hype with live performances from local favourites Beat Antenna and Jonas Desai.
But after the fanfare dies down, one big question remains: How will Caffe Nero fare in an industry dominated by global giants Starbucks and Costa?
Gulf News spoke to representatives from three brands - Caffe Nero, Caribou Coffee and Second Cup - to see how they operate in an increasingly competitive environment.
Mike Hoff, General Manager of Al Tayer Trends, said: "We [Caffe Nero] believe we truly have the best overall offer in the market. We have no interest in being the largest coffee brand but are entirely focused on being the best and are working continuously to raise the bar in terms of overall customer experience.
He added that the coffee shop offers an Italian style 'one-on-one' service, which means the person who takes your order will also make your drinks. "This makes our service much more personalised and interactive, and allows our baristas to actually get to know their customers," he says. "Another feature unique to Caffè Nero is our desire to support talented local artists from the music and arts world by giving them a platform to showcase their talent. This will help us truly integrate into the communities where we are present and become a 'local' coffee house."
Caffe Nero currently has two outlets in Dubai and one store in Ras Al Khaimah's Al Hamra Mall. Two more outlets in Abu Dhabi and Al Ain are in the final stages of completion.
Within the confines of the various malls, location is everything. Caffe Nero boasts an enviable position as it is situated next to Dubai Ice Rink, which is already proving very popular with tourists and residents alike. One of it's competitors, Caribou Coffee, a franchisee of Kuwait-based Al Sayer Group, has a branch directly above Starbucks.
Abhijit Bose, General Manager of Caribou Coffee in the UAE, told Gulf News that the biggest challenge is gaining a good location in the various malls. "In terms of the current economic situation, our flagship outlet in the Dubai International Financial Centre [DIFC] has definitely been the most affected. Across the board we have more or less maintained sales over the last year but things could definitely have been better," he says.
Another huge factor, according to Bose, is the rent as landlords are not bringing costs down at the same rate as they went up. "To make business feasible, rent has to be a certain percentage of sales; we are hoping to tide over this difficult period but the high rents are killing us in some locations as they cut deeply into our profit margins."
There are currently 23 Caribou Coffee branches in the UAE, 23 in Kuwait, seven in Bahrain, two in Jordan and one each in Qatar, Oman and Saudi Arabia.
Bose added: "We have grown quite rapidly and in this region we are in a position to compete with the two giants - Starbucks and Costa. In Dubai, we perceive ourselves to be the number three chain in the country at the moment. In Kuwait, we are definitely leading the market but in the UAE we are vying with Starbucks, who are currently in first place. But we believe we can catch them and we have big expansion plans as we aim to open another six or seven outlets in the UAE by the end of the year, bringing our total to 30. Our strength is our product and our service; we definitely use the best coffee in the UAE."
In recent years, coffee shops have enjoyed a tremendous surge in popularity and in a city like Dubai, where malls are something of a lifestyle choice, there is huge potential for coffee chains to make a healthy profit.
Second Cup, Canada's largest speciality coffee retailer and a franchisee of BinHendi Enterprises, has 13 branches across the UAE .
Naveed Dowlatshahi, Vice-President of the Hospitality Division at BinHendi Enterprises, said: "The company is focusing on diverse taste buds to cater for different segments in the market. One of our new launches for this month is Turkish coffee, which we expect to sell outstandingly well and we will follow this by introducing sushi packs, garden salads, fresh waffles and pancakes.
"Our product line has grown from simple whole-bean coffee to over 30 premium coffees, speciality beverages, complementary foods and merchandise items. We have a competitive edge over other international coffee chains with our ability to add a diverse mix to our food offering," he claims.
By Kevin Scott
© Gulf News 2009
