BENGALURU: India’s café chains are moving beyond traditional coffee-led formats and experimenting with dessert-focused concepts, hybrid cafés and experience-led stores to drive higher engagement and spending.
Last week, Westbridge Capital-backed Third Wave Coffee launched “Third Rush” at four of its outlets in Bengaluru, branding and positioning desserts as a standalone experience aimed at enhancing late-evening socializing.
“We see desserts evolving into a strategic lever that supports higher engagement and ticket size,” Rajat Luthra, chief executive officer (CEO) of Third Wave Coffee, told Mint.
Barista Coffee recently started diner-style outlets that offer a more expansive set of meal items like burgers and pastas and hybrid cafés that serve coffee and food items, while already has desserts as part of its food menu and is expanding a mix of neighbourhood stores and more immersive Reserve formats.
These formats are becoming more specialized. Dessert-led menus and artisanal bakery tie-ups are helping chains move beyond beverages into full-stack consumption. Under the Third Rush brand, varieties of tres-leches cakes, mousses, ice-creams, gelato and pastries are on offer.
Premium formats such as Reserve cafés from Starbucks emphasize coffee origin stories, brewing techniques and curated menus, while hybrid outlets are designed to function across breakfast, work and evening social occasions.
Newer entrants are widening the definition of a even further. Abhijeet Anand, founder of Nexus Venture Partners-backed Abcoffee, pointed to a strategy that extends beyond physical stores into events, fitness communities and weddings.
“We engage consumers across multiple touchpoints including tie-ups with marathons, run clubs, and weddings,” Anand said, outlining a multi-channel engagement strategy.
These off-site formats are emerging as parallel channels for customer acquisition. Anand noted that such initiatives also function as “funnel creators,” allowing brands to tap into existing communities without significantly increasing marketing spends.
Pressure on profitability
This comes as profitability pressure for major coffee chains mounts. Tata Starbucks’ net loss widened 65% to ₹135.7 crore in FY25, while revenue grew marginally to ₹1,277 crore. New-store openings slowed to 58 in FY25 from 95 the year before.
Third Wave Coffee’s FY25 loss stood at ₹94 crore while revenue grew to ₹285 crore. Blue Tokai Coffee Roasters managed to cut losses nominally to ₹50 crore during the year, while revenue grew by 50%.
“There is growing pressure on profitability, with less room to spend aggressively on customer acquisition,” said Anand Ramanathan, a partner at Deloitte.
Consumer expectations are evolving.
“You can’t just serve coffee and bad food,” Ramanathan said, highlighting the growing importance of quality food and experiences alongside beverages.
Moreover, coffee consumption itself is becoming more embedded in daily routines, spanning convenience, work and social occasions, increasing the need for formats that cater to multiple use-cases within the same brand ecosystem.
“What was once a more occasion-led category is now far more integrated into everyday routines—whether that is a quick on-the-go cup, a work meeting or a more immersive and social experience,” said Tata Starbucks’ chief operating officer Adrit Mishra.
In this environment, performance metrics are also shifting. Revenue per square foot, average bill value and repeat visits are becoming more critical indicators than store expansion alone, according to Deloitte’s Ramanathan.
Sustainable growth
The effectiveness of these new formats will depend on their ability to deliver consistent returns, rather than short-term engagement. Food and adjacent categories are already playing a larger role in the revenue mix, with the potential to contribute more than core sales over time, according to Ramanathan.
Chains are responding by broadening their offerings. Barista’s expanded menu and hybrid formats are designed to increase overall spending and capture multiple consumption occasions throughout the day.
“We are using multiple agile formats from compact cafés to diner and hybrid models allowing us to optimize capex, rentals and throughput based on the location. On the operations side, we’re driving efficiency through standardized processes, centralized sourcing and tighter cost controls,” said Rajat Agrawal, CEO of Barista Coffee.
Premiumization is another avenue. At Tata Starbucks, Reserve formats are driving “longer dwell times and a greater willingness to explore,” indicating a segment of consumers willing to pay more for differentiated experiences, according to Mishra.
The first Starbucks Reserve store in India opened at Fort Mumbai in October 2022. The Gurgaon outlet opened in November 2025, and the third one is set to open in New Delhi’s Connaught Place on 29 April.
However, scaling up these models introduces operational complexity and higher costs. Experience-led formats require consistent execution and must translate into repeat behaviour, particularly in a price-sensitive market. Ramanathan sees this as a structural evolution.
“We’ve reached the second phase of cafés. Stores now need to start becoming cash cows and not necessarily just expand,” he said.