Coffee startups chase growth despite losses

India’s emerging coffee chains are rapidly expanding their presence despite ongoing financial losses, with investors optimistic about the country’s underdeveloped branded café market offering long-term growth opportunities.

Expansion Plans of Leading Coffee Chains

Third Wave Coffee intends to open 100 new outlets this fiscal year while aiming to achieve overall break-even. Blue Tokai plans to grow from 240 locations to 800 by fiscal year 2030 and is preparing for a future public offering. Nothing Before Coffee (NBC), which currently operates 114 cafés across 45 cities, aims to more than double its outlets over the coming two years.

This growth strategy persists even as profitability remains out of reach. Investors are increasingly focusing on profitability at the store level rather than headline financials, believing that India’s café market is still in the early stages of development.

Investor Perspectives and Market Insights

Vish Narain, managing partner at Pulsar Capital, which supports Blue Tokai’s international growth, noted that previous failures in the café sector were linked to poor capital management rather than the market itself. He added that past rapid expansions failed to validate individual store economics.

Investors now recognize that India’s per capita coffee consumption remains low and interpret prior closures as issues of poor execution rather than a flawed market concept.

Financial Overview of Major Coffee Chains

Examining financial data illustrates the challenges faced by these companies:

  • Heissette Beverages, the parent company of Third Wave Coffee, reported accumulated losses of Rs 320 crore from fiscal years 2021 to 2025, with total assets amounting to Rs 538 crore by FY25.
  • Muhavra Enterprises, Blue Tokai’s parent firm, showed losses of Rs 175 crore over the same period, alongside total assets nearing Rs 370 crore. Financials for FY26 are not yet available.
  • NBC recorded losses close to Rs 3 crore during FY24 and FY25 against assets totaling Rs 18 crore.
  • Subko Coffee, a premium Mumbai-based chain with 16 stores in India and one in Dubai, posted losses of Rs 45 crore over five years with assets totaling Rs 61 crore at FY25’s close.

Profitability Prospects and Operational Models

Third Wave Coffee stated that about 90% of its outlets are EBITDA-positive and expects to reach break-even company-wide by FY27. Blue Tokai, supported by Verlinvest, targets profitability by March 2028.

NBC has implemented a franchisee-invested, company-operated (FICO) model to reduce cash requirements while maintaining operational control. Ankesh Jain, NBC’s co-founder and CEO, explained that this model enables rapid expansion using franchisee capital without losing operational oversight.

Industry experts attribute rising investor interest partly to improved unit economics as businesses transition from large dine-in cafés to smaller grab-and-go formats and cloud kitchens.

Krishna Dev Pathak, an investment banker advising startups, noted that these formats significantly lower capital expenditure and shorten payback periods, making the café business more attractive to venture capitalists rather than solely self-funded models.

Reduced capital needs have strengthened store-level economics, boosting investor confidence despite delays in overall company profitability.

Investors are also wagering on changing consumer habits. Anuj Kejriwal, CEO and MD of Anarock Retail, explained that factors like rising incomes, urbanization, and evolving preferences are shifting India from a traditionally tea-focused market to one increasingly embracing coffee.

This transition expands market opportunities for organized coffee chains beyond major metropolitan areas into smaller cities.

Consumers are increasingly using cafés as workspaces, social venues, and all-day dining spots, encouraging chains to diversify their offerings into food, desserts, packaged coffee, vending machines, and merchandise.

Devangshu Dutta, founder and CEO of consultancy Third Eyesight, stated that cafés have become ingrained in consumers’ lifestyles.

Challenges and Future Outlook

Challenges remain, including rising rents in prime locations, volatile coffee prices, and ongoing pressures from labor and supply chain costs affecting margins.

However, investors continue to fund rapid growth, confident that disciplined management and improving unit economics will ultimately make India’s expanding café industry profitable.

Key Takeaways

  • India’s branded café market is rapidly growing despite sustained financial losses at major chains.
  • Investors prioritize store-level profitability over overall company profits, recognizing the market is still developing.
  • Major chains plan significant expansion, using innovative models like the franchisee-invested, company-operated approach to reduce costs.
  • Shift towards grab-and-go formats and cloud kitchens improves unit economics and attracts venture capital.
  • Changing consumer habits and urbanization are broadening market opportunities beyond metropolitan areas.
  • Challenges persist with costs and pricing volatility, but outlook remains positive due to disciplined growth strategies.