Coffeeshop competition heats up all around the country
Local and int'l chains do battle in the latte, cappuccino markets
Posted: January 16, 2013
The UK-based Costa Coffee chain is the market leader in the country, and its 25 venues include a few locations outside the capital, as well.
By Lubomír Sedlák
For The Post
International coffee chains operating in the Czech Republic are aiming to expand further outside Prague, just as locally based outlets look to strengthen their presence across the market.
In a country famous for its beer, the coffee house has become increasingly popular, with even fast-food chains achieving success with their café-style offerings.
Starbucks, one of the local market leaders with 14 cafés, currently has one outlet outside the capital, in Ostrava, and hopes to launch in Brno, as well.
"The coffee-drinking culture in this country is constantly on the rise and as a result, in 2012 we decided to expand [from Prague] to the regions by launching a café in ... Ostrava, and we plan to continue this expansion," Michael Hudspeth, the company's brand president for Central and Eastern Europe, told The Prague Post.
"We also plan to open further shops in Prague itself in the near future, as well as in other cities."
The company reportedly achieved a profit of 177 million Kč in the Czech Republic in 2010 and has since seen two successive increases in revenue, according to Hudspeth.
The market leader in the country in terms of café numbers is UK-based Costa Coffee, which has 25 venues, including several outside the capital.
Another international chain with a strong presence nationwide is Café Coffee Day, seven of whose 13 outlets in the Czech Republic are outside Prague. The Indian-based company moved into the local market in 2010 when it purchased the Czech chain Café Emporio, which had 11 coffee shops.
While it shut one outlet last year, this month it opened a café in Plzeň in west Bohemia, illustrating the determination of chains to secure business in the regions.
Another foreign chain hoping to make an impact in the Czech Republic is Australian-based Gloria Jean's, which previously had four cafés in the Czech Republic but pulled out in August 2012 after three years.
Already prominent in several foreign markets, Gloria Jean's plans to return in about a year's time and aims to open as many as 25 outlets over the following five years.
One factor that could be luring the likes of Gloria Jean's back into the Czech market is the success of the McDonald's McCafé formula, says Jiří Lošťák, board member at the Czech Franchise Association.
"Customers have rising expectations regarding how drinks are served to them, and someone at the company simply had the idea of putting the coffee inside a china cup instead of a paper one," he said.
Reports last year suggested Coffee Bean of the United States was also planning to launch outlets in the Czech Republic, although the company this month did not confirm its plans.
Coffee Bean is still looking for a partner in the country, according to Marek Halfar, head of Czech consultancy Profit System Franchise Services, who added that foreign chains could benefit from choosing a franchise holder that has not operated on the market before.
"The fact it is something new could be an asset because the company that purchases the license could adapt more easily to the demands of the foreign investor," he said.
Pitfalls remain for foreign coffeeshop chains, as shown by the difficulties suffered by Gloria Jean's the first time around. Its previous local franchise holder, H.A.M. Gastro Czech, declared bankruptcy.
Another chain that faced challenges was Austrian Coffee and Co, whose franchise was held by a local firm called Restaurant Management. Austrian Coffee and Co has closed all 17 of its stores in the Czech Republic and Slovakia.
Given the hurdles, Lošťák says foreign chains that would like to start operating in the Czech Republic should run just one coffee shop for at least a year, and that they should only open further outlets if this single venue turns a profit in that 12-month period.
"Many foreign chains, especially the American ones, have expectations that for the Czech franchise holders are simply unrealistic," Lošťák said.
There may be better prospects for local chains, says Lošťák, giving as an example Výtopna Café in Ostrava, where the coffee is brought to the customer in a toy train.
In particular, Lošťák said foreign operators were unlikely to achieve success outside the Czech Republic's 10 biggest cities.
Halfar also sees bright prospects for the locally based outlets, citing the success of CrossCafé, which in 2012 opened four new outlets.
"Among the reasons it has been doing well is because the company has from the very beginning been making its own desserts, a fact that has become a competitive edge of sorts," he said.
However, he says "lighter" versions of the respective foreign formulas can be introduced in smaller Czech towns as well, not least because some, such as Český Krumlov, Kutná Hora and Telč, receive many foreign tourists.
- Café Louvre A large portrait of female vanity; And I wondered, Bronso, the ...
- Coffee in paper mugs; hooliganism, no nice seat, hope it stains your Nike ...