Fast-food chain Subway to enter upscale coffee house space with Subway Cafes

American fast-food chain Subway plans to break into the upscale coffee-house market in India by introducing Subway Cafes in select locations, to attract customers throughout the day with an extended menu.
“We are launching Subway Cafe with proper coffee machines and pastries to fill the morning and afternoon part when some people don’t really want sandwiches,” Karen Eidsvik Moody, regional director-Asia at Subway, said. “As people taste evolves and more competition comes in, that also helps build the whole business,” she said.
Subway, known for its foot-long submarine sandwiches and salads, launched such cafe in the US three years ago. Its global rival and burger giant McDonald’s had introduced cafes in India last year. Market observers say it would be difficult for Subway to establish itself in the Rs1,400-crore Indian cafe business which is becoming increasingly competitive and is mostly limited to cities. “While the potential remains high for cafe business, existing chains are finding it difficult to breakeven as consumer acceptance is still low currently,” said Ruchi Sally, director at boutique retail consultancy Elargir Solutions. “Subway is known for sandwiches and it will also take time for consumers to accept its change in menu,” she added.
The Connecticut-based company had recently introduced Metro Decor concept, offering an upscale environment, for some of its outlets in the country. But its upmarket drive comes at a time when high inflation and slowing economy have hit quick-service restaurants, with consumers looking to curb spend on non-essentials. Subway admitted that it has seen a decline in same store sales growth, but claimed its numbers were better than competitors.
“There is slowdown and even our product prices have gone up. But the hike is still less than overall inflation and we have kept products affordable and value proposition intact,” Manpreet Gulri, country head at Subway India, said. Subway sells sandwiches starting from Rs55 in the country, one of its lowest price tags globally. And, despite the overall slowdown, Subway plans to have 700 outlets in the country by 2015, up from around 430 now.

Source: India Times

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