Crazy for Coffee

bloomberg
Just when you thought no more coffee shops could squeeze into the tight network of Shokoladnitsas and Coffee Houses in Moscow, more Western companies are opening new locations, competing for the attention of Russian coffee drinkers.

Starbucks, the Seattle-based corporation with almost 9,000 company-operated stores around the world, opened its first Russian venue last fall in a suburban shopping mall in Khimki. The largest coffee shop brand in Britain, Costa Coffee, opened the chain's 1,000th shop last month on Pushkinskaya Square, ambitiously planning on 200 more locations in Russia over the next five years. To these seemingly late newcomers, Moscow's ratio of one coffeehouse for every 3,187 people is an opportunity for growth.

Although arriving in an already established coffeehouse scene in Moscow, Western chains are banking on their brand familiarity, the attractiveness of quick counter service and Russians' growing incomes. "Moscow, with its vibrant economy and cosmopolitan culture, is the right place to start in Russia. For a market with a quickly emerging and upwardly mobile middle class, Moscow has a low concentration of cafes," said Mojtaba Akhbari of Starbucks, which opened two more locations in March at the Moskva-City business center and at the Belaya Dacha Mega Mall.

In its established tradition, Starbucks has developed "localized" offerings for Russia, including tomato-bread sandwiches and

custard-filled cinnamon buns. Costa Coffee is appealing to the Russian palate by adding alcohol to some coffee drinks. Both companies are competing for a loyal customer base in Russia, in an attempt to woo coffee drinkers from existing domestic coffee shop chains, whose number has skyrocketed in recent years. Coffee House has over 200 locations in Russia, and Shokoladnitsa has over 140.

"A brand's status as a foreign player, whether it's a mobile phone, car or clothing brand, gives consumers the confidence that they are receiving a better quality end product," said John Derkatch, Managing Director of Costa Limited. While Starbucks' strategy seems to be to put shops in high-traffic shopping malls, Costa Coffee is partnering with Rosinter, a Russian restaurant group. They are getting their foot in the door by re-branding Rosinter's 11 existing Moka Loka coffee shops. "The aim is to start with Moscow and St. Petersburg in the first year and to develop into other cities after that," said Vlad Rogov, CEO of Costa Coffee operations in Russia.


Vladimir Filonov / MT
Muscovites have learned to appreciate coffeehouse culture, complete with individually prepared cappuccinos and pastries.


Whether or not the preference for Western cafes is a fact, Russian coffee enthusiasts are frequently willing to travel long distances for a coffee experience that is just right. Muscovite Daria Baidakova says she regularly commutes to Starbucks in Khimki, taking an hour each way to get a white chocolate mocha. "I first tried it in the U.S., and waited so long for them to open here. Finally, they did," she said. Distance doesn't stop Yelena Volodina either, even though she lives nine metro stops from her favorite coffee shop, Coffee Bean.

Coffee Bean was one of the pioneers of coffeeshop culture, opening in 1996 when most Muscovites hardly ever dined out, let alone sat around aimlessly with a cup of coffee. In the early days of Moscow's coffee culture, many customers were foreigners. Cups, utensils, and even toilet seats regularly left the premises in the hands of coffeeshop neophytes, remembers Anna, a former part-time barista who worked at Coffee Bean during college.

Today the chain, owned by expat Jerry Ruditser, enjoys steady, if not explosive, growth, and a stream of loyal customers who appreciate the quality of coffee and the non-smoking policy. Like other Western-style coffeeshops, Coffee Bean does not have waiters, instead serving drinks at the counter. The chain currently has six locations in Moscow and three more in the regions.

In terms of atmosphere, Costa Coffee and Starbucks are very similar -- their main difference is the background color that their circular logos are set against. Both serve a limited choice of food, focusing on pastries and coffee drinks. Both are more than happy to arrange everything to go, putting multiple cups in cardboard shells for employees on an office coffee run.

As if to spite the expanding paper-cup coffee culture of the world's largest coffee chains, Viennese roaster Julius Meinl quietly opened its Moscow location in early April. Instead of the familiar confusion between the Italian-American terms of the Starbucks language, a visit to Julius Meinl is a journey into Austrian territory. The cafe has a coldly modern interior with red leather seating and an extensive menu that includes food. Your coffee will arrive on a silver platter with a traditional glass of water and a ginger cookie. Getting it "to go" would seem like a travesty.

Contacts

Costa Coffee
5 Pushkin Square, 650-6181

Julius Meinl
38 Ul. Myasnitskaya, 628-2888

Starbucks Coffee
19 Ul. Arbat, 203-6714