Costa Coffee reduced its Indian footprint to 198 outlets in FY26, the first decline in five years. Despite fewer stores, the brand reported a 7% revenue growth to ₹212.5 crore, reflecting a shift toward improving sales per location over rapid expansion.
Detailed Coverage
Costa Coffee, operated in India by franchise partner Devyani International Limited (DIL), has adjusted its growth strategy by reducing its physical store count. In the fiscal year 2026, the brand closed 22 outlets, bringing its total network to 198 stores from 220 in the previous year. This development marks the first time in five years that the coffee chain has seen a contraction in its store footprint, departing from its aggressive expansion phase that saw the chain grow from 44 locations in FY21 to 220 in FY25.
Revenue Trends and Operational Focus
While the network size shrunk, the brand's financial performance showed resilience. Revenue from operations reached ₹212.5 crore in FY26, a 7% increase compared to the previous year. This revenue growth, achieved despite fewer operating outlets, suggests that the company is prioritizing higher sales efficiency per store. The shift aligns with broader operational adjustments across the food and beverage sector, where companies are increasingly focusing on profitability and unit economics rather than just increasing the total number of outlets.
Strategic Realignment by Devyani International
Devyani International, which manages multiple food brands including Pizza Hut and KFC, has indicated a move toward a more disciplined and selective approach to its brand portfolio. This strategy aims to improve the quality of the network by closing underperforming locations and concentrating on high-traffic areas. Despite the store closures, global leadership from Costa Coffee has previously identified India as a critical long-term growth market, intending to elevate its position within the country's competitive coffee landscape.
Market Dynamics and Competition
The Indian cafe sector remains highly competitive, with established international brands like Starbucks and Tim Hortons vying for market share alongside growing domestic players such as Blue Tokai, Third Wave Coffee, and the legacy chain Cafe Coffee Day. The market is driven by younger consumers who are increasingly showing a preference for premium coffee experiences and social spaces. For DIL, the challenge remains balancing this expansion in a crowded market with the need to maintain strong profit margins, particularly as they look toward future business integrations and operational changes, including the proposed merger with Sapphire Foods India.
Investors will likely track whether this trend of selective expansion continues in the coming quarters and how the focus on revenue per outlet influences the company's overall profit margins. Future updates regarding the performance of the remaining 198 outlets and any plans for new store openings in high-potential urban centers will be important indicators of the brand's long-term sustainability.