Dilupa Pathirana, Chief Executive at Sri Lanka’s largest café chain Barista, shares insights on pioneering the coffee experience in Sri Lanka, navigating the economic crisis, and how businesses in non-essentials can survive and create value.
Barista is the largest coffee chain in Sri Lanka. Can you briefly take us through the company’s journey from conception to where it is today?
Today we are the largest and the most preferred café chain in Sri Lanka, with 16 cafés around the island serving more than 75,000 customers per month and selling more than 30,000 cups of coffee brewed.
Our journey started in 2002. The growth of the café culture here in Sri Lanka since the late 2000s, linked to socio-cultural and technological changes, as well as the lifestyle evolution of urban Sri Lanka, especially in Colombo, has been a fillip to the growth of the business. We spread our wings across several strategic locations, such as the World Trade Centre, the BIA, Rajagiriya, Mount Lavinia, Thalawathugoda, Wattala, Negombo, and the Southern Highway.
What is the recipe for Barista’s success?
It is our focus on the transformational strategy we set in 2018 where the company works on six principles: to claim the position of the undisputed coffee authority in Sri Lanka, to be the best value generator for coffee, to engage and inspire our employees, ignite emotional attachment with our customers, expand our presence, and create innovatively growing platforms for our business. We have strictly adhered to these principles over the last four years, assessing every strategic decision against them, and that is how we have ensured we succeed in everything we do.
What is your value proposition to customers? How has the market evolved since Barista first opened its doors?
Best Quality Coffee and Excellent Customer Service have been our winning value proposition over the years, and we are very conscious about maintaining high standards in both aspects. We focus on value addition at the core of our business by brewing the best quality coffee using the world-famous Lavazza coffee and offering superior customer service. At Barista, customer service is a process that begins when customers enter the café and extends after they leave to their experiences with the brand online and on social media platforms.
Furthermore, when adding value to the customer experience, we focus on critical areas such as procuring the best quality coffee, milk, and other ingredients and training our Baristas to brew a perfect cup of coffee. The focus extends to responsive communication, effectively using technology and understanding customer requirements which leads to a positive and consistent customer service experience.
How are you managing and navigating the unfolding economic crisis?
The impact of the current economic crisis has quite literally altered Sri Lankan business as you know it. No one is unaffected by this crisis, and the café sector is no exception. In fact, it is one of the worst-hit. The currency devaluation, import restrictions, fuel shortages, power cuts, scarcity of raw materials and packaging items, and pressure on employee wages and remunerations are some of the issues having dramatic repercussions on the industry.
Since of late, Barista has been very conservative in our inventory management policies; we try to keep as much raw materials and packaging items in our possession to ensure business continuity. We invested in alternative power sources to contain the disruptions from the power outages.
We are now very particular about the upkeep and maintenance of our machines, especially the coffee machines, as new equipment is increasingly hard to source and too expensive. On the other hand, we are seriously looking at changing our offering and starting the process of menu reengineering to fill any gaps by sourcing more local and readily available raw materials.
Elevating employee experiences is also crucial for getting through any crisis and laying the foundations for future growth. At Barista, our employees are brand ambassadors and growth drivers. Therefore, we provide every opportunity for them to grow professionally and personally, supporting them through the struggles of the unfolding economic crisis and motivating them to be part of something more by contributing to the sustainability and success of the organization.
As a brand selling a non-essential product, what is your approach to sustaining the business? How will you unlock growth opportunities?
Due to the prevailing hyperinflationary situation in the country, it is a fact that the discretionary income of consumers is shrinking. Also, because of the mounting costs of raw materials, the prices of coffee and food they find in our cafés are increasing. I think the impact is enormous and long-lasting because cafes have inherent heavy overhead structures from the need to be situated in prime locations with higher rents that require impeccable upkeep. We also need to source high-quality supplies and hire and train the best people.
We were barely recovering from the devastating impact the covid pandemic had on the hospitality and tourism sector before this crisis.
Therefore, I believe if we need to sustain the business, we need to rethink our business model.
As the market leader, we are responsible for keeping the industry alive in these difficult times. In Sri Lanka, coffee consumption remains a premium experience for many people due to the price of coffee and the sector itself incurring higher capital expenditure and overheads, restricting the growth of cafés. Barista has been working on the mission of Generalizing Coffee by making coffee more accessible and affordable to consumers and plans to grow the company along with the sector because that is a more sustainable approach, especially in the current turbulent business environment.
Do you have any words of advice for other businesses that sell non-essential products?
My advice to other businesses that sell non-essential products at this time is to cut the frills and preserve the core. Preserve supply chains to ensure business continuity. Look for more local and authentic sources of raw materials to reduce the pressure on gross profit margins and maintain price points as affordable as possible for consumers who have already lost their discretionary incomes. In addition, streamline overheads, cut down all non-value-adding expenses to the core product and maybe absorb the increasing cost of production into their margins to keep consumer demand alive. So, be lean, mean, and hungry for success even in these turbulent times.
Companies and their leaders will be judged by how well they handled this financial crisis. As mentioned earlier, Barista has a greater responsibility and the capacity to preserve the coffee culture. There is a silver lining to selling coffee in this market. We can use digital technology to improve customer experiences, cut additional overheads, improve convenience and deploy fuel-efficient delivery mediums because people will be very concerned about their cost of mobility and the wallet share that coffee occupies.
There is a golden opportunity for brand building. As Martin Luther King once said, the ultimate measure of a man is not where he stands in moments of comfort and convenience but where he stands at times of challenge and controversy. The same applies to brands. Customers and other stakeholders would probably forget what your brand did and said today, but they will never forget how your brand makes them feel.