The Coffee Bean & Tea Leaf prioritises expansion in North America

With the hope of ‘normalcy’ on the horizon and strong backing from its parent company, Sanjiv Razdan, The Coffee Bean & Tea Leaf’s president of Americas and India, discusses the chain’s plans for aggressive omni-channel expansion in North America. By Ted Hoyt. All images courtesy of The Coffee Bean & Tea Leaf.

Impacted heavily by the sudden closure of public spaces and waves of restrictions on indoor dining, foodservice companies around the world have been scrambling to adjust to a continuously changing environment while patiently awaiting normalcy and the hopes of re-emerging intact as the global pandemic recedes.

For Los Angeles, California-based The Coffee Bean & Tea Leaf (CBTL) – a global roaster, retailer of specialty coffees and teas, and established café beverage innovator – that corner may have just been turned. Parent company, Jollibee Foods Corporation (JFC) of Manilla, Philippines announced last month a surging return to profitability in its 2021 fourth quarter operating income, citing CBTL’s 29.3 per cent jump in 2021 same-store sales as a major contributing factor.

That certainly must come as welcome news to Sanjiv Razdan, CBTL’s president of Americas and India, who was hired in May 2021 to energise growth at the iconic company’s US-based business unit.

Sanjiv Razdan, CBTL’s president of Americas and India

Founded in Los Angeles in 1963, CBTL– having grown to over 1,100 retail stores in 27 different countries – was purchased by the Filipino restaurant group in 2019 in a deal valued at USD$350million, the company’s largest and most multinational acquisition to date. Jollibee’s priority was to accelerate growth of the coffee and tea brand and strengthen its brand development and franchise support system, particularly in Asia, where most of its stores are located. But with the appointment of Razdan, growing CBTL’s North American market has been shifted into high gear.

“Jollibee is very well resourced and that has given us access to capital and investments which are so important for growing our business,” Razdan explained.

With three decades of experience leading numerous US restaurant chains, Razdan has brought a new perspective in efforts to grow the coffee chain, not afraid to do things differently when appropriate. CBTL’s core strengths have traditionally been sourcing top quality coffee beans and signature tea varietals, small-batch roasting practices, and a spirit of innovation, having pioneered frozen blended coffee drinks and chai lattes. Those principals remain unchanged.

But Razdan did promptly bolster his senior leadership team by hiring three experts in marketing, consumer packaged goods, franchise development, and digital technology innovation, to help drive his growth plans.

“For the American business that I oversee, we have approximately 250 cafés,” Razdan said recently from CBTL’s Hollywood (LA), California offices. “We’re an omni-channel business. I envision over the next three years, by the end of 2024, to add anywhere between 100 to 150 more locations, so we’re looking at pretty aggressive growth numbers.” Razdan explained “omni-channel” as any of the various ways a consumer could purchase a product that originates from one of CBTL’s stores—in person, drive-through, online, by app, or by delivery.

In North America, approximately 60 per cent of CBTL’s brick and mortar cafés are company owned, concentrated in Southern California and Arizona, while the other 40 per cent are franchise owned. According to Razdan, the strategy is to grow through both channels, but be a franchise-led growth engine going forward.

“There’s plenty more room for us to grow in southern California and Arizona,” he shared, with Arizona’s major cities of Phoenix, Scottsdale, and Tucson targeted for additional company stores. Outside of those markets, the business is all franchise, and CBTL is focusing particular attention on Portland, Oregon; Dallas, Houston, and Austin, Texas; and Chicago, Illinois, as high-growth opportunities. The company is also looking to build its presence in New York, where it currently has one store in Brooklyn and will soon be adding a second city café. [CBTL had exited the New York City market prior to the pandemic.]

The locations of CBTL’s brick and mortar stores “run the gamut,” said Razdan, with about one-fifth offering drive-throughs. “We’ve got a lot of in-lines, stand-alones, and endcaps,” he noted. “If you clustered all of them, that’s where the bulk of our estate is. And then we’ve got a significant number of stores in non-traditional locations,” which has helped direct strategy for future selections.

The chain has done well with airport cafés so it’s an area CBTL is focusing on. “We would love to continue to grow in airports around the country,” said Razdan, adding that another successful location for CBTL is universities/colleges.

CBTL actively targets coffee (right) and tea drinkers with its on-premise and at-home selections

 

 

 

 

 

 

 

Razdan said about 95 per cent of CBTL’s sales come from its brick-and-mortar stores, the balance consisting of grocery and e-commerce, both of which have grown “significantly year-on-year. In fact, we’ve had record growth because of at-home consumption, people investing in fancier machines to brew coffee and tea, and they’re just consuming much more,” he explained.

“Grocery’s growing and we continue to be present in more grocery stores, both brands and the number of locations,” which includes dozens of major national U.S. retail chains. “E-commerce also continues to grow for us,” Razdan added, “but brick and mortar will, just because of its shear size and legacy, continue to remain the dominant force.”

Among major coffee chains, CBTL is notable in prominently featuring tea, and affording it an integral position in its menu development. “A lot of our beverages are consumed by our customers in coffee and tea form,” said Razdan, citing chai lattes vs traditional espresso lattes; cold brew coffee vs its innovative peach jasmine or mango cold brew teas. “When we think about core beverage innovation, we’re constantly thinking about applying that across tea and coffee, which is what makes us unique [among] our other competitors.”

Shifting behaviour

Even before pandemic protocols closed eateries and created major shifts in consumption patterns, Razdan said it was clear that consumer behaviour was already shifting. He believes many of the consumer adjustments made during the pandemic are here to stay.

“Drive-throughs are really one of our go-forward growth engines. They do exceedingly well for us wherever we have them,” Razdan explains, noting they have now become the preferred channel for a lot of consumers. “This asset type is booming for us, and we’re definitely doubling down on growing our drive-through footprint.” While current retail stores all have sit-down cafés, Razdan is looking to include drive-through-only assets in CBTL’s growth plans and, for urban locations, walk-up-only assets focusing on grab-and-go transactions.

Considering sit-down seating as an optional feature came as a result of observing trends at existing stores, said Razdan. “We’re finding that the vast majority of guests are accessing [our stores] through the drive-through channel. If that’s what is happening…then we may as well optimise the asset for drive-through and offer a great experience there.” By reducing the footprint and capital investment, he notes, it’s also easier to find sites that lend themselves to drive-through only locations.

While pandemic protocols forced food service operators to adjust their operations, Razdan said the trend towards increased off-premise and on-the-go consumption had already been growing beforehand. “The tailwinds have been there for a few years. But in the last couple of years, thanks to the pandemic, those tailwinds have become significantly stronger. People have been left reticent about coming inside the café.” Razdan said the company is essentially meeting consumer needs wherever they are.

Pandemic’s lasting impact

Some of CBTL’s pivoting during the pandemic has now become a blueprint on where to invest resources going forward. Razdan believes some of those altered consumer behaviours won’t be returning any time soon, maybe ever, to their pre-pandemic norms.
“I think this whole notion of coffee shops being the ‘third place’ is really shifting permanently to the ‘third place’ becoming a spot on your mobile device,” he said of the well-known paradigm that coffee shops are neither home nor work, but a ‘third’ gathering spot where people meet, sit, and dwell. But consumers are increasingly accessing the coffee category through mobile devices, said Razdan, and he doesn’t see that pivoting back.

CBTL plans to aggressively expand drive-throughs, such as this Long Beach, California location

“Convenience is now shifting what used to be the whole notion of third place,” he continued, noting that the coffee experience is increasingly convenience driven. “We are very much committed to being in that space from here on. It’s just the way consumers have permanently shifted, I think.”

As a result, CBTL has focused much more heavily on its digital and off-premise channel than it had in the past.

A second trend Razdan believes is here to stay is consumers accessing coffee through delivery, which he finds downright amusing. “There was [always] a lot of usage of delivery across the foodservice category, but not coffee. We’ve doubled down on that because of the pandemic, but again, I think that is a permanent shift,” he says. “People have discovered that it’s a very convenient and easy way of accessing the beverage that they like, and we don’t see that going away, so we will stay the course.”

In conjunction with the shift to off-premise consumption, CBTL has also found that consumers are drinking increasingly more cold beverages than they used to, and the number of beverages people are ordering is significantly higher. “Seven out of ten beverages that we sell in the US now are cold vs. hot,” Razdan revealed. “As we connected these two dots, it became very clear that we basically had to meet customers where they were. With the pandemic, the delivery channel became very important.”

Now, CBTL offers delivery in two ways: either through the company’s native app and native Coffee Bean website, or through any four of the delivery aggregators that the company has partnered with: Uber Eats, Postmates, GrubHub, and DoorDash. “Essentially that’s been part of our strategy, to make it really easy for consumers to access us on delivery,” said Razdan. “That has become an important part of a business. It just keeps growing.”

A third pandemic takeaway has been the normalisation of app usage by consumers for a myriad of purposes. Razdan said people that were not habitually using apps to order ahead or to participate in loyalty programmes have now grown accustomed to the process, some having even ordered groceries online. As a result, the company has focused intently on improving its app, identifying ‘friction points’ and making it easier to use. In addition, it is currently in the process of overhauling its loyalty program. “That’s an important space for us,” shared Razdan. “We will be committed to growing that permanently.”
While embracing technology provides a framework to effectively deliver a smooth consumer experience, CBTL remains committed to innovating enticing, high quality beverages, merchandise and increasingly, food.

In tandem with shifts towards off-premise consumption, CBTL saw that many people want to order a bite to eat along with their beverage, so they’ve really made a big effort to focus on their food offerings. “As a result, we’re selling a lot more food,” said Razdan. “In fact, almost all delivery orders have some kind of add-on, either a pastry, or a breakfast wrap, or sandwich. This is something that we’re being so much more mindful of.” As a result, CBTL just launched a whole new breakfast menu in January in its California stores, “it’s definitely something that we’ve done differently,” Razdan said.

  • E Edward ‘Ted’ Hoyt has more than two decades of experience as a trade magazine editor and freelance writer, authoring many articles in the premium coffee, spirits and cigar industries, among others.

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One response to “The Coffee Bean & Tea Leaf prioritises expansion in North America”

  1. This article about The Coffee Bean & Tea Leaf’s expansion plans in North America is incredibly informative and inspiring. It’s fascinating to learn about the strategies and innovations Sanjiv Razdan and his team are implementing to adapt to the changing landscape of the coffee industry, especially in the wake of the pandemic. The emphasis on omni-channel expansion, including drive-through and delivery options, shows a keen understanding of consumer preferences and a commitment to meeting their needs. Additionally, the focus on enhancing the digital experience through app improvements and loyalty programs demonstrates a dedication to providing exceptional service. Overall, this article provides valuable insights into the future of coffee retailing and highlights the importance of agility and innovation in staying relevant in today’s market.

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