Issue link: https://read.dmtmag.com/i/491371
62 STiR tea & coffee industry international This year Forbes Russia named Traveler's Coffee the 22nd most profitable franchise in Russia with revenue of 27.6 million rubles ($675,000) and profits of 5.5 million rubles. In 2013 Traveler's Coffee became the first Russian coffee chain to enter the Chinese market. In September the company opened its second store in China and equipped it with a roaster large enough to meet the future demand of shops nearby. The company has serious expansion plans – by 2016 it eyes 200 shops and a signifi- cant increase in the corporate part of the network. "Our strategy in Russia is to develop the local markets where we have the largest penetration in the outlying regions," said c.e.o. Christopher Tara-Browne. To meet this challenge Tara-Browne realized the company needed a manager with extensive experience in operations. This led him to hire Dean Torrenga, who has 20-years experience in operational management at Starbucks and Caribou Coffee chains in Amer- ica. Torrenga joined Traveler's in September 2013 as c.o.o. and moved to Novosibirsk. "Moving to Russia, especially Siberia was considered by many a very extreme act. But when I speak about Traveler's Coffee, and the stage of development of this awesome company, they all say - Wow! It's incredible," said Torrenga. "Traveler's Coffee has all the elements to become an international coffeehouse chain. It is the first Russian firm to expand into China, and it has a strong franchise system, and at the heart of it all - some of the best coffee in the world. I am glad to be part of the team that will establish Traveler's as an international brand," he said. Traveler's is optimistic but Russian coffee analysts see future of the Russian market is unclear. In the near term all of Russia's coffee companies are likely to face challenges related to the general stagnation of the Russian market, according to Ramaz Chanturia. "Beginning in 2013 in the Russian restaurants segment there was a decline of turn- over [revenue], and in 2014 the trend has accelerated. Russian consumers are cutting their spending on cafes and restaurants so deeply that will soon become a serious prob- lem for many companies, since the reduction in the market will be accompanied by in- creased competition," he said. There are certain legal issues involving the franchise system that can also make it difficult to operate. "There have been cases when franchised companies, once reaching a certain level of technical equipment and a stable customer base, changed the name of the cafe yet con- tinue to offer the same products to consumers. Companies in Russia are not protected by the law from such actions. In situations of crisis it may become a common practice," he added. Traveler's made a great step moving to China as this market today looks much more promising than Russia, he said. "We know what we want to do with the franchise, and where we will take it," said Tara-Browne, who disclosed that the company is working to improve its franchise system before expanding into North Africa. "Our overall vision, our approach to business, our partnership with the franchisee, the Academy Traveler's Coffee and our business model - everything is moving in the right direction! This is very encouraging," said Tara-Browne. "We are really at the forefront of this field, and if it were not so, we would not be №22 as the most profitable franchises according to the research of the Russian division of Forbes. Suffice it to say that I am proud of my team and the things we do," he concluded. Expansion Plans Russia's coffee market has changed significantly in the past decade. There are now 80 coffee chains and coffee and pas- try chains operating in Russia, according to government and industry statistics. There are 5,212 coffee shops including 673 in Moscow and 476 in St. Petersburg. Coffee chains operate 1,340 of these shops. The segment grew 22% year-on-year in 2012. Average coffee consumption per capita has increased to 4 pounds (1.81 kg) per year. Twenty years ago nobody knew about coffee shops, now more than 60% of Russians visit such places every year. "Traveler's Coffee in Siberia was a real revelation for the local market, as consumers got access to a coffee with the quality they had not known before. It is not a secret that in Russia, the culture of coffee consumption always was devel- oped poorly, but in the regions remote from the country's centers it developed even worse. When Traveler's came to business there were several coffee chains Traveler's Coffee roast master and Q Grader Daniel Panov Founder Christopher Tara-Browne.