Coffee, sugar and cream

A couple of weeks back, my wife and I had a long discussion on the operations of the coffee counter at Maiya’s in Jayanagar. It was an interesting discussion since while I was extremely familiar with the operations there (having gone there almost every other day for the last year), the wife was seeing them for the first time.

My hypothesis was that it was the structure of the coffee+tiffin combo and not accounting for multiple orders in one ticket that caused the congestion. The wife’s diagnosis was rather different – she recognised the sugar counter as the bottleneck.

Most South Indian restaurants have ready two kinds of boiling milk – one with sugar and one without, and your choice of milk (or a linear combination) can be added to decoction to make coffee of the required sweetness for you. Maiya’s does it differently. They only have unsweetened milk, and you need to add the sugar yourself.

So there is sugar placed in a bowl beyond the coffee counter where you add the sugar, get yourself a spoon (inconveniently placed before the coffee counter which means you stretch across) and go on while stirring the coffee. For non-regular customers (my untested hypothesis is that most Maiya’s customers are regulars), this is a novelty and leads to inefficiency of the full queue.

The wife argued that if Maiya’s were to keep both sweetened and unsweetened milk (like other restaurants), sugar could come pre-mixed in the coffee and the bottleneck could be eliminated. Since the barista doesn’t multitask (he fills exactly one cup at a time), there is no problem in miscommunication, etc.

The problem is that turnover of the unsweetened milk in other establishments is not high enough to maintain quality. The thing with the milk is that it needs to be constantly stirred, or at least poured from, for cream to not form in it (such cream can make the coffee gross). When the demand for a particular kind of milk (usually unsweetened) is low, it is not stirred enough, and cream forms. And then when you ask for coffee without sugar (or “less sugar” – remember linear combinations of the milks are possible) you end up with cream in your coffee.

This happened to me twice in the last three days. On Saturday I was having coffee at Hatti (opposite Maiya’s), asked for “strong, less sugar”, which meant I got some of the unsweetened milk, which means there was cream in my coffee. I had to spit out some to make it palatable. And the story repeated itself at the Vasudev Adigas in Jayanagar 8th Block on Sunday. Nice tasting coffee made gross by the cream.

It is to solve this problem that Maiya’s perhaps has only one kind of milk – it is constantly boiling away and being poured from, and there is no cream. And you get superior quality coffee. For which I’m willing to pay a premium.

Coffee Pricing Dynamics

I had alluded to this coffee price war once before, but I believe it deserves fuller treatment, hence this other post. This is to do with the two coffee shops facing each other at the concurrence of 7th Main, 30th Cross and the “Diagonal Road” in Jayanagar – Maiya’s and Hatti Kaapi.

So Maiya’s opened for business sometime in 2008-09 (this was the period I was out of Bangalore, and it was there by the time I returned). On the ground floor, one the side, they opened a counter where they sold coffee. It was an efficient operation – you line up, buy the token and then move over to a window where you get unsweetened coffee in a ceramic cup, to which you add sugar as per requirement and move on. The coffee was generally excellent and pricing was always premium. In August 2014, when I started patronising it on a regular basis, a cup of coffee cost Rs. 18 and ten minutes of waiting (in line).

A month or two later came Hatti Kaapi, right across the road and facing Maiya’s. Hatti priced their coffee at Rs. 10 per cup, served in a glass tumbler. Sugar was pre-mixed into the milk, though you could ask for your desired level (no sugar, “less sugar” or “normal sugar”), which would be produced as a linear combination of sweetened and unsweetened milk. Hatti Kaapi served snacks also, and presently expanded its line selling cold coffee, juices and the like. Hatti has a larger customer-facing window than Maiya’s so the operations are rather smooth.

While people might have expected Maiya’s to drop their price in view of this newfound competition, they didn’t, though the cost of a cup of coffee for customers came down – from Rs. 18 and 10 minutes of waiting time, it came down to Rs. 18 and 5 minutes of waiting time. While several erstwhile regular customers crossed the road to the cheaper Hatti, based on anecdata (length of queue every time I go for a coffee, which is about once a day), it is unlikely that Maiya’s lost customers. The presence of two quality coffee shops close together possibly expanded the market and all seemed good.

However, it seems like Maiya’s decided that Hatti had got a competitive advantage by way of serving snacks along with their coffee and decided to replicate the strategy (note that Maiya’s has a full service restaurant upstairs, but this is about the “quick-coffee-and-snacks” market). So they started giving combo offers, where you would get a hot fried snack (choice of bajji, bOnDa, samosa and the likes) with coffee for Rs. 25. The snack would be served out of the same tiny window that served coffee, on paper plates with plastic spoons.

I must confess I’ve never purchased the combo (despite the attractive pricing; the snacks don’t look attractive enough to me), but I’m not sure about the impact that it’s been having on Maiya’s overall sales. I go back to anecdata (for I have no other data; and in my defence I have a large number of data points), and it seems like the average queue length at my arrival has remained the same from the time before Maiya’s started serving snacks (and after Hatti opened). However, I find that the total time taken in queue is now significantly higher – closer to the ten minutes from the time before Hatti’s setting up than the five minutes in the intergennum where Hatti was open but Maiya was not serving snacks.

And from my observations there, this is because the snacks have now messed up Maiya’s operations. Earlier, it was simple and linear. It’s a small passage where the Queue goes in a U-shape (unfortunately I haven’t taken pictures, and can’t find any online). At the base of the U is the cash counter and then you move to the side to get your coffee. A nice linear queue.

Now, snacks are served from the same window as the coffee, and since not everyone buys them, the ordering is broken. Also, it is the same token in which people have to get snacks and coffee at the same time, and that disrupts the queue further. Then, there are people who come back for their coffee later having taken the snacks earlier, and thus go straight to the coffee counter without going to the cash counter, messing up people’s expected wait times and leading to further chaos. In other words, thanks to serving snacks, the service time at Maiya’s has gone up, while the utilisation of the barista has gone down.

Hatti, on the other hand, makes full use of its corner location such that snack service doesn’t disrupt coffee service at all.

So the coffee at Maiya’s has effectively become more expensive again (Rs. 18 and 10 minutes), and with declining utilisation, my sense is that they are making significantly less money from their coffee counter now (including snacks) than they were before they started selling snacks. I really hope they will be able to simplify the operations of their coffee and snacks counters, else they risk losing more customers to Hatti. But then it seems like the snacks have become especially popular with Maiya’s regulars, so undoing the snacks service is also not an option.

Finally, here is a piece by the New Indian Express on this price war. As for me, I still prefer Maiya’s – the difference in quality of coffee does it for me. But if they don’t improve their operations soon enough, I might make the switch across the road.

Coffee pricing at Bangalore airport

I had what I thought was a neat theory on coffee pricing at the Bangalore International Airport. However, on second thoughts, I think the theory is bunk. On third thoughts, however, I think I should publish it, even though I don’t believe it is true. So here goes.

There are two places where you get great filter coffee outside the terminal of the Kempegowda International Airport near Bangalore. At the Western edge, close to the departure gates, there is Maiya’s, which also sells South Indian snacks and food items apart from pre-mixed filter coffee (without sugar). The coffee here is priced at Rs. 30 per cup. At the Eastern edge, close to the arrival gates, there is an outlet of Hatti Kaapi. Now, this outlet has started selling snacks, too, and now sells coffee in cups and pots of various sizes. However, the “basic” filter coffee, which is mixed fresh on the spot (you can choose the level of sweetness, and strength) and is available in a paper cup the same size of that at Maiya’s, is priced at Rs. 15.

The argument I had in mind for this differential pricing was that the clientele of Maiya’s, it being at the departure gate, is mostly passengers on their way to board flights. Given that they can afford to fly, they can afford to pay a premium for good coffee. Hence it is good economics to charge a high price for the coffee. Also, given that departing passengers are usually short on time, it is unlikely that they will pay the additional time cost of walking down to the Hatti Kaapi outlet in order to save the Rs. 15 per cup monetary cost of coffee there.

At the other end, Hatti Kaapi is at the arrival gate, and its major clientele consists of drivers. Given the distance of the airport from Bangalore city, it has become almost unheard of for relatives and friends to go all the way to the airport to pick up people. So people waiting at the arrival gate are mostly drivers. And given that drivers are not particularly rich (not rich on an average as airline travellers at least), they are much more price-sensitive when it comes to their coffee. And so the coffee at this end of the airport is priced at a much more reasonable Rs. 15 per cup. This makes for a nice economic theory, right?

The theory falls apart, however, if you compare the prices at Maiya and Hatti kaapi outlets at the airport to their prices elsewhere in the city. A good parallel is in Jayanagar, where the same two establishments have outlets across the road from each other (intersection of 7th Main and 30th Cross).

The kind of service in the two establishments is similar. You stand in line, take a token and stand in line again to get your cup of coffee. Hatti serves its coffee in a paper cup while Maiya serves in a ceramic cup-and-saucer. Like at the airport, Hatti’s kaapi is mixed on the spot and you can set your sugar level. Unlike at the airport, Maiya also mixes coffee fresh on the spot, but like at the airport no sugar is added and you need to add it yourself. It must be mentioned here that the Maiya in question has been there for several years while the Hatti outlet across the road started only a few months back.

And how do Maiya and Hatti price their coffee in Jayanagar? Maiya is at Rs. 18 per cup, and Hatti at Rs. 10 per cup. So the ratio of prices of a cup of coffee between Maiya and Hatti at the airport (2:1) is not very different from the ratio of prices of a cup of coffee between Maiya and Hatti in the city (1.8:1). So the theory I mentioned above falls flat on its head.

Where the theory stands, perhaps, is in explaining why Maiya and Hatti are located at the airport at the ends where they are located – Maiya being a more premium brand in general captures the passenger crowd at the departure gate, while Hatti being a more price-sensitive brand captures the driver crowd at the arrival gate.

And regarding the coffee itself I’ve had coffee at all four outlets and can confirm that both in the city and the airport, the quality of Maiya’s coffee is much superior to Hatti’s. In fact in Jayanagar, where the two outlets are a 5-minute walk from where I live, I prefer to pay the price and time (the lines at Maiya are generally longer than at Hatti) premium to drink coffee at Maiya rather than to drink the more “reasonably priced” stuff at Hatti.