Starbucks aims to win Indian hearts with cheaper drinks
Starbucks, the world's largest coffeehouse chain, has devised a new strategy to win Indian hearts: cheaper beverages. The American company has been facing stiff competition from domestic rivals in one of the fastest-growing markets. Starbucks believes cheaper drinks will ward off the competition and win new customers. It was one of the first foreign coffee brands to enter India.
Why does this story matter?
- India's tea and coffee market is now worth $300 million. It is not much compared to some of the biggest markets in the world, but it is growing fast at a rate of 12% per annum.
- This makes India an attractive destination. Starbucks is still the dominant force, but its rivals are getting closer. The new move is aimed at tackling domestic competition.
Company plans to expand into smaller towns
With cheaper beverages, Starbucks hopes to change the perception that its drinks are expensive. The US giant has introduced a six-ounce (roughly 180ml) beverage called Picco starting at around Rs. 184 and milkshakes, which cost Rs. 284, to attract more customers. The company also plans to open more stores in smaller towns in the country.
Starbucks has introduced more 'Indian-inspired' tea offerings
Most of the multi-national food brands in India have added some Indian touch to their offerings to attract customers. Starbucks is also heading that way now. For years, the coffee giant offered just one milk chai 'latte' or Chai Tea Latte in the country. Now, it has launched 'Indian-inspired' tea offerings with spices and cardamom that start at Rs. 185.
Third Wave Coffee and Blue Tokai are challenging Starbucks
Starbucks's decision comes amid rising competition in India's specialty tea and coffee market. The company, which operates in India in partnership with Tata Group, is being challenged by domestic rivals, including Third Wave Coffee and Blue Tokai. The two have opened over 150 stores in the last 15 months. Comparatively, Starbucks took almost 11 years to open 384 stores.
Starbucks may have received pushback against larger, expensive drinks
With smaller drinks that are cheaper, Starbucks aims to capture the heart of value-conscious Indians. "Excessively large portion sizes are an American phenomenon," retail consultancy Third Eyesight's Devangshu Dutta told Reuters. The company may have seen a pushback against larger, expensive drinks in India. Especially because of competing offerings by Third Wave Coffee and Blue Tokai.
