Coffee In A Land Of Tea: Starbucks Arrives In India

Via The Financial Times, a report on Starbucks’ entrance to India:

In few countries would the opening of a coffee shop be treated as headline news, but that’s exactly the treatment Starbucks’ 4,500 square foot flagship Indian store in Mumbai received on Friday.

Throngs of journalists converged on the restored heritage building owned by the company’s local 50:50 partner, the Tata Group, to mark the entrance of the Seattle-based coffeehouse into the traditionally tea-drinking subcontinent.

Television reporters sipped imaginary coffee from empty mugs as they filed live reports, anchors announced breaking news reports as they cut away to billionaire chief executive Howard Schultz’s press conference, while workers readied a stage in front of the heritage building that houses the store for an event later that night.

India’s coffee and café culture is in the early stages of its development – the total café market is estimated at $230m per year, and is dominated by the Bangalore-based Café Coffee Day, which has more than 1300 stores across India. But Technopak, a New Delhi-based consultancy, estimates that the market will grow around 13 to 14 per cent a year for the next five years to be valued at around $410m by 2017.

“The size of this market is one of the largest in the world for Starbucks, so we’re coming here with a very large appetite in terms of overall growth and investment,” said Schultz, though he did not go into detail on the company’s growth strategy.

Schultz said that while the store was designed to make a statement, pricing was designed to be accessible to a broad spectrum of Indians: a short cappuccino will cost Rs95, while a venti caramel frappachino will run customers Rs200.

He said the comparisons with China, in which Starbucks has around 700 mainland stores, weren’t quite apt.

“We’ve been in China for 13 years, we have 700 stores on the mainland, and around 1,000 including Hong Kong and Taiwan – we’ve invested years of doing business there, and unlike India, there we had to educate the consumers,” he said. “The wind is at our back in India…the awareness of Starbucks is higher here than any other market that we’ve never entered.”

Despite the Indian government having recently opened up single-brand retail to foreign direct investment – and Starbucks having been looking to tap the market since 2006 – Schultz said the company would still only have entered with the Tata Group, in part because of its reputation and its capabilities with infrastructure, a tricky proposition in India, and food.

To that end, the 42-item food menu has been designed with India-specific dishes, like a cardamom flavoured croissant, a chicken tikka panini, and a tandoori paneer roll. Schultz said that while coffee would be the main reason patrons came to Starbucks, it was clear that food was important to the Indian consumer.

“We anticipate that the percentage of revenues from food will be higher in India than perhaps anywhere else in the world,” he said.

In the next week, Starbucks plans to open two more smaller stores in an upmarket Mumbai mall and the Tata-owned Taj Mahal Palace Hotel.

This entry was posted on Sunday, October 21st, 2012 at 8:01 pm and is filed under India.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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