Starbucks is facing a major challenge in India, as homegrown coffee brands like Blue Tokai and Third Wave Coffee have rapidly gained popularity among consumers. Despite being one of the first international coffee chains to enter the Indian market, Starbucks has struggled to match the expansion rates of these domestic brands.
While Starbucks has opened over 340 outlets in India in the last decade, domestic players like Third Wave and Blue Tokai have opened over 150 stores each in the last three years. The competitive landscape has pushed Starbucks to adapt, and its recent moves reflect a significant shift in its India strategy. This includes introducing more affordable drinks and expanding into smaller cities, tapping into an audience that prefers tea but is increasingly open to specialty coffee experiences.
A New Pricing Strategy
Starbucks has introduced new beverage options, such as the smaller-sized Picco drinks, priced at ₹185 to attract price-conscious consumers. This is a notable departure from its earlier premium positioning, as the company now seeks to shed its expensive image and cater to a broader customer base. These offerings are India-exclusive and are not available in other markets like the US or China.
This pricing strategy is aimed at tapping into India’s rapidly growing café market, which is projected to grow at 12% annually. With Starbucks’ primary competitors rapidly expanding, these new, lower-priced products may help the company solidify its position in the Indian market, especially in non-metropolitan areas.
Expanding Beyond Metros
Starbucks has also focused on expanding its footprint into smaller cities, following the footsteps of other international brands like McDonald’s and Domino’s, which have succeeded by localizing their offerings to Indian tastes. Starbucks aims to open over 1,000 stores across India by 2028, signaling its commitment to long-term growth in the country.
To cater to India’s chai-loving culture, Starbucks has also introduced tea-based drinks inspired by Indian flavors, such as spiced chai and cardamom chai lattes. While coffee remains its primary focus, these new offerings allow Starbucks to appeal to a broader audience that may not be traditional coffee drinkers.
Competitive Challenges
Despite these efforts, Starbucks faces significant challenges in the Indian market. Competitors like Third Wave Coffee and Blue Tokai have captured the interest of younger, more discerning coffee drinkers, with a focus on quality brews and unique experiences. These brands have quickly built a loyal customer base, especially in urban areas, and pose a direct threat to Starbucks’ market share.
Additionally, Starbucks has yet to fully capitalize on India’s tea culture. While the introduction of tea-based drinks shows an effort to localize its menu, the company has not made tea its central offering, unlike rivals who have successfully embraced both tea and coffee.
Starbucks’ ability to balance its premium brand image with the need for affordability will be critical in determining its success in India. As domestic brands continue to grow rapidly, the company’s future in India hinges on its ability to adapt quickly and meet the diverse preferences of Indian consumers.
Credit: This article is based on information from Livemint and India Today.
Summary:
1. Starbucks competes with domestic coffee brands like Blue Tokai and Third Wave Coffee in India.
2. The company has introduced lower-priced drinks and expanded into smaller cities to tap new markets.
3. It has also localized its menu with Indian-inspired tea offerings to appeal to the country’s tea-drinking culture.
4. Despite these efforts, the brand faces stiff competition from domestic and international coffee chains.
