Economy Decoded

Starbucks invades India

By | 8 Apr, 2013 3:19 PM |

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Starbucks is the latest rage in the capital. People stand for hours in a mile-long queue just to have a feel of the ‘Starbucks experience’ and also, of course, to upload pictures on Facebook and let the world know of their unique conquest.

Unlike other coffee-houses(CCD & Costa Coffee), Starbucks has elected to expand internationally primarily through joint venture. In India also, Starbucks followed its script and entered via a joint venture with Tata Global Beverages. It opened its first outlet in Mumbai in 2012. This year it has opened two outlets at the IGI Airport and one at Connaught Place in New Delhi.

Starbucks chose to go for a local Joint Venture over franchising/licensing because of the unique challenges in the Indian market. The most daunting challenge it faced was inadequate infrastructure in India to support the back-end supply chain where it needed the expertise of a local player like Tata.

India’s coffee market which is presently growing at 25% annually has huge potential for even higher growth. This is demonstrated by the face that even when Starbucks is a late entrant and competitors like Cafe Coffee Day, Costa Coffee, Barista have already consolidated their position, it got an overwhelming response from the consumers.

Skeptics argue that this initial excitement over Starbucks will eventually fade as India being a tea-loving country will revert to its chai-wallahs in a matter of months. But the author feels that with growing brand-consciousness and rising emerging middle class, India can support both tea and coffee. As an analyst in The Week said,” “You could be selling lemonade in Starbucks in India and people would still come”.

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Baniya Bechara

Views presented in the article are those of the author and not of ED.

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