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Continued: Starbucks brews following in India, where tea is supreme

  • Article by: MELISSA ALLISON , Seattle Times
  • Last update: February 10, 2013 - 2:04 PM

Despite its economic gains, India remains a developing country where many roads are more pothole than pavement, making it difficult for companies to get goods to market.

Still, Culver said he expects India to someday be one of Starbucks’ top-five markets.

Established competitor

As it is, Starbucks faces formidable competition in the country, where a coffee-shop chain called Cafe Coffee Day has proliferated.

It has 2,000 locations mostly in India, with plans to reach 5,000 stores worldwide in the next five years.

V.G. Siddhartha, Coffee Day’s founder and chairman, oozes confidence and enthusiasm about the future for coffee shops and India.

He does not even mind if Starbucks makes a huge dent in the market he has cultivated for almost 20 years.

“I don’t have any ego on that. If they put thousands [of stores here], it is good for me. The market will grow,” Siddhartha said.

Siddhartha admits Starbucks’ arrival “will improve the standards in the industry, because we have to make sure our service and ambience and offerings are better.”

Better, but not more expensive. Siddhartha wants Coffee Day to remain an “affordable luxury” — language Starbucks CEO Howard Schultz often uses — but in Coffee Day’s case, even more affordable so that it can appeal to 40 percent of the population. He figures big international players like Starbucks appeal to 5 to 7 percent.

Starbucks, aware of its reputation for high prices, is attempting to offer value in India.

In contrast to central Beijing, where Starbucks charges $4.34 for a 12-ounce cappuccino, in Mumbai it costs $2.14.

“A lot of people were truly surprised by our pricing strategy,” said Avani Saglani Davda, CEO of the Starbucks and Tata partnership.

The lower prices are part of its long-term plan to operate stores beyond a handful of major urban areas, she said.

“If the Indian consumer doesn’t see value, then it tends to be a temporary commitment to the brand,” Davda said.

Although brand savviness is growing, many Indians still shop at mom-and-pop stores that specialize in everything from car parts to bicycles to tea.

“Historically, India was not about materialism or consumerism. It will take years before we can change that culture,” said Saloni Nangia, president of Technopak Advisors near New Delhi.

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