Despite global setbacks, Starbucks, the world’s largest coffee chain, is optimistic about its future in India. The company has recently introduced a premium "experiential store" in Delhi’s Punjabi Bagh West, signaling a strategic response to rising competition. This store offers a distinctive menu blending local flavors like Malabar Coconut Cream Latte and Black Palm Jaggery Cinnamon Latte with international favorites. With freshly prepared food comprising over half of its offerings, Starbucks is clearly aiming to strengthen its foothold in the upscale café segment. However, premium pricing may pose a challenge even for affluent customers.
Globally, Starbucks has been grappling with declining foot traffic, attributed to consumer pushback against its high prices. The scenario in India mirrors this struggle, with the company competing against well-established brands such as Café Coffee Day (448 stores) and Barista (450), alongside emerging players like Blue Tokai (130 outlets) and Third Wave Coffee (108). These competitors attract a discerning audience with quality coffee and more affordable pricing. International brands like Tim Hortons (33 outlets) and Pret A Manger (19) are also entering the fray.
Starbucks launched in India in 2012 through a joint venture with Tata Consumer Products Ltd. Although its store count has grown to 452, the company remains unprofitable. Losses for FY24 widened to ₹124 crore compared to ₹82 crore in FY23, despite revenue increasing to ₹1,218 crore. The Indian subsidiary has also seen frequent leadership changes, with four CEOs in 12 years, mirroring the parent company's trends.
The Indian café market is evolving, fueled by rising disposable incomes, younger demographics, and a growing interest in specialty coffee. Research estimates the Indian coffee market is worth ₹15,000 crore ($600 million), with the specialty coffee segment expected to grow at an annual rate of 9% through 2028.
Starbucks’ competitors have capitalized on shifting consumer preferences. Specialty coffee chains such as Blue Tokai and Third Wave Coffee offer affordable, high-quality brews, challenging Starbucks’ premium positioning. Blue Tokai, for instance, recently raised ₹500 crore in funding and is valued at ₹1,500 crore. Meanwhile, McDonald's McCafé and Tim Hortons have adopted competitive pricing strategies, undercutting Starbucks in key segments.
While Starbucks has doubled its store count in three years and set a goal of 1,000 outlets in India by 2028, its premium pricing remains a hurdle. A small cappuccino at Starbucks costs ₹290-300, significantly higher than comparable drinks at competitors like Blue Tokai and Third Wave Coffee, priced between ₹230-245.
Globally, Starbucks is also facing challenges. In North America, transactions at long-standing stores dropped 6% in a recent quarter. In China, the chain has doubled its store count to over 7,000 but lost nearly half its market share to local rival Luckin Coffee, resulting in a 14% drop in same-store sales.
Starbucks’ strategy in India involves creating a unique identity while expanding aggressively. However, the company’s ability to sustain profitability in a market with increasing competition and price-sensitive consumers remains uncertain. As specialty coffee becomes more accessible and affordable, Starbucks must innovate to maintain its relevance and appeal.
Comments