Starbucks Sets Up Shop in India

Illustration by Brandon Bird

A decade after it started sourcing coffee from India, Starbucks, the world’s largest coffee chain, has decided to serve up its concoctions to an Indian audience. It’s been a while coming and long after most retail multinational brands—from McDonald’s and KFC to Zara and Marks & Spencer—have trooped in to tap the Indian middle class, estimated at 300 million people. Starbucks’s joint venture with Indian conglomerate Tata Group will set up 50 co-branded cafés in Indian cities over the next eight months.

Starbucks has its work cut out for it. India’s café market is booming—with lots of competition, led by domestic chain Café Coffee Day. There are about 1,500 cafés nationwide, growing at a healthy 30 percent annually. Indians in the metros are also used to international chains like Gloria Jean’s and The Coffee Bean. Being the latte-come-lately, can Starbucks crack India? And do Indians drink coffee anyway?

Barring southern states like Tamil Nadu, where “filter coffee”—milky, sweetened, and drunk from stainless-steel tumblers—is a delicious obsession, Indians are a chai people. Most domestic Mysore coffee is exported. Domestic coffee consumption has doubled in the last decade, but Indians prefer tea any day. Coke and Pepsi already know that.

What makes these cafés click? Consumers love an air-cooled hangout that offers anonymity, snacks (which far outsell coffee), and free Wi-Fi. Coffee is incidental to the business model, though it fulfills a branding role. So Starbucks will have to alter its global strategy for India.

What’s inexplicable is why it’s taken Starbucks so long. But partnering with the Tata Group will help, thanks to its network of companies and interests in retail and hotels. The Starbucks branding will count among well-heeled Indians (a market with 50 million consumers). So what if they don’t drink coffee?