Text size:

  • Small
  • Normal
  • Large

Starbucks has to wake up and smell the coffee in India

As it prepares to enter the Indian cafe market, the US chain should tailor its product to locals, most of whom who regard themselves as connoisseurs.

There is a great line in the movie When Harry met Sally, in which the hero differentiates women as "high-maintanence" or "low maintenance," and proceeds to tell the heroine she is a "high-maintanence who thinks she is a low-maintanence".

Coffee lovers in India are high-maintanence drinkers of the brew who think they are low-maintanence. I am typical. I come from Tamilnadu, the state that drinks the most coffee and live in a state, Karnataka, that produces 54.6 per cent of coffee in India, according to statistics from the Coffee Board of India. As with 70 per cent of Indians, I drink the bulk of my coffee at home: a ground mixture of Arabica and Robusta beans with 20 per cent of chicory mixed in. In south India, we call this filter coffee, and all we coffee drinkers ask for when we go out to a cafe is a cup of "decent coffee".

Therein lies the "slip 'twixt the cup and the lip", to quote an old English proverb that seems particularly appropriate for this topic.

"Decent" coffee for a committed south Indian coffee connoisseurs such as me involves a long, very specific list: it has to be piping hot; the foam must be on top; it has to be bubbly and the bubbles have to be breaking down; it should be served in a stainless-steel tumbler and "davara", which is the Indian version of a saucer; the colour of the drink should not be as dark as cocoa, but not too milky either; and the amount of sugar should be just enough to take out the bitterness but without adding any sweetness to the taste. That's what I would call decent coffee. You see why I think Indians are high-maintenance coffee drinkers who think they are low maintenance?

And here is why Starbucks should worry: there are millions like me in India.

Last week, Starbucks announced it would enter India through a US$80 million (Dh293.8m) joint venture with Tata Global Beverages. The chain had planned to come in on its own, but daunting regulations prevented the move. A recent ruling has allowed 100 per cent foreign ownership of single-brand retail outlets. Costa coffee has recently arrived in India and will be Starbucks' biggest foreign competitor. Café Coffee Day (CCD), an Indian coffee chain, offers much more serious competition. With some 600 outlets in more than 95 cities, including Vienna and Karachi, CCD owns two thirds of all the chain coffee houses in India, by some estimates. It is ubiquitous at airports and malls and has stand-alone outlets in most neighbourhoods. Yet, in terms of outlets per person, its market penetration is one forty-fourth that of Starbucks, according to the Espresso News & Reviews website.

Starbucks hopes to change that. It hopes to convert tea-drinking north India into a nation of coffee-drinkers. RK Krishnakumar, the chairman of Tata Coffee, said the company planned to move aggressively and could have 50 stores by the end of this year. Brand consultants caution Starbucks should not assume that just because it is a well-known global brand, it can just walk into India and attract customers. Part of the problem is just the differential pricing of coffee in India. My dad drinks four cups of coffee a day and pay 10 rupees (75 fils) per cup at his neighbourhood, no-name café. I pay 35 rupees for a cup of espresso at Café Coffee Day. It still costs under a dollar for the most expensive cup of coffee in India. How is Starbucks going to get price-conscious Indian consumers who think they are coffee experts to pay US$4 (Dh14) for a tall latte?

The company's biggest outlay will be on property.

Santosh Unni, the chief executive of Costa Coffee India, has said the consideration for a coffee chain is not so much about rent per square metre but to keep the "rent-to-revenue percentage in the ballpark of 25 per cent".

Café Coffee Day has used it first-mover advantage to set up outlets in every premium location imaginable, from the hills of Coonoor where Bangalore millionaires go in the summer, to motorways and urban malls, with extremely high footfalls. Starbucks needs to think through its strategy for India quite significantly so that its failure in Israel is not replicated.

Lastly, it needs to figure out what the Indian consumer means when they say, "All I want is a simple cup of decent coffee."

business@thenational.ae

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 Three generations of the Hakimi family tend to their stall Crawford Market in Mumbai. Subhash Sharma for The National

In pictures: Shopper’s delight at Crawford Market in Mumbai

Crawford Market is an old British-style covered market dealing in just about every kind of fresh food and domestic animal imaginable. Later on renamed Mahatma Jotirao Phule, the market remains popular among locals and visitors by its old name, taken from Arthur Crawford who was the first municipal commissioner of the city.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National