India, known for its love affair with tea, is witnessing a remarkable surge in coffee consumption, and global coffee giant Starbucks is capitalizing on this trend. In an ambitious move, Starbucks Corp. has unveiled plans to double its stores in India over the next four years.
This expansion plan aims to open a new Tata Starbucks shop every three days, strategically focused on tier-2 and tier-3 cities, where the burgeoning middle class is fuelling a rapid evolution in coffee culture.
Current Coffee Market in India
Traditionally, tea, especially sugary, milky chai, has dominated India’s hot beverage landscape. However, the past decade has witnessed a significant shift, with coffee becoming increasingly popular, especially among aspirational consumers frequenting cafes. Starbucks, other high-end cafes, and local chains like Blue Tokai have contributed to this shift, offering beverages sourced from locally harvested crops.
Starbucks and its Growth Ambitions
Starbucks’ intensified focus on India is part of its broader strategy to strengthen its presence in economically promising markets worldwide. Since entering India in 2012 through a joint venture with Tata Consumer Products Ltd., Starbucks has steadily grown its footprint, boasting 390 stores across 54 cities. The ambitious goal is to reach 1,000 stores by 2028, positioning India as one of Starbucks’ major overseas markets.
Starbuck’s Current Presence in India
The joint venture with Tata Consumer Products has been instrumental in Starbucks’ Indian journey, and the partnership aims to deepen its roots, focusing on tier-2 and tier-3 cities, marking a strategic departure from its initial focus on major metropolises. With 390 stores and a net addition of 22 outlets in the last quarter alone, Starbucks’ presence in India is significant, albeit dwarfed by its expansive presence in mainland China.
Starbucks and its Competition
Starbucks faces stiff competition from local chains like Cafe Coffee Day and foreign entrants such as Barista. Emerging players like Third Wave and Blue Tokai, backed by private equity, have added about 150 stores in the last three years, intensifying the competition for market share.
Revenue Growth and Challenges
Tata Starbucks reported a 14% year-on-year revenue growth in the Sept. 30, 2023 quarter. Despite this positive performance, it marked the slowest growth since the March quarter of 2020. The challenges were attributed to the lingering impact of the COVID-19 pandemic, underlining the resilience required in the ever-evolving market.
Revamping On the Cards
Recognizing the dominance of instant coffee consumption at home, Starbucks has revamped its strategy in India. Initiatives include introducing smaller-sized drinks starting at $2.24 and milkshakes, a tactical move to appeal to the diverse preferences of the tea-loving population.
Starbucks acknowledges the importance of local partners in its success, so it plans to skill these partners for various roles, opening new stores to provide an elevated customer experience and promoting Indian-origin coffee globally.
Strategic Importance of India
As India becomes the world’s third-largest economy by 2030, Starbucks believes the country will be a focal point for its growth. With a thriving middle class and evolving consumer preferences, Starbucks is doubling its presence in India.
The 50:50 joint venture between Starbucks Coffee Company and Tata Consumer Products Limited has been the cornerstone of Starbucks’ operations in India since 2012. The collaboration has not only let Starbucks navigate the intricate Indian market but has also provided a platform for mutual growth.
To achieve the ambitious target of 1,000 stores by 2028, Starbucks plans to double its workforce to ~ 8,600 partners and expand drive-thrust, airports, and its 24-hour store footprint to serve customers where they are.
Upskilling and Empowering Women
Tata Starbucks’ expansion strategy in India includes its commitment to women’s empowerment and upskilling initiatives. Recognizing the need for diversity and inclusivity, the company will help to empower underserved young women in the F&B retail industries through vocational skills training.
In collaboration with The Starbucks Foundation, Tata Starbucks will offer workforce development training, skills building, and mentoring for 2,000 young women by 2024. The grant awarded to Trust for Retailers & Retail Associates of India (TRRAIN) will provide on-the-job learning options for program participants in critical cities, contributing to the socio-economic development of women in India.
Tata Starbucks has extended its on-the-job learning program for participants in stores across Bengaluru, Chennai, Delhi, Hyderabad, and Mumbai. This initiative contributes to skill development and strengthens Starbucks’ commitment to fostering inclusive growth at a grassroots level.
Tata Starbucks’ plans to double its stores in India reflect its confidence in the country’s economic trajectory and evolving consumer preferences. The company’s strategic approach and initiatives to empower local partners and contribute to skill development could position Starbucks for sustained success in one of its fastest-growing markets.
FAQs
Is Starbucks the first foreign coffee brand in India?
No, Starbucks was among the first foreign coffee brands to enter India in 2012.
How does Starbucks plan to appeal to the tea-loving population in India?
Starbucks is introducing smaller-sized drinks and milkshakes to cater to diverse preferences.
What challenges did Tata Starbucks face in recent quarters?
As of now, Starbucks operates 390 stores across 54 cities in India.
What is Starbucks' workforce expansion goal in India?
Starbucks plans to double its workforce to approximately 8,600 partners, reflecting its commitment to the Indian market and fostering inclusive growth.
I’m Archana R. Chettiar, an experienced content creator with
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