Coffee lovers in India rejoice for you wont have to travel thousands of miles to sample a Starbucks coffee!! Starbucks has paved its way into India by entering a equity joint venture with India’s Tata Coffee.
It is noteworthy that Starbucks had been mulling an entry into the Indian Markets for a while and it was in January that Starbucks actually made some headway by hinting a possible partnership with Tata Coffee.
According to reports earlier, Starbucks was to source the coffee beans from Tata Coffee and probably use their help in setting up distribution channels. The terms of the finalized agreement are not known as yet but the modus operandi could be similar.
As for the JV which is mandatory for a foreign entity like Starbucks owing to the 51% FDI limit, it will be an equity based joint venture and Tata shares are expected to be routed from not only Tata Coffee but other entities within the Tata Group.
The brand Starbucks is synonymous with Coffee in the west and Starbucks is obviously looking to tap into the Indian market which has not only developed a taste for coffee (what else can explain the maddening growth of the Coffee Cafe Days and the Barista’s in the country) but also has an increasing number of well traveled high-disposable income folks.
It will be interesting to watch the strategy Starbucks adopts with respect to its offering and especially its pricing.
I am no coffee connoisseur but I wonder if Starbucks is going to alter its menu based on the Indian palate and yet maintain its authenticity. Food giants like McDonalds, Dominos etc. have had to align their offerings to suit the Indian palate while at the same time maintaining their true identity.
Despite claims of Starbucks primarily eyeing to position itself in the high-end premium segment, given the $2-3 average pricing I doubt if the same will apply. Majority of good coffee chains in India now charge upwards of Rs 100 (~$2) for their coffees and as such Starbucks shouldn’t have a lot of problems going after the market shares of the CCDs or the Baristas as such.
Additionally, from what I understand Coffee beans account for the most cost in a cup of coffee. So, if Starbucks is going to source the coffee beans from its JV partner- Tata Coffee there is a possibility of getting a good deal. Well, that’s another matter if Starbucks will want to increase its profitability or pass on the cost savings to the customer.
What are your thoughts on Starbucks establishing itself in India? For me, Starbucks entry into India will sure be a delightful move and I cant wait to sample a Starbucks coffee sitting in India itself.