July 14, 2022
(press release)
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Tata Starbucks Private Limited (Starbucks), the Indian joint venture of Starbucks with Tata Consumer Products, is revamping its menu with affordable and localized offerings to broaden its consumer base and create new consumption occasions. However, while these affordable mass-market offerings will help Starbucks in taking on spiraling inflation and competitors, it runs the risk of diluting its international brand proposition, opines GlobalData, a leading data and analytics company. Besides rolling out ‘desi’ drinks such as masala chai and filter coffee, and street-style bite-sized snacks, Starbucks is reportedly trialing a smaller beverage cup in four bustling Indian cities: Bengaluru, Gurgaon, Bhopal, and Indore. Bobby Verghese, Consumer Analyst at GlobalData, comments: “Since opening its first store in India in 2012, Starbucks has strived to Indianize every aspect of the consumer experience, from products and pricing to store ambiance and marketing. For instance, the cost of a Starbucks coffee is cheaper in the price-sensitive Indian market than that in Singapore or China. Yet, Starbucks has always set itself apart from competitors such as Cafe Coffee Day with its premium pricing and American brand aura.” However, Starbucks is now moving a step closer to recreating the experience of roadside tea stalls and traditional teashops with its lower-cost and desi offerings. The new launches come at a time when inflation levels are worryingly high, with 71% of Indian respondents in GlobalData’s 2022 consumer survey* saying they were quite/extremely concerned about the impact of inflation on their household budget. Comparatively, only 34% of Chinese respondents in the same survey expressed similar concerns about inflation. Verghese adds: “Inflation may be a key factor for the waning customer footfall in outdoor eateries as 52% of Indian respondents said they visited coffee and tea shops at least once a week in the Q2 2022 survey*, compared to 56% in Q1 2022**. Moreover, 24% of the Indian respondents in the Q2 2022 survey said their spending in coffee and tea shops was very high, compared to 22% in the Q1 2022 survey**.” Starbucks may be attempting to stem this declining tide with its new affordable offerings, attracting the mass-market audience to its fold, and providing existing clientele with an extra reason to visit its outlets more often. The smaller beverage cups can gain the appeal of 39% of Indians, who look for a range of affordable/lower-priced menu items/frequent promotions and discounts when deciding which foodservice restaurants they want to visit***. Verghese concludes: “The latest move is in line with Starbucks’ efforts to aggressively expand its Indian network with smaller stores and drive-through outlets, and branch out into new cities over the last year. The move may have been driven by the announcements of top MNC café brands Tim Hortons and Pret a Manger to venture into India. While the ‘glocalized’ pricing strategy may aid Starbucks in the short term, it may inadvertently dilute its USP of recreating an international café experience for India, which is valued by its core customer base of affluent and upwardly-mobile urban youth.” *GlobalData Q2 2022 Consumer Survey, India, with 556 respondents, published in June 2022 **GlobalData Q1 2022 Consumer Survey, India, with 598 respondents, published in March 2022 ***GlobalData Q4 2021 Consumer Survey, India, with 530 respondents, published in December 2021
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