The Starbucks chain in India is facing increased competition from domestic startups, particularly in cities like New Delhi and Bengaluru. These startups, known as Third Wave cafes, have gained popularity and are attracting customers away from Starbucks.
To counter this challenge, Starbucks is revamping its strategy by introducing smaller and cheaper beverages to target affluent Indians who prefer smaller servings. Starbucks has launched a new six-ounce drink called “Picco,” starting at $2.24, and milkshakes priced at $3.33.These offerings are unique to India and not available in other countries like China, Singapore, or the United States. By adjusting portion sizes and offering more affordable options, Starbucks aims to dispel the perception that it is an expensive brand and attract new consumers.
The Indian market for speciality tea and coffee cafes is valued at $300 million and is expected to grow at a rate of 12% annually, according to Euromonitor.
Starbucks faces competition not only from Third Wave cafes but also from international chains like Tim Hortons and Pret A Manger, although they have only a few outlets in India.
Starbucks recognizes that excessively large portion sizes, commonly found in American culture, may not resonate well with value-conscious Indian consumers.Therefore, the company’s decision to adjust portion sizes and offer smaller and more reasonably priced beverages could potentially boost its sales. Starbucks aims to continue expanding in smaller towns and cities across India, recognizing that growth lies beyond the major metros.
In addition to the size and pricing strategy, Starbucks is also focusing on appealing to Indian tastes.
The company has introduced “Indian-inspired” tea offerings infused with spices and cardamom, which are popular flavours in Indian households. While coffee remains Starbucks’ primary offering, these tea options are aimed at attracting non-coffee drinkers and expanding its customer base.
Generally, Starbucks is responding to the competitive landscape in India by adapting its offerings, adjusting portion sizes, and targeting smaller towns. The company recognizes the need to appeal to value-conscious consumers and compete with domestic startups that have gained popularity in the Indian market.