Tamarind Meets Calzone

Starbucks India

With offerings like “Tamarind Peanut Chicken Calzone” and “Chatpata Paratha Wrap”, Starbucks – whose first Indian outpost opened this week – is taking the well trodden path of global food “manufacturers” localizing their menus across the world.

Like other global or “foreign” companies entering new, non-home markets, Starbucks is doing this in a JV with India’s Tata group and must most likely have extensively market-tested its offerings. So while the food offerings are new, its drinks menu doesn’t seem to have been tampered with much:

The drinks menu doesn’t feel particularly Indian, although the coffee itself is sourced and roasted locally. Prices range from 80 rupees ($1.50) for a plain espresso shot to 200 rupees for fancier concoctions like Starbucks’ “Caramel Frappuccino,” a blended coffee-based drink. The trademark “Chai Tea Latte” is in the menu although, as we noted earlier, to Indian ears this sounds like “tea tea latte.”

But thinking about this some more, I think three things will determine Starbucks’ long-term success:

  1. Its ability to bring in the urban elite whose western-brand awareness is generally pretty high. At some point I am sure it will open outlets in Tier 2 cities and perhaps even Tier 3 cities, but for now its probably safe to assume that Tier 1 cities are where it will focus.
  2. Position itself as a coffee and snack/meal destination with enticing, quality offerings delivering in an upscale setting (road-side  tea and coffee stalls probably can’t be beat on price and convenience…but then again, I highly doubt if Starbucks is targeting that demographic). Part of the issue for Starbucks is also that tea in India is still king – especially outside the south.
  3. Compete and differentiate itself from both local coffee chains like Barista, Coffee Day as well as McDonalds (which is now trying to compete with Starbucks in the U.S. in the coffee drinks market and has been building an extensive network across India for a while, with its own localization, including two recently announced all-vegetarian McDonalds outlets – people in the US, try saying this fast: “Vegetarian McDonalds”, without trying to laugh).

Big Spicy Paneer Wrap

(McDonald’s “Big Spicy Paneer Wrap” – a vegetarian entree at its India restaurants)

India has been good to other American fast food companies like KFC, McDonald’s, Pizza Hut, Subway et al and I am going to guess that Starbucks will succeed as well, especially in the major metros – Mumbai, Bangalore, New Delhi, Hyderabad, etc. Otherwise Starbucks, known for strategy and execution around the world, wouldn’t have entered India.

Still, while it is, on the one hand, aware of India’s potential, it is also aware of the potential pitfalls along the road to marketshare and profits:

Starbucks runs 18,000 stores in 60 countries globally. “India is a very complex and complicated market to enter and it has been a lot easier when we came together with the Tatas. We will import the coffee beans but the core product of espresso will be sourced and roasted locally,” he (CEO Howard Schulz) said, adding “We must earn the respect of the Indian customer and approach this market with humility, as in the long term, this could be one of the largest markets for Starbucks.”

Many eyes will follow Starbucks on its path to respect there. 

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