The Indian joint venture of Starbucks with Tata Consumer Products, Tata Starbucks Private Limited (Starbucks), is revamping its menu with affordable and localised offerings to broaden its consumer base and create new consumption occasions. While these affordable mass-market offerings will help Starbucks in taking on spiralling inflation and competitors, it runs the risk of diluting its international brand proposition, according to a leading data and analytics company GlobalData.
Alongside rolling out ‘desi’ drinks, such as masala chai and filter coffee, and street-style bite-sized snacks, Starbucks is reportedly trialling a smaller beverage cup in four bustling Indian cities: Bengaluru, Gurgaon, Bhopal, and Indore.
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. The cost of a Starbucks coffee is cheaper in the price-sensitive Indian market compared to that in Singapore and China. Yet, Starbucks has always set itself apart from competitors such as Cafe Coffee Day with its premium pricing and American brand aura. Starbucks is now moving a step closer to recreating the experience of roadside tea stalls and traditional tea shops with its lower-cost and desi offerings.
The new launches come at a time when inflation levels are worryingly high, with 71 percent 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 percent of Chinese respondents in the same survey expressed similar concerns about inflation.
Consumer Analyst at GlobalData, Bobby Verghese commented that inflation may be a key factor for the waning customer footfall in outdoor eateries. 52 percent of Indian respondents said they visited coffee and tea shops at least once a week in the Q2 2022 survey, compared to 56 percent in Q1. 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 gained the appeal of 39 percent of Indians in GlobalData’s Q4 2021 survey, looking for a range of affordable/lower-priced menu items/frequent promotions and discounts when deciding which foodservice restaurants they want to visit.
“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,” Verghese concluded.
