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Wednesday, October 4, 2023

Starbucks Produces Cheaper Beverages in India to Combat Domestic Rival Brands

Starbucks is introducing "Indian-inspired" tea selections that start at Rs 185

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INDIA: Starbucks is rethinking its approach to entice Indians, particularly youngsters, with smaller, less expensive beverages. However, it is facing competition from local companies, such as Third Wave and Blue Tokai.

The business has established 343 locations in 11 years, while Third Wave and Blue Tokai have launched 150 in the last three years.

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Sushant Dash, the chief executive of Starbucks in India, stated that the chain’s “pricing play” will help dispel the notion that it is costly.

To appeal to wealthy Indians who like smaller portions, the company has introduced the six-ounce “Picco” drink and milkshakes at $2.24 and $3.33, respectively. The business aims to expand its presence in smaller communities.

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Euromonitor estimates that the speciality tea and coffee café business in India is now worth $300 million and is expected to increase by 12% annually. UK’s Pret A Manger and Canada’s Tim Hortons are both growing, but only have few locations to serve.

The company continues to dominate the Indian market, but there is fierce competition in New Delhi and Bengaluru. A barista at a Starbucks location in Delhi said that a Third Wave restaurant recently opened, selling 3,700 cups per day, has cost the company 30 cups. 

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In China, Starbucks’ 6,200 outlets serve the largest market outside of the United States. In last few years, Luckin Coffee has employed discounts to entice customers to its 10,000 locations.

Starbucks is introducing “Indian-inspired” tea selections that start at Rs 185 ($2.24) and are spiced with cardamom and other ingredients. It is estimated that only 11% of Indian houses consume coffee, but 91% drink tea. Previously, Starbucks only provided one milk chai “latte” prepared with tea syrup.

It launched smaller, less expensive beverages in India to entice those who do not drink coffee and avoid Starbucks.

Starbucks opened in India in May, but its rivals are catching up, and a pricing war has started. Third Wave introduced its own line of milkshakes that were a fifth less expensive at $2.71. Meetings between business founders and investors take place in Third Wave locations in Bengaluru, which has more than 40 locations.

Blue Tokai CEO Matt Chitharanjan attributed decreased costs to its success in converting customers from Starbucks. The company is aware of the danger of competition and has a “cafe exclusivity” condition in one leasing agreement.

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