Starbucks plans to open 1,000 coffee shops in India within four years. The target is to more than double the number of outlets in the country. In practice, that means a new coffee shop will open every three days. Starbucks wants to capitalise on the growing middle class, where it sees the potential for increased coffee consumption. But they won't have it so easy.
Starbucks Corporation is a coffee manufacturer and the world's largest coffee shop chain, originally from Seattle, USA. The company was founded in 1971 by Gordon Bowker, Jerry Baldwin and Zev Siegel. It is named after a whaling ship officer named Frank Starbuck from Melville's novel The White Whale. As of November 2022, the company had 35,711 stores in 80 countries, 15,873 of which were located in the United States. It focused primarily on selling many types of ready-to-drink coffees, espresso, various other hot and cold beverages, coffee beans, coffee cakes, and promotional items.
"Over the past 11 years, the Indian market has grown to become one of Starbucks' fastest growing markets," said Starbucks CEO Laxman Narasimhan. "With a growing middle class, we are proud to help cultivate an emerging coffee culture."
The global coffee giant wants to operate 1,000 stores in India by 2028 and will focus on so-called tier-2 and tier-3 cities, that is, outside its largest metros. Starbucks also plans to expand its presence in the country through drive throughs, airports and 24-hour coffee shops and expects its Indian workforce to double to 8,600.1
Starbucks already has its foot in the door
The target of opening 1,000 cafes would make India one of the company's main overseas markets, although China still dominates the rankings with more than 6,500 outlets.
The company has already been operating in India since 2012 through a 50% joint venture with Tata Consumer Products Ltd, a unit of one of the nation's largest conglomerates, and currently has 390 outlets in 54 cities. In the third quarter of 2023 alone, 22 new Starbucks outlets were opened in India, according to Tata Consumer, with sales up 14% from the same period last year.
Attacking the appetites of Indians
While tea - especially sweet, milky chai, which is a blend of Indian spices - has traditionally been a popular hot beverage in India, coffee drinking is becoming increasingly popular as aspiring consumers flock to coffee shops. Along with Starbucks, more upscale cafes and local "coffee plantation-to-cup" chains, such as Blue Tokai, have boomed, offering drinks sourced mostly from local produce.
When it comes to consuming coffee itself, Indians prefer to drink instant coffee at home, and retailers are now targeting consumers to switch to more sophisticated forms and varieties, according to the U.S. Department of Agriculture. Still, the market for premium coffee products remains relatively small, accounting for about a third of Indians' total consumption. Moreover, demand for more premium product may be limited as higher prices force consumers to curb their spending.
Starbucks share price performance over the last 5 years. Source:Tradingview.com*
Starbucks' goal of more than doubling its presence in India is indeed ambitious, but the company is not starting from scratch. The coffee giant has been operating in India since 2012 through a 50% joint venture with India's Tata Consumer Products Ltd, and currently has 390 outlets in 54 cities across the country. Additionally, the numbers are more than encouraging for Starbucks - sales in Q3 2023 grew 14% over the same period last year.
Adam Austera, Chief Analyst at Ozios
* Past performance is no guarantee of future results
 Forward-looking statements are based on assumptions and current expectations, which may be inaccurate or based on the current economic environment, which may change. Such statements are not guarantees of future results. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.