In an extremely price-sensitive Indian market, Starbucks is adjusting its strategy to lure Indian consumers including children with smaller, cheaper beverages as it looks to expand in smaller towns amidst fierce competition from domestic rivals.
Starbucks currently has 343 stores in India, and “As your grow in size, you need to get new consumers,” said Sushant Dash, the Chief Executive of Starbucks in India.
The company has launched a 6 ounce drink, Picco, which starts at only US$2.24, and milkshakes for US$3.33 as part of its revamp to target affluent Indians who prefer smaller servings.
Starbucks also plans to open more stores in smaller towns, as such the more affordable pricing will expand its customer base in India.
This new offering is unique only in India and not available elsewhere. India has a small but rapidly growing US$300 million specialty tea and coffee cafe market. Other foreign players in India include Tim Hortons and UK’s Pret A Manger.
Large portion sizes are American phenomenon however Indian consumers are more value conscious. With the rapid opening of startup and local cafes such as Third Wave and Blue Tokai, Starbucks are facing real challenges in India, similar to what it is facing in China.
In addition, research showed that only 11% of Indian households drink coffee as compared to 90% who drink tea. Starbucks has launched Indian-inspired tea to catch up with the local trend, while at the same time attract the huge number of consumers who don’t drink coffee.