Can Starbucks make it in India?
The unquenchably ambitious coffee chain opens its first store in the world's second-most-populous nation. But it faces some cultural challenges.
On Friday, Starbucks (SBUX) opened its first outlet in India, a cavernous, two-story building in a swank Mumbai neighborhood.
The store is part of the chain's broader push to expand its presence in emerging markets -- seen as the most promising areas for growth, given Starbucks' super-saturation in the States and Europe's entrenched cafe culture.
But breaking into new countries requires a little more finesse than simply showing up, as Home Depot (HD) recently learned in China.
Here's a guide to Starbucks' foray into India:
How does India's Starbucks differ from the company's other stores?
For one thing, the coffee is made "from beans grown and roasted in the country," giving local customers a "distinct Indian blend," says Vikas Bajat at The New York Times. In addition, the menu is tailored to Indian tastes, featuring items like Chicken Tikka Panini, Elaichi Mawa Croissant, and Tamarind Peanut Chicken Calzone. "The trademark Chai Tea Latte is in the menu," say Meghan Bahree and Margherita Stancati at The Wall Street Journal, "although . . . to Indian ears, this (translates as) 'tea tea latte.'"
Does Starbucks have big plans for India?
It did. As recently as January, "Starbucks and its Indian partner, the Tata Group, announced ambitious plans to open 50 stores in the country by the end of the year and speculated that they could one day have as many as 3,000 outlets here," says Bajaj. However, those goals have been scaled back, with current ones calling for two more Mumbai stores before the end of this year and one in New Delhi, the capital, by early 2013.
What is holding Starbucks back?
The company is apparently just being careful. "Most Indians still begin their day with a steaming cup of milky, sweet chai," says Pamela Boykoff at CNN, and it's unclear whether their taste for coffee will grow. Plus Starbucks' profit margins in India are smaller: It's selling its products at a significant discount so prices are more in line with Indian standards. Starbucks does not shave prices at its franchises in China, which is expected to become the company's second-largest market in a matter of years.
So can Starbucks make it in India?
Some analysts are optimistic. At least one report estimates that the Indian coffee market could double in the next five years, hauling in more than $500 million. And Indian consumers -- hungry for clean, safe places to get together with friends -- may view Starbucks more as a hangout spot than a purveyor of coffee. "You could be selling lemonade in Starbucks in India and people would still come," analyst Arvind Singhal tells CNN.
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