FRANCHISING | Staff Reporter, India

Tata Starbucks' rapid expansion threatens to sink local India coffee chains

Surmounting Starbucks’ premium-brand appeal will be tough.

Local coffee companies in India are getting a run for their money, as global giants threaten to overtake the market in the long term.

According to a report by BMI Research, already, smaller chains are struggling to turn a profit. In 2014, Australian coffee chain Gloria Jean's Coffee terminated its deal with Dubai-based Landmark Group due to high competition.

Currently, Starbucks is poised to become the star of the Indian coffee market. The chain has a 50:50 joint venture with Tata Coffee, and they currently operate over 75 stores. However, BMI Research asserts that frequent openings will further push the figure up. In the long term, Starbucks pegs India as important as China, with CEO Howard Schultz saying that the country will be the home of “thousands” of Starbucks stores.

BMI Research opines that the the priority for the current coffee players must be to get their positioning right in the India in order to take advantage of the burgeoning coffee culture, in line with the expanding middle class.

Further, Starbucks is already positioning itself at the premium end of the Indian coffee market, and it may prove unwise for others to launch a challenge in this segment given the Starbucks’ well-established premium-brand appeal.

BMI Research believes existing coffee retailers could leverage their local market expertise to lock down a domestic foothold. Café Coffee Day, for instance, has been in the Indian coffee market for over 14 years, and its familiarity with Indian consumer preferences gives it a competitive edge against Starbucks or Dunkin' Donuts given the localised tastes of the Indian market.

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