Starbucks to make cheaper India drinks as domestic rivals expand

As it looks to expand in small towns, Starbucks is rethinking its approach to entice Indians with smaller, less expensive beverages.

In one of its fastest-growing markets, this move comes amid fierce competition from domestic coffee startups.

The American giant, one of the first foreign coffee brands to enter tea-loving India, has opened 343 stores in nearly 11 years, as opposed to chains Third Wave and Blue Tokai, which are backed by private equity and have opened about 150 in the previous three years.

As the company expands, Sushant Dash, the CEO of Starbucks India, noted that it needs new customers. He also said that the pricing strategy of the company would help dispel the idea that it is expensive.

As part of its makeover, the company introduced the six-ounce Picco drink, which starts at $2.24, and milkshakes for $3.33, in an effort to appeal to wealthy Indians who prefer smaller portions.

According to a source in the business who requested anonymity, Starbucks plans to expand its presence in smaller towns.

China, Singapore, and the US do not have access to either of its two new products, which are exclusive to India.

According to Euromonitor, the small but rapidly expanding specialty tea and coffee cafe market in India is currently worth $300 million and is expected to grow by 12% annually. Although they only have a few locations each, Tim Hortons in Canada and Pret A Manger in Britain are both growing.

Overly large portion sizes are an American phenomenon, according to Devangshu Dutta, head of the retail consulting firm Third Eyesight.

He added that Indian consumers were value-conscious and that it was a win-win situation if portion sizes were reduced to those that are more typical in order to make prices more affordable.

He was one of the analysts who believed Starbucks' decision, which it made in a joint venture with Tata Group to operate in India, could further increase its sales, which reached a record $132 million in fiscal 2022–23.