India wakes up to smell of Starbucks coffee

Nitin Chopra picked up his spoon and stirred the foam on his latte before taking a deep sip. “I’ll come to a coffee shop at least once a week,” said the 28-year-old banker. “I always order the same thing.”

The unstoppable march of coffee has been underway for some time in this country, once famed as a nation of tea-drinkers. Over the last half-a-dozen years, as India’s economy has grown and a new upper-middle class has had more money for consumer spending, Western-style cafes with comfortable furniture and frothy coffee have been sprouting up all over its towns and cities.

And it seems there are going to be more yet. This week, the world’s largest coffee chain, Starbucks, finally announced a deal that will see it bring its cafes to India. The Seattle-based company revealed it had signed an agreement with the Tata group to buy coffee beans from India and to explore opening cafes, possibly in Tata’s collection of luxury hotels. Reports suggest Starbucks coffee shops could be opening in as little as six months, as the company seeks to continue its expansion in new markets.

“[This] is the first step in our entry to India,” Starbucks CEO, Howard Schultz, said in a statement. “We believe India can be an important source for coffee in the domestic market, as well as across the many regions globally where Starbucks has operations.”

There was a time, not so long ago, when for all classes of people in northern India, tea was the drink of choice and usually the only option available. (Southern India, by comparison, has always maintained a tradition of coffee drinking.) Millions of glasses of sweet milky chai are still gulped down every day by labourers, taxi-drivers and office workers, but coffee shops are becoming increasingly common. Sales of instant coffee are also rising. According to the government’s own data, the total domestic consumption of coffee rose to an estimated 94,400 metric tons in 2008, an increase of almost 90 per cent since 1998.

It is easy to see why the coffee shops are so popular. Not only do they offer a comfortable seat on which to sit, unlike grubby chai stalls where drinkers are invariably forced to stand or else crouch on their haunches, but with their air-conditioning and cleanliness coffee shops are marketed strongly at young professional women. One chain, Café Coffee Day, which currently has 1,016 cafes across India, uses the sales pitch: “A lot can happen over coffee.”

It was at a branch of Café Coffee Day, whose first café opened in 1996, that Mr Chopra and his friend, Nikhil Mandal, a 23-year-old businessman, were relaxing yesterday. Mr Mandal, who was using a spoon to demolish an All Day Refresher, a concoction made of cold coffee, cream and cookie pieces, said it was essential that Starbucks studied the market before it launched here. Whereas a regular latte in Café Coffee Day costs a little over 50 rupees (around 70 pence), he claimed other chains had been less successful because they had tried to charge considerably more. Given that a roadside glass of tea can be had for five rupees, companies needed to be aware that 50 rupees was still a lot of money for the vast majority of India’s population. “They also need to think about how they will market themselves,” he said. “They need to get a cricketer or a Bollywood star to help.”

Mr Schultz told reporters he hoped India would one day match China in terms of coffee sales. Starbucks recently announced plans to try and triple the number of outlets in China to more than 1,500 over the next five years. In India, they face the challenge of being a little late to join the race; having been searching for a business partner in India in 2007, Starbucks will find itself rubbing shoulders not just with Café Coffee Day but Costa Coffee, Barista and Coffee Bean.