November 9th, 2012
10:22 AM GMT
Mumbai, India (CNN) - India has been a nation of tea drinkers for centuries, but in the past decade coffee consumption has been growing. From Starbucks to Costa Coffee, coffee giants are moving into India, converting consumers from chai to cappuccino.
Last month, Starbucks opened its first outlet in India, partnering with Indian firm Tata.
“There's a tremendous amount of coffee being sold and served in this market,” Howard Schultz, Starbucks chairman and CEO, told CNN’s Mallika Kapur.
Though India's domestic coffee consumption is increasing annually, it’s still relatively low. India's per-capita consumption of coffee is 82 grams per year: in the United States it's four kilos.
But in India coffee isn't what draws people to a cafe. “Cafes are actually a place where people go to meet,” said Arvind Singhal, of retail consultancy Technopak Advisors.
“Coffee is incidental,” he added. “Sometimes people ask this question, but India doesn't have a coffee culture. In India it doesn’t matter. You could be serving lemonade in Starbucks in India but people will still come.”
Modern, clean, and aspirational, cafes are particularly popular with India’s youth. India's economic growth means many people have more spending power. They're traveling abroad, developing new tastes and adopting Western lifestyles.
Total revenue from the cafe market is $230 million this year, according to Technopak. And it expects the market to touch $410 million by 2017.
The current market leader - domestic brand Cafe Coffee Day - has more than 1,000 outlets across India and has plans to get even bigger.
“We are looking to be a 2,000-cafe brand by the end of 2014, which means we'd have to add a cafe every day and we are working towards that,” said K Ramakrishnan, of Cafe Coffee Day.
International brands too are pursuing this market of a billion people. Costa is here. Dunkin' Donuts entered India in September, and the latest entry is Tata Starbucks.
“We will sell very high quality tea and chai here,” said Schultz. “I suspect we’re going to do extremely well here.”
R K Krishnakumar, of Tata Global Beverages, said: “I think the opening of the Starbucks partnership is a comment on India’s potential.
“When you open newspapers and on television channels you only see hear or read about the sad things in India. This is about the bright side of India. This is about the expanding market here.”
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