India’s largest billionaires are on rival sides of a battle by worldwide espresso chains to persuade one of many world’s largest tea-drinking nations to spend on flat whites and Frappuccinos.

Starbucks introduced final week that it deliberate to just about triple the variety of retailers in India, the place it opened its first café greater than a decade in the past, to 1,000 by 2028.

The chain, which operates a three way partnership in India with the nation’s Tata conglomerate, says it deliberate to broaden past giant metropolises into smaller cities, in a rustic the place shoppers typically purchase Rs10 ($0.12) cups of masala chai served by distributors on the highway.

India is a “market that has huge long-term potential”, Laxman Narasimhan, the Seattle-based espresso chain’s chief government, instructed the Financial Times after a go to to India this month. “The development of the infrastructure here, the growing consumer base and the widespread adaptation of technology translate to a prime opportunity for bolstering Starbucks stores.”

Starbucks is confronting an more and more aggressive subject as traders in search of to faucet the rising food-and-beverage market flip to cafés. Fast-food chains equivalent to McDonald’s and Domino’s grew 25 per cent a 12 months between 2010 and 2020 as they constructed 1000’s of retailers round India, in accordance analysts.

International meals manufacturers have usually entered the market by means of franchisees or native companions conversant in the market. Pret A Manger launched in India final 12 months in partnership with Mukesh Ambani’s Reliance Industries, shortly after Canadian model Tim Hortons, which is backed by fast-food group Restaurant Brands International.

Costa Coffee, operated by an Indian franchisee of Yum Brands, has introduced plans so as to add 50 cafés a 12 months, whereas homegrown chains equivalent to Third Wave Coffee and Blue Tokai Coffee Roasters every raised cash from enterprise capital companies final 12 months to finance a whole lot of latest retailers.

Tarushi Chauhan, a 29-year-old engineer ready for her order at a Starbucks in Delhi, mentioned she began ingesting espresso when she found Frappuccinos as an undergraduate.

“Compared to five years ago, especially in metro cities, people are earning more and they’re not hesitant to spend Rs500 on a coffee,” she mentioned. “When I was in my undergrad, it was an exclusive thing.”

Speciality espresso remains to be properly out of attain for many of India’s 1.4bn inhabitants. Goldman Sachs estimates solely 60mn Indians have an earnings above $10,000 a 12 months, with the determine set to develop to 100mn by 2027.

The marketplace for espresso is “restricted by geographies, incomes and households”, mentioned Ankur Bisen, a retail analyst with Technopak Advisors.

Coffee has lengthy been a part of Indian tradition. The nation is among the many world’s largest espresso growers, and it has historically been the drink of alternative within the south, the place a powerful filtered brew is mixed with chicory, frothed milk and sugar.

Café Coffee Day, which launched in 1996 and is predicated in Bengaluru, pioneered worldwide espresso tradition in India with smooth cafés that supplied WiFi and twists equivalent to chilly espresso, earlier than a debt disaster pressured it to shut many shops. The firm’s share value is down 80 per cent from a 2018 peak.

International manufacturers equivalent to Starbucks have proliferated as a replacement, in search of to ingratiate themselves by specializing in speciality Indian-grown espresso and adapting their menu to native tastes with masala potato puffs and chilli hen in English muffins.

“People are willing to spend money for good-quality coffee,” mentioned Rohan Kuriyan, a supervisor at Balanoor Plantations, a grower within the southern Indian state of Karnataka. “When [brands] started seeing the numbers increasing . . . it just cemented their idea of money in coffee.”

Jasper Reid, the founding father of IMM, who runs quite a few cafés in India beneath the Jamie Oliver model, mentioned cafés had confirmed notably widespread amongst worldwide traders as a result of working them value lower than for different kinds of fast-food eating places.

A typical espresso outlet may value a few quarter of the tens of tens of millions of rupees wanted to open a burger joint, he mentioned. “The thing about coffee and the café format, it’s much lower capex, much cheaper to build . . . [and] you charge like a wounded rhino for a flat white,” Reid mentioned.

Yet within the race to construct a whole lot of latest retailers throughout the nation, manufacturers danger overestimating the power and urge for food for Indian shoppers to spend on discretionary drinks, mentioned analysts.

Reid mentioned the profitable chains would wish to train endurance as a way to capitalise on the India alternative. “The people that tend to win tend to have a very long view, have capital that is aligned with that view and won’t panic or try to sell out too quickly,” he mentioned.