beyondbrics

Indians’ beloved chai seems to have received a reprieve from the international onslaught directed towards it lately: the US’s biggest retailer of coffee by the cup is gearing up to enter the Indian market but will focus on foods rather than beverages.

Just three weeks after Starbucks announced its entry into Asia’s third largest economy, its chief US rival, Dunkin’ Donuts, revealed on Tuesday that it would open up its first store in New Delhi by June – a couple of months earlier than Starbucks, according to the WSJ.

Dunkin’ announced its plans for India a year ago. But while many expected the more recent announcement by Starbucks to pit the rival US chains against each other yet again, the company’s Indian partner says that won’t happen.

Instead of focusing on the beverage half of the business – as Dunkin’ has, to great success, in the US – Ravi Gupta, CFO for Jubilant FoodWorks, which has a 15-year contract for exclusive franchise rights in India, told beyondbrics the company would brand Dunkin’ as an all-day eatery.

“Indian consumers want value and they believe that food offers more value than beverages, so we believe that if we can execute the food part well we can excite the consumers,” he said. “Also, there is a younger consumer who sees equal value for both food and beverage.”

The food will be “western-centric but spicing has to be Indian”, Gupta added, with sweet and savory, hot and cold options.

“Coffee might have competition but… the emphasis is on all day food where other players aren’t focusing right now,” Gupta said.

Just as analysts had told beyondbrics Starbucks was smart to enter India with a trusted name like the Tata Group, they said Dunkin’ was also wise to partner locally.

But instead of heritage, Dunkin’ Brands has gone for field experience and expertise: Jubilant has had great success as the exclusive operator of the Domino’s Pizza chain in India, with 439 stores nationwide as of the end of last year.

Dunkin’, the 62-year-old US-based chain, operates 6,800 stores in its home market and plans to double that number by 2020. In July, shares in parent company Dunkin’ Brands leapt more than 40 per cent the day after an initial public offering that raised $423m.

The companies plan to open 80 to 100 Dunkin’ stores across India in the next five years, considerably slower expansion than that planned by Starbucks and Tata, which aim to have as many as 50 stores by the end of this year and eventually to surpass Starbucks’ presence in China and open more than 3,000 stores.

Despite Jubilant’s plans to brand Dunkin’ stores as restaurants rather than coffee shops, comparisons to Starbucks – and India’s local coffee shops – are inevitable.

The first Starbucks store will open in Mumbai or Delhi by September. Dunkin’ will face competition from Café Coffee Day, which has more than 1,000 stores and is expanding quickly backed by a $200m investment from KKR, the New York private equity firm.

It also faces the Barista chain, owned by the Italian coffee producer Lavazza. Then there’s local company Mad Over Donuts, which operates 26 stores in Delhi, Mumbai and Pune, according to the company’s website.

One thing Jubilant doesn’t plan on doing is fighting the same battle Dunkin’ fought in the US: convincing customers to focus less on the donut and more on what they’re dunkin’ it in. It worked in the States. The company’s slogan went from “Time to make the donuts” to “America runs on Dunkin’” and says it is now the largest retailer of coffee by the cup.

Related reading:
Starbucks: a challenge for chai, beyondbrics
Starbucks joins Tata for India foray, FT
The coffee king of modern India, FT