“My niece is back in India . When I saw a recent newswire story about Starbucks initial opening there I decided to email her as she is both a Starbucks user and is now on her second stint in India .

I asked her the following:

“ Kate, do you think Indians will patronize Starbucks in a big way? Is there another coffee shop brand already there?”

Her response was:

“ Sorry I'm just emailing you back! I was out of town this weekend, and just got back to Jaipur yesterday.

“I think that wealthy Indians will love Starbucks, but I don't imagine that lower or middle class Indians will go to Starbucks at all. Going to/sitting at coffee shops isn't a 'thing' in India the way it is in Europe and America . However, there are enough wealthy Indians/visiting foreigners that I don't think it will have much trouble staying in business. I'd be interested in seeing what their prices are in the Indian Starbucks- meaning, is it just western prices for coffee translated into rupees, or is it lower prices that reflect the lower cost of living in India? I have a hard time imagining Indians paying the equivalent of five dollars for a coffee drink, but I'm probably thinking of more middle class Indians when I say that. Again, I think that wealthy Indians will have no problem paying the prices, and will definitely patronize Starbucks. However, I think that middle class Indians would have to embrace Starbucks in order for it to become as popular in India as it is in the US .

“The biggest coffee shop in India is called "Cafe Coffee Day," but there are also some smaller chains that are seen in big cities throughout India . CCD is definitely the largest, though.”

“Your recent comments about Starbucks at the Contrary Forum reminded me of Wal-Mart 15 years ago when it aspired not to be the largest retailer in the world but the largest retailer in every country in the world.

“Key question given Kate's on the ground estimate of Starbuck's in India : is the Starbucks operating model adaptable to different cultures or is it an agent of an ongoing theme of global Americanization?”

Eoin Treacy's view Thank you for forwarding this insightful email which is sure to be of interest to the Collective. Here is a section from a recent article in the Times of India which may answer some of your questions:

Schultz, the son of a US soldier who grew up in public housing in New York, added that a lot of thought had gone into setting Indian prices at levels that are competitive, a significant departure in business practice for a brand that has globally positioned coffee drinking as an elite experience. "We don't want price to be a barrier. People are surprised, but this will give us a competitive advantage in the market."

A cup of coffee at Starbucks will cost anywhere between 95 and 155 depending on the size while iced coffee and blended beverages will be 115-200.

These prices are at a moderate premium to that of largest local rival Cafe Coffee Day , which has around 1,350 coffee chains. It sells a cup of coffee at around 80 and cold coffee and beverages for less than 150.

At these prices Starbucks will be charging in the region of $1.50 per cup of coffee. In a price sensitive market such as India, this is probably a wise move. It is also worth mentioning that Starbucks is selling an experience as much as coffee. If it intends to offer free Wi-Fi in India, as it does in China, then it will represent a fashionable hangout in which to parade the latest technological must haves. The American/Western experience is a highly marketable product if evidence from other markets is anything to go by,

For investors who have thrived on Starbucks expansion, the news that they are willing to accept lower margins in a potentially large market such as India is probably not welcome. Starbucks has held a progression of lower rally highs since hitting an accelerated peak in April and encountered resistance in the region of the 200-day MA a month ago. It will need to sustain a move above $52 to question potential for additional downside.