Starbucks to enter Chennai's hardcore coffee market; faces stiff competition by rivals like Madras Coffee HouseSangeetha Kandavel, ET BureauJul 8, 2014, 10.35AM IST

(Starbucks will not only)CHENNAI: Starbucks may be the world's biggest coffee chain but it could be in for one of its toughest battles yet as it seeks to make a dent in the filter kaapi capital of India Chennai. The Seattle, US-based company will enter this coffee-crazy city on Tuesday by launching three outlets.

To do well, Starbucks will not only have to contend with some stiff competition from traditional names such asMadras Coffee House, it will also have to jostle with the various Kumbakonam degree coffee outlets dotting the city. Added to this, it will also be vying for space with upmarket rivals Cafe Coffee Day,Costa CoffeeandGloria Jean's.Coffee consumption in India stood at 90,000 tonnes in calendar year 2013. Of this, Tamil Nadu accounts for more than 40 per cent. "Chennai is and will definitely remain the hardcorecoffee marketin India," said Ramesh Rajah, president ofCoffee Exporters' Association of India.Starbucks ventured into India with an equal-stake joint venture betweenStarbucks Coffee CompanyandTata Global Beverages. It rapidly scaled up and opened 12 Starbucks stores during 2012-13 in Mumbai and New Delhi. As of July, it has 49 stores in India.Coffee experts told ET that coffee drinkers in Chennai want the traditional taste and even if they opt for other varieties it's mostly during weekends. Also, the city's coffee lovers visit upmarket outlets for variants such as cold coffee hot coffee accounts for less than 10 per cent of sales at most of these outlets."People who (have) worked in the US or the expat community will associate themselves with Starbucks as they are the market leaders in the US and well known for their ambience. But for a person in Mylapore (in Chennai), it's the traditional coffee that matters and not (the) ambience," Rajah added.Harish Bijoor, brand expert and CEO of Harish Bijoor Consults, said Chennai will be the ultimate testing ground for Starbucks. "Inmarketssuch as Mumbai and Delhi it is easy for any coffee maker to experiment. But Chennai is known for coffee heritage and experiments don't work here. They have to find a new strategy." Tata Starbucks could not be reached for comments.R Saravanan, who heads the domestic operations of Saravana Bhavan chain of hotels, said his restaurants and canteens in Chennai alone sell 30,000 coffees every day. He said bigbrandswill not eat into the business of the smaller outlets, which know the art of making traditional coffee. "Every coffee maker has a niche market and it all depends on how you position yourself and command a premium."But KT Srinivasa Raja, managing director of Adayar Ananda Bhavan and the president ofChennai Hotels Association, said he has lost 5-10 per centmarket sharein the past two years to the many small coffee shops that have come up in the city. His 70 branches across Tamil Nadu sell around 30,000 cups of coffee per day with Chennai accounting for 15,000 of them.Consumer goods companies' focus on rural markets pays offDilasha Seth & Writankar Mukherjee, ET BureauJul 7, 2014, 06.44AM IST

(About 50 per cent of the rural)NEW DELHI/KOLKATA:Consumer goodsmakers stand to profit from a sharper focus on India's rural areas, where ownership of products such as cars, motorcycles and white goods more than doubled between 2004-05 and 2011-12 according to the latest statistics, but the much lowerpenetrationthan in the urbanmarketsshows that there is a correspondingly higher potential for growth.

Data released by theNational Sample Survey Organisationor NSSO, under the Centre's ministry of statistics, shows that faster rise in rural incomes than in the urban areas led to a near doubling of spending in the hinterlands during the period that saw flat overall sales in variouscategories.About 50 per cent of the rural households owned a television in 2011-12 compared with 25 per cent in 2004-05, as per the NSSO's report titled 'Household Consumption of Various Goods and Services in India'. Similarly, 9.4 per cent households in villages possessed a refrigerator in 2011-12 against 4.4 per cent seven years ago.Spending on products such as mobiles and laptops also rose at a faster pace in the rural areas during the period. Significantly, the increase in rural spending happened even as the dismal power supply improved only marginally during the period.If the new government at the Centre carries out power sector reforms as it has promised, consumption in rural areas could rise at an even faster rate."Agriinflationbeing higher than the non-agri inflation has led to income getting transferred from urban areas to rural areas. Several things like rural roads programmes, MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act),microfinancehave all led to a rise in rural incomes from 2004-5," saidNational Statistical Commissionchairman Pronab Sen.Moreover, Sen said, the gap between rural and urban consumption patterns and expenditures had narrowed to a large extent in the past few years and would likely converge over the next decade.As per NSSO data, about 2 per cent of rural households owned a car in 2011-12 compared with just 0.8 per cent in 2004-05.In 2011-12, nearly 13 per cent of rural households incurred expenditure on a mobile handset, higher than 12 per cent of urban households."The higher expenditure by rural households on consumer durables is also a result of availability of these products in the villages, besides the rise in incomes. Also, they are much cheaper compared to 20 years ago, when rural households would have had to spend their entire life savings just to buy white goods," said SR Hashim, former member,Planning Commission.The number of rural households consuming electricity went up by 36 per cent between 2004-05 and 2011-12. This contributed to the higher sales of products such as refrigerators and televisions. Rural areas contribute 25-30 per cent to sales of white good companies at present.According to Kamal Nandi, business head and vice president of Godrej Appliances, rural demand led to marginal growth of 2-3 per cent in single-door refrigerators in the past two-three years, a time when the company's refrigerator category saw flat sales and thepremiumfrost-free category even suffered a declin