Why Do Indians Pay More for Starbucks Coffee?

Starbucks, the popular global coffee chain, has become a symbol of status in India. With prices much higher than in the United States, many Indians are still willing to shell out more for a cup of coffee that they feel makes them appear cool. While the reasons behind the higher prices may be complex, one thing is clear: Starbucks has become a brand that many in India aspire to be associated with.

Starbucks Coffee Price in India

Pushkar Singh, a professional in Startup advisory and investment from TREMIS, recently shared a detailed explanation of Startbugs' overpricing on LinkedIn. Singh argues that Starbucks coffee is pricier in India compared to other global brands. He uses The Economist's Big Mac Index, which measures purchasing power parity, to show that the Indian rupee is undervalued by 52% against the USD based on the prices of a Big Mac burger, a proxy for a basket of goods and services. Therefore, a fair price for a Starbucks latte in India, which costs $3.26 in the USA, should be around Rs 126. However, it is actually priced at a whopping Rs 292.

Singh's post delves into the nuances of pricing strategies and highlights the factors that contribute to the high cost of a Startbugs latte in India compared to other global brands. With his expertise in the field, Singh breaks down the complex calculations behind the nominal and real exchange rates and provides insights into the concept of Purchasing Power Parity (PPP). 

Price Of A Starbucks Tall Latte - in every country

Why is Starbucks So Expensive?

According to some reports Starbucks adopts a pricing strategy that factors in both the cost of production and the target profit margin. To illustrate, assuming the production cost of a cup of coffee is $0.50 and the desired profit margin is 20%, Starbucks would set the price at $0.60 per cup.

However, the high price of Starbucks coffee in India can be attributed to a number of factors, including the cost of doing business in the country, import duties, and the fact that Starbucks is seen as a luxury brand in India. Many of these factors contribute to the higher prices of products in the country, but it's the aspirational nature of the brand that really sets Starbucks apart. Despite the fact that Starbucks coffee is more expensive in India than in the United States, many Indians are still willing to pay the premium for a chance to be seen drinking a Starbucks coffee. The brand has become synonymous with success and sophistication, and many Indians see it as a status symbol.

Why Drinking Starbucks Coffee Is A Status Symbol? 

Part of the appeal of Starbucks in India is that it offers a Western-style coffee experience that is not available elsewhere in the country. The chain has become popular among young professionals and students who are looking to experience a taste of the West, even if it comes at a premium price. However, the high price of Starbucks coffee in India has also caused some backlash among consumers. Many have criticized the company for pricing their products too high, and some have even called for a boycott of the brand. Nevertheless, Starbucks remains a popular choice for many in India, and the company continues to expand its presence in the country.

Starbucks Near Me

Looking for a Starbucks location nearby? While finding a store is easy, understanding why their prices are so high in India is more complicated. The reasons include the aspirational nature of the brand and the desire of many Indians to be associated with success and sophistication. Despite the higher prices, many consumers are still willing to pay a premium for a chance to hold a Starbucks coffee and be part of the brand's status symbol. For them, the Starbucks experience is worth the cost.

Read Pushkar Singh's LinkedIn Post