Coffee culture in India is at an exciting crossroads. What was once a tea-dominated market is slowly but surely warming up to the rich aroma of coffee, boosted by the surging popularity of specialty cafés and in-home brewing. Recognizing this shift, Nestlé, the global coffee powerhouse, is exploring the possibility of introducing Starbucks-branded at-home coffee products in India as part of its partnership with Starbucks. With premium coffee consumption on the rise, this move could reshape the coffee landscape in one of the fastest-growing consumer markets in the world.

Through this post, we’ll explore why India presents a unique growth opportunity for Nestlé, the increasing influence of café culture, and how Starbucks-branded at-home coffee could cater to this evolving market.

What is Driving Nestlé’s Strategy?

Nestlé’s interest in launching Starbucks-branded coffee for home consumption in India is rooted in its global alliance with Starbucks, signed in 2018. This partnership grants Nestlé exclusive rights to market, package, and distribute Starbucks specialty roasts and coffee blends for any scenario outside of Starbucks cafes. Since then, these products have been introduced in around 80 global markets, but India has so far been left out of the equation.

While global players like Nespresso and Nescafé Dolce Gusto have already brought Starbucks-compatible coffee capsules into homes worldwide, India’s packaged coffee market presents unique opportunities—and challenges. Though a relatively small coffee market, India’s evolving consumer preferences, driven by metropolitan café culture, make it fertile ground for expansion.

Speaking on this potential, Axel Touzet, head of Nestlé’s Coffee Strategic Business Unit, stated, “We continue to evaluate similar opportunities to expand our coffee portfolio in India to target different coffee consumption moments as more and more people in India look to coffee as their favorite beverage.” With such aspirations and a burgeoning market, the timing has never been more favorable for Nestlé to act.

India’s Sudden Affection for Coffee

Despite its deep-rooted tea culture, India is steadily warming up to coffee. Over the past decade, urban populations, particularly millennials and Gen Z, have embraced coffee as part of their lifestyle. This change is evident in the rise of specialty coffee chains, the availability of small-batch brews, and a growing appreciation for premium blends.

Starbucks, a key player in fostering this shift, operates more than 450 outlets in India through a joint venture with Tata Consumer Products. While Starbucks cafés are already a strong presence, Nestlé alone holds the retail rights to their packaged coffee products, making them uniquely positioned to capture in-home coffee consumption trends.

Key Drivers of Growth in India:

• Café Culture Expansion – Coffeehouses have established themselves not just as beverage providers but also as urban meeting points, fostering deeper connections with coffee.
• Premiumization – Consumers are trading up for high-quality brews. The influx of specialty coffee chains sourcing beans from Tamil Nadu and Karnataka has amplified interest in premium products.
• At-Home Coffee Experiences – The pandemic underscored the joys of in-home brewing, a trend that shows no signs of slowing down. Nescafé, Nestlé’s signature brand, has already entered 30 million Indian households, proving the potential of this space.

However, there is still room for growth. Currently, India’s per capita coffee consumption is a modest 30 cups per year, far below the global average of 200 cups. Premium Starbucks branded coffee could be the catalyst India needs to increase its consumption.

Leveraging a Strong Foundation in India

Nestlé’s footprint in India is already substantial, with its powdered and liquid beverage category posting high double-digit growth during the December 2023 quarter. Staples like Nescafé Classic, Nescafé Gold, and Nestlé Sunrise continue to dominate this category, delivering ₹2,000 crore in retail sales over the past year.

Recognizing this momentum, Nestlé has doubled down on investments in its coffee production capacity. The company has committed 110 million Swiss Francs to expand its Nanjangud coffee factory in Karnataka, expected to complete in 2025.

More importantly, the Starbucks partnership has been fruitful for Nestlé at a global level, generating an impressive $1.6 billion in incremental sales in 2022. Adding India to this success story could further solidify coffee as one of Nestlé’s most dynamic categories.

Challenges and Opportunities

While India presents immense opportunities, its market conditions require a strategic approach. Coffee still represents a small slice of Nestlé India’s revenue, contributing just 12.4% of total sales as of March 2024. Dominated by milk and milk nutrition products, India’s preference for tea could pose a hurdle.

However, Nestlé’s global experience in leveraging in-home consumption trends, paired with Starbucks’ premium brand appeal, gives the company an edge. Building a bridge between café culture and the homebrew experience could unlock the next wave of growth for both the company and the Indian coffee market.

By focusing on marketing premium, artisanal experiences, Nestlé has the opportunity to convert occasional café drinkers into regular home brewers.

A Premium Path Forward

Globally, coffee contributes over a quarter of Nestlé’s sales, highlighting its significance to the company. Through its Starbucks partnership, Nestlé has successfully bridged the gap between premium café experiences and at-home convenience. Indian consumers, increasingly drawn to quality and uniqueness in their coffee journeys, are likely to find Starbucks-branded products appealing for their globally-recognized craftsmanship and taste.

Key Takeaways for Business Professionals

For businesses eyeing the Indian market, Nestlé’s anticipated Starbucks-branded launch provides invaluable lessons. It showcases the importance of:

• Understanding Local Context – Despite being a tea-drinking nation, India’s growing café culture and at-home trends create specific opportunities for tailored solutions.
• Leveraging Partnership Branding – Nestlé’s collaboration with Starbucks exemplifies how strategic partnerships can amplify growth in new territories.
• Investing in Long-Term Trends – Nestlé is demonstrating patience and foresight by betting on a steady rise in coffee consumption rather than short-term profitability.

This approach not only sets the stage for brands like Nestlé but also points to broader shifts in premium consumer markets.

The Road Ahead

India’s coffee landscape is evolving from functional to experiential. Nestlé’s potential entry with Starbucks-branded at-home coffee products could act as a pivotal moment for premiumization in this category. With foundational elements in place—including rising demand, proven expertise, and an iconic partner—Nestlé has what it takes to tap into the aspirations of India’s emerging coffee enthusiasts.

The real question is, how will consumer habits evolve over time? If successful, this strategy could redefine how Indians enjoy coffee—taking it beyond the café and firmly into their homes.

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