Brewing it right

For most foreign companies, India is a confounding market, to say the least. Several of them have come into the country attracted by the vast middle class but have been unable to grow profitably. Marquee consumer brands, including Coca-Cola and PepsiCo, despite their marketing spends and wide distribution, struggle to make profits, while there have been pockets of success in luxury automobiles, smartphones and so on. As companies are realising, the Indian consumer is much more discerning than a few years ago — many offerings, especially in the automobile space, bombed because the foreign manufacturers did not bother to launch their latest models here — but is also deeply value-conscious. 

A value for money proposition that combined a good café experience with affordable prices is what swung the café market in favour of Café Coffee Day, from the first-mover Barista. Almost 16 years later, Starbucks has decided to take a premium stance. Whether this time around consumers are ready to repeat rush into that category remains to be seen. Their willingness to splurge will determine how much the relatively new entrant will be able to scale up, sticking to its premium positioning. The dilemma facing Starbucks in India and its strategy form this issue’s cover story here. 

The other interesting piece in this issue is a detailed interview with James Grant, an astute American stock market historian. He talks about the risks facing global equities and the existing pockets of irrational exuberance. Another story in our markets section is on Aptech, the training-services company now owned by legendary Dalal Street billionaire Rakesh Jhunjhunwala. There are two triggers to consider the stock for your portfolio — one, its buyback will shore up its earnings per share and two, the promoter is looking to sell his stake, which means a distinct pop-up if a buyer emerges. Associate Editor Kripa Mahalingam cautions that so far the company has been unable to find a buyer because of differences over valuation. Investors need to be cognizant that given Jhunjhunwala’s track record, it is unlikely that he will sell his acquisition for a song.