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Coffee Is Not a Smartphone: Starbucks (NASDAQ:SBUX), India, and the Myth of Untapped Markets


Why does every big company think it can go everywhere?

MINYANVILLE ORIGINAL Coffee giant Starbucks (NASDAQ:SBUX) is finally opening its first location in India next month. Given India's struggling economy, that announcement has been met with a lukewarm response from investors, although other major retailers like Wal-Mart (NYSE:WMT) and IKEA are also planning on expanding into the country. India, along with its fellow BRIC countries (Brazil, Russia, and China), has long been heralded as a massive untapped market for everything from fast food to smartphones to soccer.

Now, the Indian national soccer team is currently ranked 169th in the world. They have never played in a World Cup and never contributed a player to a top league. My friend Sandeep beat me at the video game FIFA 12 once and instantly became one of the greatest Indian soccer players of all time. There's no innate reason that Indian people aren't good at soccer; India's a massive country with plenty of urban centers and a developing economy, which is a pretty good recipe for a strong soccer nation (see Brazil, Mexico, et al.). But while the ingredients are there, India still has a strong cultural preference for cricket, instilled by years and years of history.

This is all to say that there are some historical events, and some cultural ties, that determine the preferences of a demographic, and it is this that determines the difference between an untapped market and a lost cause. There's no historical or cultural reason that Africa shouldn't like smartphones, which is why the text-only Facebook Zero (NASDAQ:FB) has been such a massive success there; as Africa increasingly moves from feature phones to smartphones, that market will already be accustomed to using Facebook.

India, though, has historical and cultural reasons for not being a coffee nation just as it does for not being a soccer nation.
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