‘A morning without coffee is like sleep’ ~ Author Unknown

Yes the American iconic brand – STARBUCKS is all set make the big splash in India. A recent ruling has allowed 100 per cent foreign ownership of single-brand retail outlets. Starbucks rides in with a US$80 million 50/50 joint venture with Tata Global Beverages. It is one of the companies of the highly respected Indian giant conglomerate the TATA GROUP who owns global brands like Jaguar, Tetley, Corus and several other Indian brands.

The choice of partner does seem a perfect strategic fit. With Starbucks sourcing Tata’s premium Arabica beans from their coffee plantations for Starbucks stores worldwide as also opening outlets in posh Tata retail locations and in the upscale Taj hotel chain.

A Starbucks store in US

Starbucks intends to flag-off its grand entrée from the commercial capital Mumbai and aims establish 40 outlets by 2012. It also plans to open stores from Delhi, Chennai and Bangalore. India with its teeming millions is an attractive market for MNCs not only for Starbucks. The market, according to analysts has the potential to touch US$900 million with a total of 5,000 cafés by 2015.

The question is “will the Indian consumer wake up and smell the Starbucks coffee”? Will Starbucks be the game changer?


Challenges for Starbucks in India


‘Coffee is not my cup of tea’
~Author Unknown

India is a tea drinking country. India is one of the largest tea producers in the world, though over 70% of the tea is consumed within India. Tea is culturally rooted in India and the Govt. seriously considering making tea as India’s national drink by end 2012.

So will the Indian Chai drinking consumer switch easily to Coffee drinking? Well some skeptics do say ‘may be yes … maybe no’. With more than half of the country’s population under 25 and rising youth spending, globally mobile executives and higher incomes, coffee outlets are bound to grow exponentially.

A serious competition can be expected from the well entrenched Indian coffee chains like Café Coffee Day (CCD) with 1000 outlets and Barista Lavazza with over 200 outlets. CCD has a built-in ‘first-mover’ advantage of owning large coffee estates to provide a ‘beans to cup’ experience. This brand with the “A lot can happen over coffee” tagline is loved by the youth and is a favorite ‘hang-out’.

Other International players already have a foothold here – U.K.’s Costa Coffee and Gloria Jean’s of Australia.
Another aspect is the Indian consumer being price conscious. While CCD may charge around Rs 40 for a coffee and the wayside shops charge Rs 10 Starbucks $2.5 for a short latte would seem to be very expensive.

The China story

In the words of Howard Schultz Chairman & CEO ~ “China traditionally has been a tea-drinking country but we turned them into coffee drinkers.” Starbucks entered China in 1999 and now has more than 570 stores in 48 cities. By 2015, it plans more than 1,500 stores in 70-plus cities.

Starbucks exciting growth story in China could be identified with its ability to customize Chinese food items such as

Executives say good morning with Starbucks

selling rice dumplings, a traditional local Chinese food for the Dragon Boat Festival and few other favorites. Corporate executives in China love the Starbucks store ambiance and the free unlimited Wi-Fi facility.

Starbucks India Strategy

National responsiveness: Starbucks’s success in India like other foreign brands depends on their adaptability in addition to what they do globally. Like Domino’s “Peppy Paneer” pizza, McDonald’s McAloo tikki burger Starbucks might consider tasty healthy vegetarian recipes for an Indian breakfast treat, next to its muffins some chicken tikka sandwiches may also do fine.

Mr. Schultz said Starbucks plans to become a “third place” for young Indians to seek out between home and work. And he agreed catering to local tastes is crucial. “We’ve done a good job of that around the world and we have every intention of doing that here,” he said.

Drive through to a coffee served with a smile… the staff always very pleasant and professional


The winning mantra according to Schultz, Starbucks will look to create different entry points for different demographics

The Starbucks ambiance

and “will create food relevant to Indian consumers that [it does not] provide anywhere else.”

The company’s biggest outlay will be on property and according to Santosh Unni, the chief executive of Costa Coffee India, the consideration for a coffee chain is not so much about rent per square meter but to keep the “rent-to-revenue percentage around 25 per cent”.

Live feedback

The reactions on Starbucks of friends and my students on whether they are excited about the Starbucks entry – those who have experienced Starbucks coffee overseas are clearly positive others say we’d love to try it out. It’s lucky so far for Starbucks that the ‘naysayers’ are fewer in number.

If Starbucks could achieve success in China and Mexico and other countries can it win the hearts and minds of the Indian consumer?

About these ads

About dilipnaidu

An open mind! Love to share inspirational thoughts and a keenness to learn. My interests are growing culinary herbs and playing golf. I enjoy my teaching assignments and interaction with students.

48 responses »

  1. Biswadip says:

    Dear Sir,
    so finally the waiting is over.Starbucks inaugurate their first outlet in India/ Mumbai called “Schultz”.Starbucks prices beverages at Rs. 80 – 160, food at between Rs 80 – 150.they are also offering tea,price range between Rs 90 – 130 and variety of snacks like Mawa croissant,salmon & cream cheese croissant etc.presently the premise is entirely captured by media and I’m yet to enter.but at a first glance my feeling is they are selling an entire lifestyle.
    Regards,

    • dilipnaidu says:

      Hey Biswadip these are nice inputs :) Many thanks, trust you are doin well.
      Cheers :)

      • Biswadip says:

        I’m fine sir. have managed to take some snaps of their first outlet and would mail you soon.heard they are opening another outlet today at Horniman Circle,Mumbai.anyway i wish howard schultz would introduce Starbucks to Punekar very soon. :)

        • dilip says:

          Hey Biswadip … Great to know you were around … given a chance I too would have liked to be there :) Please do send the pictures we can share them with our readers…
          Cheers

  2. STARBUCKS is a well known brand of coffee café in an international market. It will be very interesting to see what will its brand and marketing strategy to exist in the market as there are lots of coffee café brands available.

    Pls accept my greetings.

    Request you to please intimate me, whenever you post an especially RETAIL related topic. I always feels pleasure to participate in your correspondence.

    Cheers!!
    VEDANT

  3. Hello dear Dilip! I see you have made some changes around here! I like them very much. Fits with your posting style beautifully! A Starbucks in India? I find this post very interesting. Let is know what happens once the initial excitement wears off. I swear they put something addictive in their beans, LOL, as it is revered herein the states by young and old. Hmmm. Margie

  4. Hi, I have been through your latest articles in the blog and I was amazed, it is rish with with several informations, great work.

  5. pennycoho says:

    Excellent article, very informative and not slanted in either direction. the comments you received are interesting as well. I live in the state where the whole thing started. Starbucks, that is. Isn’t it amazing where one person’s dreams can lead them. Young enterprising entrepreneur to world wide conglomerate. That’s a good thing, right? I will enjoy following you.

    • dilipnaidu says:

      Welcome. Thrilled to know you live in Seattle the home of Starbucks. And yes today Starbucks is loved and respected globally – mainly through the power of the founders inspiring vision.

      Your words indeed are encouraging. Thanks a lot & regards.

  6. Prachiti Talathi says:

    Dear Sir, a very informative article. Starbucks will have a competition from CCD and Barista which are more preferred among college students. But definitely their success depends upon the pricing and the location where they open the outlet. If they open near colleges then low pricing will be an advantage and in IT parks people don’t mind to pay that extra buck.

    • dilipnaidu says:

      Hi Prachiti long time no see :) You point on location near educational institutions & IT parks is quite relevant. At the take-off stage Tata’s prime real estate properties would prove a major asset.

      Thanks & kind regards!

  7. Sachin Macwan says:

    Dear Brig. Naidu,

    I’m lovin this brand, “Starbucks” Yeah! I am always fascinated by this brand & was expecting them in India too. They will be operating India by Oct. 2012. That’s the good news for us.

    I would like to share few words about a man behind this magnificent brand, he is Howard Schultz (Chairman & CEO of Starbucks). The son of blue-collar Jewish-American parents; Schultz was raised in Brooklyn, NYC. People know him as a man of business ethics and values. His turning around skill is amazing. His journey from Brooklyn, NY to Seattle, WA is full of achievements.

    “India is one of the most dynamic markets in the world with a diverse culture and tremendous potential.” Howard Schultz, CEO, Starbucks.

    One can easily identify his crystal clear vision about Starbucks’ future in India. I believe, after studying Indian market from 360 degree; he selected Tata Group as their business partner. Unyielding focus on quality of Tata Coffee has made them expertise in the bean-to-cup value chain. Tata Coffee is Asia’s largest coffee plantation company. The huge experience in technology and coffee plantation will surely help both to establish their “Coffee Kingdom” in India.

    According to John Culver, president of Starbucks’ Asian Pacific region the biggest challenge is lack of infrastructure in India. However; at the same time they are positive since its an emerging economy too.

    Another challenge is most of the people (including youth) are Tea drinkers. Catering them and transforming their taste will be a tough job. Starbucks expects a lot as they already changed the zest of China with the same passion.

    At the end of the day, Starbucks’ strengths like retail expansion, product & service innovation, continuous observation for cleanliness and strong brand image will hopefully help them to rule the market.

    Starbucks represents something beyond a cup of coffee. JV of Starbucks and Tata Global Beverages will establish market surely. It seems Starbucks will become synonym of Coffee in India.

    “Only one thing is certain about coffee…. Wherever it is grown, sold, brewed, and consumed, there will be lively controversy, strong opinions, and good conversation.“

    - Mark Pendergrast

    I would like to have a cup of coffee with Brig. Naidu whenever Starbucks would open their first outlet in Pune. :-)

    Starbucks Aficionado!

    Sachin.

    • dilipnaidu says:

      Hey Sachin my friend what a stunning response. I too feel its is some great leadership that makes a company successful and Howard Schultz in this case is the one who has set the vision for Starbucks. John Culver’s statement on India’s infrastructure challenge is indeed somewhat worrisome yet with the Tata’s by their side they should be in a position to circumvent the locational and real estate problems.

      Sachin thanks for that invite for a Starbucks coffee we surely will enjoy the Starbucks experience :)

      Regards & thanks.

  8. I hope you find that you enjoy Starbucks, we do here in the states, the coffee and the Chai are good. I am not a coffee drinker – preferring tea, (I would be at home in India!) but when I do go to Starbucks I usually try one of the coffees, usually good but it is very expensive here. You can request for the tea not to be too milky and they would not add as much. The costs is usually double or triple what a normal coffee would cost at a restaurant – depending on what you order. Blessings – Patty

    • dilipnaidu says:

      Nice comments and feed back from the States :) Reading of Starbucks success story in other parts of the world it looks like they have many strengths to make it a success in India.

      Thank you for stopping bye and reading the article. Regards.

  9. Ashish Mahto says:

    Dear Sir,
    It is always interesting and full of knowledge to read your post.
    1) I Think Starbucks can do good in India as it is already a well know and good brand. So Must of the people prefer to go to the place where the ambiance & crowed is very good. Due to high price of their coffee the crowed will be top notch, Executives and high income only.
    As written in the post “Corporate executives in China love the Starbucks store ambiance and the free unlimited Wi-Fi facility.” We can imagine the customer for the Starbucks , the students crowd would be very low. CCD tagline “ A lot can happen over Coffee” attracts mainly youth and the students crowed, the business executives would not like to sit in such a crowd. So, the location would be very important for the Starbucks.

    2) Regarding selling CHAI, it Would be just an option for the customer who only love to drink chai, as most of the customer drink chai in there home everyday and the person who come outside for hangout or to chill or we can say for a change they would prefer coffee rather than drinking chai as they drink it everyday and most of the people would not like to pay higher for it.

    3) StarBucks can come up with the variety of CHAI like, Iced Tea and all which Indian people do not drink in there home and when they come to StarBucks they can have a different option for CHAI and I think it would work.

    Warm Regards,
    Ashish Mahto

    • dilipnaidu says:

      Hi Ashish how are you doing. Nepal must be beautiful at this time of the year :) Your comments give out some interesting take on Starbucks. Yes I too feel Stabucks will make a premium and youth focussed entry!

      Thanks my friend and do keep in touch. With warm regards.

  10. dilipnaidu says:

    Hi and welcome Rajan! The points you have put forth are certainly relevant to the theme of the article. I do have my views and would love to share them. The discussion is kept open for debate. Hopefully we may get some independent thoughts from readers.

    You please be assured that we will take this forward here or in another forum! I really appreciate your response.

    Wish you all the best my friend. Kind regards.

  11. Rajan Mehta says:

    Hello Sir, it’s very well written, quite informative and properly analysed. It would be nice if you could also include what you feel is the strategy they should use to penetrate the indian market, which customer segments they should target, product pricing and value addition and how differently they would do it from CCD and Barista. It would be nice to have your opinion on this.

    Regards,

    Rajan.

  12. Starbucks does have tea as well and I hope you enjoy the new place to sit and relax!

    • dilipnaidu says:

      I am quite Starbucks sure will provide us a wonderful experience in Tea too! The feedback on the US Starbucks tea is that it is a shade too milky. Thanks for your inputs.

  13. Dalip,
    It is interesting to hear the voices overwhelmingly interested and optimistic about Starbucks coming to India. I am actually not much of a Starbucks fan, and I don’t buy from them very often–even too expensive in my opinion, here in the United States as well.
    I am often saddened when I see American chain stores taking over the local culture in the United States, and even more saddened when I see the same (American chains taking over) happening in cultures across the world. So many sweet, quaint stores owned by local people have died out because of these big chains, and in my opinion, that is a death to be mourned. Our character is quickly becoming streamlined. How I hate to see our chains doing this, not just in the U.S., but extending this to other countries.
    I would be interested in learning what you think about this idea.
    Bethany

    • dilipnaidu says:

      Bethany, Oh yes you have a point there. This is an issue which most multinational chains need to understand if they wish to make it big in emerging economies such as India, China, Japan and others. Therefore understanding diverse country cultures and positioning themselves as responsible citizens becomes a prerequisite for success. Values and ethics therefore need to be given paramount importance.

      The good news is that many multinationals are now aware of this and are doing fairly well on this issue.

      Thanks I really felt nice reading all your responses.
      Dilip

  14. Bindu says:

    A big and resounding Yes to coffee to anytime, anyday!!
    But I still a big pinch when I have to shell out some 60-70 bucks (pun intended ;-) ) for a cup of coffee!

  15. I must say I dont find anything GREAT about starbucks , I mean people just og mad ove it , I dont know why .. I have had it a few times but it seems the same to me .. I can make a better coffee at home myself :)

    lets see how it fares I am not going ot bet on it anyway …

    • dilipnaidu says:

      Hi Bikram … yes I am sure you can. Which means Starbucks does have a daunting task ahead in India …thanks I enjoyed your frank views :)

      Cheers!

  16. Biswadip says:

    Dear Sir,
    my reaction to starbucks enters India?obviously very excited .Fortunately had the pleasure to taste some of their products.I’m 200% sure about their success in Indian soil.TATA and Starbucks both understand customer pulse very well.Yes the “Glocal” term is going to play a huge role.They are well aware that Indians are price sensitive and they are going to design the cost structure according to Indians purchasing power.

    Indian and Chinese cuisines are available even at local food outlets but sometimes we do visit to some Star restaurants to have those.not necessary those taste better at star rated restaurants but simply we can’t have same kind of ambience and hygiene at those places.So we don’t mind to overpaying them when our near & dear ones are with us.Very similarly the American hotel giants like Hilton,Marriott and pure Indian hotels go hand in hand in India.

    Starbucks tagline is :”Delicious, handcrafted beverages and great-tasting food. The secret to making life better”.I’m sure they are going to maintain the same in India.I don’t think they are going to transform Indians food habit rather they are going to customize their products.Indian “Desi Flavor and Desi Product” are going to be their success mantra.Though they will not give up their originality.

    Starbucks USP is their service.As far I’m concerned Starbucks developed flavors, such as green tea-flavored coffee drinks, that appeal to local tastes in China. Rather than pushing take-out orders, which account for the majority of American sales, Starbucks adapted to local consumer wants and promoted dine-in service.Overall in Asia, its operating margins are 34.6% in 2011 versus 21.8% in the United States.Also their Target customers are going to be Indian youth and executives since Starbucks outlet are very popular for meeting place.At least I won’t be surprised if some of the major business deals are finalized at Starbucks outlet in near future.

    So just wait for few days to say “Happy Starbucks morning”.
    Regards,
    Biswadip

    • dilipnaidu says:

      Dear Biswadip,

      Comprehensive take-on Starbucks India entry. You have nicely highlighted some practical issues and your own thoughts quite convincingly.

      Yes I too will bet on Starbucks :)

      Thanks for sharing & have a lovely weekend.

  17. Ketaki says:

    Dear Dilip Naidu Sir,

    I personally prefer a Glass of Cold Coffee (in Durga) which is much on the sweeter side for which i am comfortable paying 20 Rs, rather than a typical CCD /Barista/Gloria Jeans/Costa Coffee for which i would think twice before paying 50 + for a Bitter Tasting Coffee ….No No

    ( Although i am aware that the Original Coffee Taste is supposed to be Bitter, but that definitely doesn’t suit me, and i am sure most Indian people would simply add sugar and only then drink it )

    I am a Typical Price sensitive and a taste sensitive person , if a get a Coffee luxuriously rich, milky, creamy & sweet only then i would like to pay 50+ to enjoy my coffee in that Ambiance.

    That why i think the 2 Most big Challenges for Starbucks is

    1) TASTE – They should customize the Coffee taste for Indians
    2) PRICE – They should Lower the Price

    also to accompany the coffee, i get to eat ‘Free’ delicious biscuits ,that would be Great ,

    and Yes, i am going to the Starbucks outlet, the moment they come in Pune, and i am going to check out its taste if it suits me … Cheers !!!

    Thank you ,
    Always have Good Thoughts

    With Warm Regards
    Ketaki Ranade

  18. renu says:

    Most of the youngsters prefer coffee only, and if Starbucks keeps itself affordable here, it will do, not like Barrista where charges were exorbitant. In Indian context they are too much to pay for a cup of coffee whatevr the experience.

    • dilipnaidu says:

      Hi Renu you do have a point there. I am sure Starbucks too would have deliberated on the pricing factor for India.Finally it will depend on its positioning decisions – premium or mid market segments.
      Lets wait & see :)
      Thanks for your visit & comments!

  19. Shay says:

    This will be interesting to see. I’m more of a tea person, so I rarely go into Starbucks. But I believe erranttranscendentalist is on to something, because I could totally see Starbucks coming out with a brand of Chai!

    • dilipnaidu says:

      Ha Ha Shay … oh yes absolutely Starbucks just might do the Chai :) its a versatile brand and that’s perhaps the reason for its phenomenal global success. Well good luck to Starbucks!

      Thanks for your comment!

  20. Geetha says:

    Great learning in your post here, Sir. Thank you!

    ‘Pour Your Heart Into It’ is one of the best books that I have ever read. “Everything Matters” about Starbucks which is indeed a “Third Place”.

    This was an interesting interview with Mr. Howard Schultz in Forbes India last year:

    http://forbesindia.com/article/my-learnings/starbucks-ceo-howard-schultz-weve-built-an-institution-that-brings-people-together/21952/0?id=21952&pg=0

    An organisation’s culture is often developed in its formative years. How did that journey happen at Starbucks?
    The analogy for developing a corporate culture is like raising a child. The imprinting of a culture is like the early years of a young child. People can sense what the culture is. The fabric of the culture of our company has been built on trying to exceed the expectations of our people. If we don’t do that, we can’t exceed the expectations of our customers. Two examples of that are: Starbucks was the first company in America to give comprehensive health coverage to every employee and give stock options to every single employee.

    And as a trivia buff, this is what I collected last year:

    “This Company, the world’s largest in its category, recently changed its logo for the first time in its 40-year history. Since it is now a well-known brand, it has made its logo a wordless one. Name it. (The Strategist Quiz dated 17th January, 2011).

    And the answer is:
    STARBUCKS!

    http://www.psfk.com/2011/01/starbucks-new-logo.html#
    In March, Starbucks will celebrate their 40th anniversary with the launch of a new logo and identity. Howard Schultz says that the new logo embraces and respects their identity plus evolves the company to a point that’s more suitable to the future. In this video, the CEO says that the logo is at the core the same – the love of the coffee – but by putting the Siren outside the original logo it allows the company to move beyond just being a purveyor of coffee.

    And the words “Starbucks” and “coffee” have been dropped from the logo!”

    http://www.psfk.com/2011/01/starbucks-new-logo.html#
    http://www.starbucks.com/preview

    Thanks and regards,

    Geetha

    • dilipnaidu says:

      Oh wow Geetha I really find your response so enriching. Yes Howard Schultz’s outstanding leadership come out so distinctly. I intend reading this one and the links in greater detail to understand what makes Starbucks click:)

      Many thanks & kind regards!

  21. ShriShailya says:

    Respected Sir,

    How are you dear Sir ? I always love Starbucks Brand due to its reach history and experience.

    Starbucks is known to use strategy “Global company, Local touch”(GLOCAL), will help them to get easily attach with the Indian consumer sentiments and feelings. The only problem that Starbucks will going to face is Pricing of Coffee, but if we see in today scenario coffee is gaining popularity. But CCD will give tough competition with its pricing and wide present in Indian Coffee Industry.

    Cafe market is estimated to grow at 30% per annum for five years, with top 24 cities accounting for 70% of new additions, says a report by retail consultancy Technopak Advisors. Due to this I think, this is right time for Starbucks to enter in Indian coffee market, where the consumers are having money in their pockets and customer are looking for international experience.

    The word saturation is not even in our vocabulary and Starbucks represents something beyond a cup of coffee- Respected CEO of Starbucks Mr.Howard Schultz.

    I think we should be happy to have Starbucks brand in India. Cheers……..

    Thanks and Regards,

    ShriShailya

    • dilipnaidu says:

      Hey Shri well said my friend. Your point on Global think and local touch may be just what is in Howard Schultz’s mind for India having successfully adapted it in its China story.

      Keep well and take care! Cheers!

  22. I’ll be interested to see how it fares. If I were a betting woman, I’d put my bet on success. Maybe Starbucks will learn from this venture how to make a decent Chai?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s