Starbucks India
- 2. Market Scan
- 3. World Coffee consumption 142 million bags (2012) Coffee consumption in exporting nations 43.5 million bags Coffee consumption in India (4.4%) 1.9 million bags/96.65 million kgs $1261 million At home consumption 95% $826 million Out of home consumption 5% $434 million Coffee consumption in Importing nations 98.5 million bags Source: International Coffee Organization International Coffee Council 112th Session 3 – 7 March 2014 London, United Kingdom Market Understanding:
- 4. Starbucks: Revenue and Stores Stores Revenues Starbucks Worldwide $14.9 billion $11.4 billion in United States $3.4 billion in Other Countries $917 million in CAP countries Starbucks Stores 19,767 worldwide 10,194 Company Operated Stores worldwide 9,573 Licenced Stores worldwide 2,976 in China and Asia Pacific 59 in India Source: Starbucks corporation fiscal 2013 Annual Report
- 6. 1971: Starbucks opens first store in Seattle, Pike Place Market 1982: Howard Schultz joins Starbucks as director of retail operations and marketing 1983: To begin a coffee culture back in Seattle 1987: II Giornale acquires Starbuck assets with the backing of local investors 1991: Opens first licensed airport store at Seattle’s Sea-Tac International Airport. Total stores: 116 1992: Completes Initial Public Offerings on NASDAQ. Total Stores: 165 1995: Begins serving Frappuccino blended beverages. Introduces Starbucks ice cream. 1996: Opens first store outside US, In Japan and China 1998: Acquires Tazo, a tea company and incorporates the same to its menu 1999: Opens stores in China, Kuwait, Lebanon and South Korea 2000: Schultz transitions from chairman and chief executive officer to chairman and chief global strategist. Further expansions 2002: Starbucks enters into licensing agreements with national Fair Trade organizations to sell Fair Trade Certified coffee Name changes to Starbucks Corporation
- 7. 2002: Establishes Starbucks Coffee Trading Company in Lausanne, Switzerland. Total stores: 5,886 2004: Releases Ray Charles, Genius Loves Company CD through a collaboration between Concord Records and Starbucks Hear Music. 2005: Opens stores in: Bahamas, Ireland and Jordan. Total stores: 10,241 2008: Howard Schultz announces a renewed focus on customer experience and innovation. Opens stores in: Argentina, Bulgaria, Czech Republic and Portugal. Total stores: 16,680 2009: Starbucks is voted the most engaged brand in social media. 2011: The company has 17,009 stores across the globe Source: Forty years young, a history of Starbucks, Telegraph
- 8. Starbucks and its expansions • Starbucks has a strong network of 21,000 stores in over 65 countries Asia-22 countries Europe- 24 Countries Middle East and Africa- 2 countries North America- 10 countries South America- 6 countries Oceania- 2 countries Source: Starbucks Website
- 9. • International Market- success and failures of Starbucks • Success in England – Starbucks was quick to respond to the growing competition – It was able to build a point of difference and emerge as a successful brand in the UK – Introduction of drive-through stores which are considered exciting in UK – Starbucks has revamped its business models to suit the UK market needs • Success in China – Adapted to the local tastes and preferences – Promoted the concept of dine-in services in contradiction to the culture in the US – Better ambience and comfortable outlets to consider Starbucks the right option for executive meetings and other gatherings – Improved and highlighted customer service
- 10. Failure in US – Increase in the cost of production of real estate – Sharp fall in consumer demand – Emergence of substitutes like; Coffee Beans, Burger Kings – In 2008, 12,000 workers lost their jobs with 600 stores shut down* Decline in Australia – Concept of ‘coffee’ was not new to the market – Weak customer service as compared to various new brands – Lack of advertising; no brand communication – Re-enforced the US style of coffee drinking Failure in Israel – Opened stores in partnership with Delek group with 80.5% shares with Starbucks and the rest with the later – One of the major reasons highlighted was that the two brands did not mesh with each others – The strategies adopted by Starbucks in Israel were not in compliance with the ones that could drive sales in the area *Starbucks closing 5% of Starbucks stores, Seattle Times
- 12. 2012: Starbucks comes to India with a 50-50 TATA alliance with its first store in Mumbai 2013: Expanded the stores in Delhi- 2 outlets 2014: Expanded within India and reached to Chennai, Hyderabad, Bangalore
- 13. Mumbai- 23 Pune- 6 Delhi- 14 Delhi/NCR- 4 Bangalore- 10 Chennai- 1 Hyderabad-1
- 14. • The company announced to open 50 cafes in the country in 2012, entailing investment of 400crores,which further got delayed • Presently 59 outlets in 6 cities • India is the fastest growing new market in the history of Starbucks • According to John Culver, group president ,Starbucks China & Asia Pacific, India being a strategic market will be among top 5 markets in near future worldwide • Tata Starbucks has begun exporting locally sourced &roasted Starbucks India Estates Blend to selected stores in Asia & in US through online channel • It is innovating in beverages & food menu to add localized tastes in product offering
- 15. Starbucks- TATA alliance • The brand is in a 50:50 joint venture with Tata and the alliance is named Tata Starbucks • Coffee beans are sourced and roasted locally from Tata fields in Coorg, Karnataka • It is spread over Delhi, Maharashtra, Karnataka, Tamil Nadu and Telangana • Starbucks had previously tried to enter the Indian market in 2007 with the Future Group for its India foray because of the latter's known credentials as India's biggest retailer by far owing to FDI regulations.* TATA STARBUCKS Type Joint Venture Traded As Starbucks “A TATA Alliance” Industry/ Genre Coffee Shops/ Coffee House Headquarters Mumbai, Maharashtra Number of Locations 59 stores (October 2014) Key People Avani Saglani Davada, CEO Products Coffee, tea, pastries, frappuccino beverages, smoothies Owners Starbucks Corporation(50%) Tata Global Beverages (50%) Employees 1000+ (September 2014) **Jordan Melendrez, Go off the menu with these 8 secret Starbucks drink ideas, today.com, October 2014
- 16. Starbucks- Product Price Mapping
- 17. Item Price FRAPPUCCINO® BLENDED BEVERAGES Coffee Tall Rs.145 |Grande Rs.165| Venti Rs. 185 Caramel Tall Rs.185 |Grande Rs.205| Venti Rs. 225 Espresso Tall Rs.185 |Grande Rs.205| Venti Rs. 225 Mocha Tall Rs.165 |Grande Rs.185| Venti Rs. 205 White Chocolate Mocha Tall Rs.170 |Grande Rs.190| Venti Rs. 210 Java Chip Tall Rs.170 |Grande Rs.190| Venti Rs. 210 Cold Coffee Grande Rs.185 Vanilla Cream (Coffee Free) Tall Rs.170 |Grande Rs.190| Venti Rs. 210 Green Tea Cream (Coffee Free) Tall Rs.170 |Grande Rs.190| Venti Rs. 210 Double Chocolate Chip Frappuccino Tall Rs.190 |Grande Rs.210| Venti Rs. 230 TATA®TAZO® TEA Full-Leaf Brewed Tea Short Rs.105| Tall Rs.125 |Grande Rs.145| Venti Rs. 165 Green Tea Latte Short Rs.110| Tall Rs.130 |Grande Rs.150| Venti Rs. 170 Chai Tea Latte Short Rs.110| Tall Rs.130 |Grande Rs.150| Venti Rs. 170 Iced Shaken Tea Tall Rs.130 |Grande Rs.150| Venti Rs. 170
- 18. Item Price CHOCOLATE Signature Hot Chocolate Short Rs.115| Tall Rs.135 |Grande Rs.155| Venti Rs. 180 Kid’s Hot Chocolate Short Rs.115 FRESHLY BREWED COFFEE Brewed Coffee Short Rs.105| Tall Rs.115 |Grande Rs.125| Venti Rs. 135 Pour Over Cone Brewed Coffee Short Rs.105| Tall Rs.115 |Grande Rs.125| Venti Rs. 135 French Press Brewed Coffee 4 Cup Rs. 140| 8 Cup Rs. 190 CREATE YOUR PERFECT DRINK CHOOSE YOUR SIZE Short 237ml| Tall 354ml |Grande 473ml| Venti 591ml DO YOU WANT IT HOT OR ICED? CHOOSE YOUR MILK- Regular, Non Fat, Soy WANT DECAF OR HALF DECAF? ADD- INS Flavour (Vanilla, Hazelnut, Caramel, Chocolate, Lemonade) Espresso Shot| Tea Bag Chocolate Chips | Extra Whipped Cream Rs. 35 Rs. 45 Rs. 20
- 19. Item Price ESPRESSO BEVERAGES (HOT OR ICED) Espresso Solo Rs.100 | Doppio Rs. 110 Espresso Macchiato Solo Rs.100 | Doppio Rs. 110 Espresso Con Panna Solo Rs.100 | Doppio Rs. 110 Cappuccino Short Rs.125| Tall Rs.145 |Grande Rs.165| Venti Rs. 185 Caffè Latte Short Rs.125| Tall Rs.145 |Grande Rs.165| Venti Rs. 185 Vanilla Latte Short Rs.160| Tall Rs.180 |Grande Rs.200| Venti Rs. 220 Hazelnut Latte Short Rs.160| Tall Rs.180 |Grande Rs.200| Venti Rs. 220 Caramel Macchiato Short Rs.140| Tall Rs.160 |Grande Rs.180| Venti Rs. 200 Caffè Mocha Short Rs.145| Tall Rs.165 |Grande Rs.185| Venti Rs. 205 White Chocolate Mocha Short Rs.150| Tall Rs.170 |Grande Rs.190| Venti Rs. 210 Caffè Americano Short Rs.110| Tall Rs.130 |Grande Rs.150| Venti Rs. 170
- 20. V/NV Item Price PASTRY/CAKES Chocolate Raspberry Crunch Cake Rs.180 Blueberry Delight Cake Rs.160 Chocolate Truffle Gateau Rs.165 Red Velvet and Orange Cheese Cake Rs.185 Lemon Loaf Cake Rs.130 Lemon Jazz Cheesecake Rs.185 Banana Chocolate Cake Rs.140 Chocolate Brownie Cream & Chocolate Chips optional Rs.160/40 Pain de Chocolate Rs.170 COOKIES Butterscotch and Almond Cookies Rs.125 Oatmeal & Raisin Cookie Rs.130 Java Chocolate Chip Cookie Rs.125 MUFFINS Blueberry Muffin Rs.130 Java Chip Chocolate Muffin Rs.135
- 21. V/NV Item Price Basil Tomato & Mozzarella Cheese Sandwich Rs.170 Chatpata Paratha Wrap Rs.145 Mediterranean Focaccia with Roast Vegetables Rs.165 Tandoori Paneer Roll Rs.165 Wild Mushroom Pocket Rs.165 Greek Salad Wrap Rs.155 Char Grilled Potato Sandwich Rs.145 Smoked Pepper Sandwich Rs.185 Mediterranean Cheese Roulade Rs.160 Hummus & Pita Platter Rs.195 Egg & Cheese on English Muffin Rs.165 French Butter Croissant Rs.120 Murg Kathi Wrap Rs.130 Murg Tandoori Kebab Sandwich Rs.165
- 22. V/NV Item Price Chicken & Mushroom Pie Rs.135 Chicken Mozzarella Turnover Rs.130 Star Club Sandwich Rs.185 Double Meat Club Sandwich Rs.185 Grilled Chicken Salad Sandwich Rs.170 Chicken & Veg Lattice Rs.170 Chicken & Mushroom Frittata Rs.165 Reshmi Kebab Roll Rs.160 Salmon & Cheese Croissant Rs.185
- 23. Starbucks Culture As per Howard Schultz, CEO Starbucks, brand’s vision is based on employee happiness and given their customers an experience that will make them come time and again to Starbucks • Fanatical standards about coffee and service • Empowered employee culture through generous benefits program • Employee training to brew the perfect cup of coffee • Employee happiness-key to competitiveness and growth • Benefits package to both part-time and full-time employees • The experience one gets from the stores is to be overwhelming and different Source: Starbucks’ quest for healthy growth: An interview with Howard Schultz, Mckinsey.com
- 30. Target Audience • Parameters: 1. willingness to pay 2. Ability to excite others 3. Likeability for social image 4. Appreciate good quality coffee • Coffee Experts- 35-49 years of age, these people are quality conscious. They enjoys lattes and have long built choices in coffee • Trendy Lot- These people are 25-35 years of age and enjoy the ambience of a place more than anything else. Teen parties, Kitty parties may all fall within this criteria • Status Opportunists- 25-40 years of age, these people fall under the secondary target market. They are looking out for good crowd to be with and wish to establish their place in the high end society Source- Starbucks Market Entry and Expansion Strategy into India, A case study by IIMB
- 31. Product Adoption Cycle AGE GROUP DESCRIPTION/PRIORITIES ADOPTION 15-25Years Income:<50,000 per annum Students, new couples seeking a status symbol, primarily occasional visitors People looking for value for money, maybe a good crowd Single Income no kids Low priority , Low adoption 26-35 Years Income: >6 Lakhs per annum Married(Early nesters)/Unmarried Double income no kids People looking for the best ambience, the corporates, the kitty party ladies, the fashion/health conscious socialites, the trendy lot ,the snobs who are educated abroad, the expatriates, international tourists, the matrimony seekers High priority , High adoption Source- Primary research by the group
- 32. AGE GROUP DESCRIPTION/PRIORITIES ADOPTION 35-49 Years Income > 15 Lakh per annum The coffee experts, meeting with friends ,the westernized and knowledgeable ,they know what they want 50+ years Constant MHI Completely developed taste ,they exactly know what coffee they want if at all they do, retired personnel (including grandparents) Contd. Source- Primary research by the group
- 33. Starbucks- SWOT • Strengths Good relations with coffee suppliers Located in high traffic areas and big cities Strategic relationships with suppliers Spread across 65 countries with 21,000 stores • Weaknesses Occasional lack of workforce on the floor Lack of experience in India High pricing- not affordable by all Starbucks refused to guarantee that all milk, beverages, chocolates, ice creams and baked goods are free from genetically modified ingredients* * Tell Starbucks to sell only organic milk from cows and not fed GMOs, gmoinside.org,
- 34. Contd. • Opportunities Innovate products and services Increasing product ranges, establish a thorough Indian coffee market Selling the experience rather than the product Fair trade products can be offered • Threats Frequent change in market trends Better value offered by local cafes Non acceptability in international markets Recurring global financial crisis Increasing health concerns over negative impact of coffee Influence of substitutes like tea in India
- 35. Starbucks Positioning Frame of Reference Comparative Brand Points of Parity Points of Difference International Status Lavazza and Costa- early entry in the market High quality, premium brand status Brand Equity of Starbucks, larger outlets, customer service, product ranges Local Players in India CCD- Market Leader- understanding the market is easy, value for money, wide channel Awareness, Quality to some extent Better ambience, speciality coffee Quick Service Restaurants McD, KFC- customised products, fast delivery systems Stylish stores giving a valuable experience Brand Image and Quality Standards Other Restaurants Free home deliveries, easily accessible and convenient Availability of both tea and coffee (specific to India) Larger space in the outlets, ambience and experience “It is the premium coffee drinking experience for the premium customer”
- 36. Value Chain for Starbucks Product Development>>>>>>>>>>>>>>> International Development >>>>>>>>>> Bean and Ingredient Selection>>>>>>>>>Product Distribution>>>>>>>>>>>>>> Online Storefront Customization>>>>>>>Storefront>>>>>>>>>>>>>>>>>>>>>> Mobile Apps>>>>>>>>>>>>>>>>>>>>>>Take-home Products a) International development- To allow for international markets to develop new products that better suit their cultures that could add value to the US market as well such as the Green Tea Latte developed in Japan’s Starbucks. b) Online Storefront customization- Allow you to create a profile online, order online, create new drinks etc. c) Mobile app- Could locate starbucks locations, put in drink orders etc. Kathleen Lee, Case Study: Starbucks Coffee
- 37. Frame of Reference Starbucks Barista Costa Coffee CCD Store Format Single Format Multi-Format Multi-Format Multi-Format Ambience/ Experience Great ambience Brand plays on the overwhelming experience Made keeping in mind a particular theme. Same for all Almost same for all Made on one theme only Brand Status US based, Premium Aspirational India based, Lost the classy status UK based, Aspirational India Based, Functional Price In India, Highly Priced At parity with most of the competitors A bit over priced Affordable pricing structure Coffee Quality At parity At Parity At parity At parity Service Quality At parity At Parity At parity At parity Competitors
- 38. Situational Analysis • Starbucks launched in India in 2012 and its further growth is now stagnant whereas in other parts of the world it has reached the maturity stage* • The taste that savors the Indian palette is very different from the West and other foreign countries and hence still maximum population of India drinks tea** * Kathleen Lee, Case Study- Starbucks Coffee ** Joshua Berlinger, Starbucks faces one enormous problem in India, Business Insider, October 2012 *** Prakash Murali, Tea Report, Care Research, a division of the CARE Ratings, June 2013
- 39. Contd. • Starbucks faces one serious problem – they have to prepare a menu that suits the Indian taste buds and is also economical* • Most of the people find the brand not to be affordable and consider it as a big hole in the pocket** • The brand needs to maintain its international standard since it is positioned around the amazing experience one gains at a Starbucks store • The brand needs to attain an aspirational yet a functional status * Joshua Berlinger, Starbucks faces one enormous problem in India, Business Insider, October 2012 ** Primary Research done by Group
- 40. Future Aspects • As per the CEO, Howard Schultz, the growth model is introducing new products and new brands inside our stores. • We introduced VIA instant coffee in our stores. • Instant coffee is a $24 billion global category that has not had any innovation in over 50 years. • Build upon the emotional connect that Starbucks has with its loyal customers • Draft off of our stores into ubiquitous channels of distribution and then integrate that into the capability and the discipline we have around social and digital media. • Introduce better reward systems via Starbucks Reward Card that could further instill the customers to go to Starbucks • Biggest growth constraint for Starbucks is ‘Human Capital’ as the brand is looking out for only the world-class who have values similar to that of the brand Source: Starbucks’ quest for healthy growth: An interview with Howard Schultz, Mckinsey.com
Editor's Notes
- #36: Quick Service Restaurants McD, KFC- customised products, fast delivery systems Stylish stores giving a valuable experience Brand Image and Quality Standards