Feb 2: Starbucks, the world’s largest coffee chain, has been operating in India since 2012 when it opened its first store in Mumbai. Since then, the company has expanded its presence to 20 cities and 240 stores, making India one of its top five fastest-growing markets.
In this blog post, we will look at some of the factors that have contributed to Starbucks’ success in India, as well as some of the challenges and opportunities that lie ahead.
Factors behind Starbucks’ success in India
- Strong partnership with Tata: Starbucks entered India through a joint venture with Tata Consumer Products, one of the largest and most respected conglomerates in the country. This partnership gave Starbucks access to Tata’s expertise in sourcing, distribution, real estate, and local regulations, as well as its brand reputation and customer loyalty. Tata also owns several tea plantations and coffee estates in India, which provide Starbucks with high-quality raw materials and a traceable supply chain.
- Premium positioning and customer experience: Starbucks positioned itself as a premium brand that offers not just coffee, but a whole range of beverages, food, and merchandise. It also invested in creating a distinctive store design and ambience that reflects the local culture and heritage, as well as providing free Wi-Fi, comfortable seating, and friendly service. Starbucks aimed to create a “third place” for its customers, where they can relax, socialize and work.
- Innovation and localization: Starbucks adapted its menu and offerings to suit the preferences and tastes of Indian consumers. It introduced products such as masala chai latte, cardamom mocha, almond croissant, and chicken tikka panini, as well as seasonal and festive specials. It also launched a loyalty program, mobile app, and delivery service to enhance convenience and engagement.
- Expansion and growth: Starbucks has been growing at a rapid pace in India, opening an average of one store every three days in the past year. It has entered new markets such as Jaipur, Kanpur, Indore, Bhopal, Ludhiana, Kochi, Amritsar, Lucknow, and Vapi, tapping into the rising demand for coffee and cafe culture in tier-two cities. It has also increased its store size and capacity to cater to larger crowds and events.
Challenges and opportunities for Starbucks in India
Competition and differentiation: Starbucks faces stiff competition from other local and international players in the cafe segment, such as Cafe Coffee Day, Barista, Costa Coffee, Blue Tokai Coffee, and McCafe. These players offer similar products and services at lower prices and wider reach. Starbucks needs to constantly innovate and differentiate itself from its rivals by offering superior quality, variety, and value.
Cost and profitability: Starbucks operates at a higher cost structure than its competitors due to its premium positioning, imported ingredients, higher wages, and rents. It also charges higher prices than the average consumer is willing to pay for coffee. This affects its profitability and margins, especially in a price-sensitive market like India. Starbucks needs to optimize its costs and pricing strategy to improve its bottom line.
Awareness and education: Coffee penetration in India is still low compared to other countries, as most Indians prefer tea or other beverages. Coffee consumption is also skewed towards the southern states, where it is more culturally ingrained. Starbucks needs to increase awareness and education about coffee among Indian consumers, especially in the northern and eastern regions where it has less presence.
Sustainability and social responsibility: Starbucks has been committed to sustainability and social responsibility in its operations, sourcing, and community involvement. It has adopted practices such as water conservation, waste management, energy efficiency, and green building standards in its stores. It has also supported farmers’ livelihoods, women’s empowerment, youth development, and environmental conservation through various initiatives. Starbucks needs to continue these efforts and communicate them effectively to its stakeholders.
Conclusion
Starbucks has achieved impressive growth and performance in India over the past decade, thanks to its strong partnership with Tata, premium positioning, customer experience, innovation, localization, and expansion. However, it also faces challenges such as competition, cost, profitability, awareness, education, sustainability, and social responsibility. To sustain its success in India, Starbucks needs to leverage its strengths while addressing its weaknesses.
By
Sujata Muguda
Shreyas WebMedia Solutions