Category: MARKETING

 

By Moinak Mitra

 

In January 2011, when Starbucks chairman and CEO Howard Schultz made his maiden India visit to sign the 50:50 JV with Tata Global Beverages, hopping over to Asia’s largest coffee maker Tata Coffee’s 8,258 sq feet roasting facility at Kushalnagar near Coorg made perfect sense. After witnessing the plant first hand, his team pointed out that the coffee at the roasting facility matched the global espresso blend that Starbucks prides itself on.

 

So for the first time ever in Starbucks’ history, the company pinned its faith on a partner-owned roasting facility, outside the five plants it owns across the world, including one at Amsterdam. Local coffee, global taste.

 

WHAT’S IN STORE

That set the ball rolling for a slew of localization initiatives which the JV kickstarted from October 2012, as it launched its very first outlet in Mumbai. The store in Horniman Circle, which can accommodate 120 people, has hand-carved wooden screens, tables of solid Indian teak, painted vintage trunks and old leather-bound books, harking back at Mumbai’s mercantile past.

 

As for the grub, there’s Konkani Twist or a Reshmi Kebab Roll, jostling for mouth-share with the standard Blueberry Muffin or the Classic Breakfast Chicken Sandwich-all coming from the Tata-owned TajSATS, India’s largest provider of meals to domestic and international airlines. While the coffee variants are largely untouched, the beans and espresso blend at the heart of the coffee are locally sourced. Even the Tata Tazo tea range throws up a spice-infused Chai Tea Latte-distinctly Indian. Similarly, when Starbucks opened shop in Delhi’s Connaught Place in February 2013, the ropework design of the store stood out as a local theme, along with food offerings, such as Murg Kathi Wrap and Murg Tikka Panini.

 

The Pune store, on the other hand, honours the rich copper culture of the city through copper artifacts and even has a traditional Indian swing for customers to sway. While certain elements in its food kitty are customized to suit local taste-buds, things are no different when Starbucks launched its 50th store in the country at Chennai earlier this month, which is the only outlet vending a ‘pour-over set’ single brew serving merchandise, typical of the filter coffee culture down south.

 

Procurement, store décor, F&B, merchandise- across locations , Tata Starbucks has set out to garner neighbourhood connect, to create what its CEO Avani Davda claims as the “third place” between the office and home. Unlike rival Café Coffee Day, which operates across multiple formats on a franchisee model, Tata Starbucks prefers operating the third place on its own, with an average covered floor area of 1,000-1,200 square feet. Much of that is governed by homegrown research that points to a more leisurely café culture in India than the west, where it is an on-the-go, grab-a-bite, kiosk-led approach with tiny outlets located near workplaces. That explains why Starbucks gets about a fourth of its revenue here from food as against 20% globally.

 

Though Ms Davda’s cuppa of choice is Sumatra or a vanilla latte in the morning, she would any day welcome the growing consumption of Chai Tea Lattes from her stores. Unlike in most countries, Starbucks realized that India is largely a tea-drinking nation and has now solidified that beverage selection on its menu. It has also launched the India Estates Blend – a country-specific blend developed with Tata Coffee, and the India Espresso Roast, which is sourced locally through the coffee sourcing and roasting agreement with Tata Coffee.

 

LATE, YET RELEVANT

As the local theme gains momentum, Starbucks’ late entry into the country’ Rs 1,200 crore coffee chain market must not be overlooked. When it finally entered in 2012 after a botched entry in 2007 with Future Group’s Kishore Biyani , the domestic market was nearing saturation, with quite a few players snapping up prime properties in the top ten cities.

 

Though the JV never compromised on real estate, Starbucks President, China and Asia, John Culver said forging a sense of community will be key, while inaugurating the Horniman Circle outlet. Surely, the $14.89 billion Starbucks has also drawn lessons from the localization bids of other food retail chains, particularly KFC and McDonald’s. While the former ranks Paneer Zinger and Veg Twister as its top-sellers, McDonald’s McAloo Tikki and Masala Grill scorch the tables.

 

But since such chains operate across multiple formats, some of them even resort to differential pricing across different formats or locations, to cater to a broader consumer base. But Starbucks is clear about its premium pricing and aware of its international brand following.

 

“We now have an average customer who is very well-informed, and has exposure to international brands and experiences… although price and convenience play a part in their spending decisions, they are also more and more influenced by a brand’s values,” says Manmeet Vohra, Director-Marketing & Category, Tata Starbucks.

 

THE NAYSAYERS

The Indianizing influence, particularly from a brand like Starbucks, has its own share of sceptics though. “People line up outside Starbucks for a global gourmet coffee experience with knowledgeable staff (partners) and baristas who can toss up the Starbucks experience…. unfortunately, the company has adopted a cookie-cutter approach (in India)….it’s like Zara saying it’ll sell salwar-kameez in India,” observes Harminder Sahni, Founder and MD, Wazir Advisors.

 

As a counter, Ms Davda claims that a career at Starbucks starts with learning about coffee, often through coffee-tasting and roasting events. “Our baristas are trained for specific periods by certified baristas, and each partner undergoes the training before undertaking their respective roles,” she says. Keeping the debate alive, former VPMarketing of Tata Coffee and brand consultant Harish Bijoor observes that Starbucks must not dilute its international flavour in order to grow in India.

 

“It must not become an Indian cafeteria from an American café,” says Mr Bijoor, adding that strong brands are often inflexible. Even marketing guru Jagdish Sheth dismisses the ‘think global, act local’ approach of Starbucks, pointing out the new trend as ‘think local, act global’, with a slew of examples, such as Haldiram’s, Dabur and Pathak Pickles from India now riding high overseas with very ethnic offerings.

 

BANKING ON THE HOOD

But Tata executives, like Davda and Vohra, remain steadfast in their commitment to serve local communities and grow the business case around regions and neighbourhoods. It goes to explain why each outlet supports the surrounding ecosystem.

 

In Mumbai’s Horniman Circle store, for instance, Starbucks maintains the adjoining heritage park while in Gurgaon’s HUDA Metro Station store, partners take time out for regular cleanliness drives. Pradeep, one such partner, works the counter in Delhi’s Hamilton House branch at Connaught Place and keeps watch as the outlet’s assistant manager. Amid rope chandeliers and the surrounding wood, steel and concrete surfaces that resonates the character of the Lutyen’s-era building, Pradeep helps fellow partners with orders, calling out names of consumers alongside the order on delivery.

 

Right next to where he stands, about one-fifth of the food section has local offerings-“Chatpata Paratha Wraps and Tandoori Paneer Rolls are the highest selling food items in this outlet,” claims Pradeep. Though Davda will be happy to see local grub flying off the tables, for Tata Starbucks, food accounts for just 25% of its Rs 16 crore revenue. It is the core beverage category that Ms Davda will be watching closely after ensuring that the beans at least are sourced and brewed in India.

 

Source:The Economic Times

Copyright © 2014, Bennett, Coleman & Co. Ltd. All Rights Reserved

Licensed to republish