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TECHKRITI’20 – Coffee Wars in India: Starbucks vs CCD
- 1. TECHKRITI’20 –Best Manager Case Analysis- Coffee Wars in India-Starbucks TEAM MAGNUS
- 2. An Overview 2012 1996 1999 Starbucks and Tata Global Beverages announced 50-50 joint venture and Tata Starbucks opened its first store in India. 1971 Starbucks started its business selling coffee beans, tea and spices in Seattle Starbucks opened its first international store in Japan Starbucks entered China with three different firms in northern, eastern and southern China Followed ‘One city at a time policy’ and expanded slowly across USA By 1996, Starbucks projected itself as most recognized specialty coffee brand, riding on these unique business practices. Instead of advertising Starbucks depended on ‘Word of mouth’ to attract customers, relying on its superior product quality & customer service
- 3. Global Reach-Analysis India China Japan TATA Starbucks, joined venture between TATA & Starbucks , to own & operate Starbucks cafe across India Opened first store in India in 2012, in South Mumbai. Different operating model then Starbucks from other countries, where it generally collaborates with smaller partners & later acquires them Starting with Japan, it ventured into China in 1999, in partnership with three different local firms in Northern, Easter & Southern region of China. By 2014, it expected china to become its second largest market Starbucks Opened its first international store in Japan in 1996. Entered in joint venture with Sazaby, a national food, apparel & lifestyle retailer.
- 4. Marketing Strategy PRODUCT PROMOTION PRICE PLACE PROCESS PEOPLE Customized Coffee (The way you want) Higher than others Accessible and available Attractive Store outlook and ambience, uniform sign boards Quick service, customized cups, feedback from customers Social, positive attitude, active, skilled staffs Social media, Free Samples, Credit card discounts Marketing Mix- 7 Ps PHYSICAL
- 5. SWOT Analysis Strength Opportunity Weakness Threat Strong brand image Extensive global supply chain Moderate diversification through subsidiaries Adaptability with local culture Friendly store design. High price points Generalized standards for most products Imitability of products Expansion in developing markets Business diversification Partnerships or alliances with other firms Rise in target population due to rapid urbanization Competition involving low-cost coffee sellers Imitation of brand in market like China Independent coffeehouse movements Fickle customer loyalty/frequent changes in market trend Threat Strength
- 6. India-China Cultural Differences Key Differences Capitalizing Differences In India, the consumers are very discerning and their expectations are high The service industry in India does not have a positive reputation. Price sensitivity of customers in India is high compared to China Competitors presence in India before Starbucks entered (CCD & other chains), unlike China where starbucks proved to be the pioneer Starkly different food habits and preferences. Less number of metropolitan cities compared to China Collaboration with TATA, known for its service-procuring in services & location of retail space Unlike China, where it went with three small local players, in India, selected TATA, which had better outreach across India & understood local cultures better. Catering to local tastes: Offered Tea & beverages in china, Tandoori chicken in India Delivers fresh supply to every store, 7 days a week. Proper training provided to staffs. To provide better services, staffs were trained to build personal connections with customers. English speaking culture of India helped Starbucks.
- 7. Starbucks Vs CCD Starbucks is entering in Indian market, which already has major competitors, CCD leading the way among them. The target segment of Starbucks & CCD are completely different. Starbucks target premium customers, in high price range and are mostly expanding in premium locations. CCD works in affordable price range, targeting middle class consumers & youths.
- 8. Way Ahead-India It can go for extensive marketing instead of relying on ‘word of mouth’. Differentiate itself from CCD/other chains in terms of status symbol. Indianization of food: Studying and developing variants suited to Indian flavors Association with Indian emotion: Associating with sports such as Cricket, with festivals can prove to be great way to reach out to customers. Utilize the association with TATA as they have deeper reach and trust among Indian masses. Can open stores in all TATA brands like (Westside) and leverage their customers base. Segment targeted by Starbucks is very small and the there is a need to tap into the middle class segment, which is already crowded by players like CCD & Barista. However, Starbucks can’t lower its prices to capture this section as it will hamper brand conscious upper class. Hence, it can enter with some alternate brand under the same umbrella.
- 9. Recommendations Real Estate Acquisition is going to be very challenging, but again having Tata’s help will be a big advantage for Starbucks Developing the suppliers. Starbucks has been controlling the price, which is affecting its profitability. Getting new resources might lower the cost. Starbucks can open stores in Tier-II cities, educational institutes, with a subsidiary brand. Building up on Tea as it is most preferred beverage in India.