Starbucks India

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:

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

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

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

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

• 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

 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

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

Mumbai- 23
Pune- 6
Delhi- 14
Delhi/NCR- 4
Bangalore- 10
Chennai- 1
Hyderabad-1

• 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

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

Starbucks- Product Price Mapping

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

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

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

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

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

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

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

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

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,

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

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”

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

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

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

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

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

Starbucks India

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