Maybe there’s more to your basic white girl than meets the eye. We all love the prestige associated with misspelled names on cups brimming with overpriced coffee, but how exactly did this global brand make its way into the chai guzzling country?
What does it do that is so special that makes us cave time and again? This article will assess Starbucks’ global strategy and its presence in India as a Tata Alliance. Let’s see how it warmed us up to the coffee house culture.
The Tata Alliance
Tata Starbucks, the 50-50 joint venture between Starbucks Coffee and Tata Global Beverages recently completed half a decade in India and crossed a 100 store milestone. The company is now focused on making India one of its top five markets across the globe. John Culver, group president, Starbucks International and Channel Development mentions, “The China and Asia Pacific (CAP) region remains at the forefront of our global growth for Starbucks, and India is an important market with significant long-term growth opportunity.” The success of the alliance was largely based on matching values. Building a company with a conscience was vital for both parties, they acknowledged that while it was incumbent on them to face the challenges that a business offered, the people they worked with mattered. Community care and ensuring customer and employee satisfaction ranked equally high as core company ideals for them, resulting in an fruitful partnership.
Although their presence in India was first announced in 2002, they took their time to enter the market, acknowledging its complexity and variedness. With other premium players including Costa Coffee, Gloria Jean’s, and Coffee Bean & Tea Leaf unable to successfully secure a profitable position in India, Howard Schultz acknowledged the fact that he could not undertake this task alone. He also realised that associating with a credible and strong brand name that Tata offered brought numerous strategic advantages for the company. Tata’s retail and FnB expertise as well as access to high traffic locations via its hotels and retail outlets assured a country-wide reach.
Real estate, coffee bean sourcing, and food sourcing were the main entry concerns that the association helped them tackle. Expensive real estate with red tapism served as a severe barrier that Tata helped overcome owing to their 45-year-old widespread presence in the country. There was a sourcing advantage due to Tata’s presence across the production chain, growing, roasting and trading coffee. Furthermore, they were already aligned with the Starbucks policy of investing in building sustainable farming practice and cultivating relationships with local coffee growers. For the first time in Starbucks, all the coffee beans used at the stores were sourced locally. Lastly, tying up with Taj Hospitality, a trustworthy catering source eased their entry into the market.
The Starbucks Experience
The primary source of its brand equity is on selling the finest quality of coffee and supreme customer service and loyalty. Starbucks channelizes efforts in making its stores the “Third Place” – first and second being your home and office. It aims to position itself as a place where people can lounge for hours, working or catching up with friends. It does so by having ample comfortable seating and free Wifi for 12 hours. They want customers feeling the love with a “Welcome to Starbucks” greeting whenever someone enters and a loud “Thank you” or just a smile and “have a nice day” when drinks are given at the hand off counter. Furthermore, they have a hard and fast policy of the customer being right, even if that means completely replacing your drink!
The design is not as per the global template; the stores must reflect the culture of the community in which they operate. For example, New Delhi stores have ropes and chatai on the walls, Pune stores have antique and copper displays (copper was a primary resource in Pune) and Chennai’s store has its traditional Kalamkari style of painting to show regions of coffee plantation. There is ample use of colour which is uncommon in the US market. Additionally, there is a focus on ensuring a perpetual smell of coffee to enhance the experience.
What It Does Differently
Starbucks has maintained its popularity through time by being flexible. It has been open to adapting to changing consumer tastes and preferences. It takes pride in being a leader in product innovation, a widely known example of this would be its Pumpkin Spice Latte. Closer to home the coffee chain has introduced several localised flavours like the Alphonso Mango Frappuccino, the Diwali special Saffron Truffle Mocha and launched its speciality tea brand – Teavana. Food options including Murg Kathi Roll and Tandoori Paneer Sandwich allows the food to entice the Indian palette as well. All this while maintaining the international standard for the brewing and serving of coffee.
The other major strength is its human resource management, a keen value for strong internal and external relationship with stakeholders. Their ethical approach towards sourcing coffee and related products is almost a trademark. Employees are engaged and given a variety of fringe benefits. Baristas are called “partners” because there is a foundational belief in shared success. Being a Starbucks partner means having the opportunity to be part of something bigger, to be more than an ‘employee’. Engaging employees in this way is not only an investment in its workforce but also an investment in its customers: engaged employees lead to satisfied customers.
Finally, while majority of quick-service restaurants focus on franchising their stores completely due to the exponential increase in profits and outsourcing of risk. Starbucks’ refusal to engage in franchising at all stems from the fact that the CEO believes, “Franchisees are middlemen who would stand between us and our customer.” They value their company culture and maintain that it is would continue to propel them forward.
Currently, their focus remains on urban markets however they would want to create a footprint across India, growing in a disciplined manner. Starbucks also announced it will soon take flight on Vistara, India’s fastest growing full service airline, later this year. Starbucks’ fresh brewed coffee service will be exclusively available on all Vistara flights. They hope to introduce Starbucks Reserve® Tata Nullore Estates, the first ever Starbucks Reserve® coffee sourced exclusively from India which highlights the deep coffee heritage and expertise of both companies to source, roast and distribute the finest-quality Arabica coffees.
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