Tata Starbucks India

Starbucks is making an entry into the India Coffee market by making a joint venture with TATA coffee Ltd.
A view on their marketing strategy and a generic view of the Indian Coffee market

1. TATA STARBUCKS COFFEE INDIA By, Arjun Singh Division B Roll no. 18 Batch 2013-15 SIMS, pune 1

2. Generic view Coffee kiosk market Starbucks is the largest coffee house company in the world 17012 stores in 50 countries Parameters CCD Barista Costa Coffee Starbucks Market Share 2011 75.5 % 19% 4.6% - Stores 2011 1100 240 90 4 (2013) Products & Offerings Cappuccino, expresso , café mocha, Irish coffee, ice tea Sandwiches, burgers, cakes Cappuccino, expresso , café mocha, Irish coffee, ice tea Sandwiches, burgers, cakes + Salads, desserts, pastas Cappuccino, expresso , café mocha, Irish coffee, ice tea Sandwiches, burgers, cakes , muffins, wraps, pastas Cappuccino, expresso , café mocha, Irish coffee, ice tea Sandwiches, burgers, cakes + Salads, desserts, pastas 2

3. Indian Coffee market Analysis Industry rivalry : Major rivals- Café Coffee day (900 Stores), Barista (200) Other new players- Costa Coffee, Coffee bean Threat of substitute Product Consumers may opt to reduce Caffeine intake due to health reasons Tea is very popular in India Bargaining Power of Suppliers Arabica Coffee Prices soared 77 % from 2010-12 (Data monitor) which has hurt bottom lines for competition But Starbucks getting coffee from partner (TATA), so power of suppliers can be regarded as weak Threats of entry Entry barriers are relatively low FDI in retail was 51 % which is now increased to 100 % Starbucks being a global coffee chain, don’t have much capital problems and they have the experience to manage large economies of scale India is the 6 the largest producer of coffee (310000 tonnes annually) so sourcing coffee wont be a problem Bargaining power of buyers with the advent of MNC in food and beverage sector (McDonalds', barista lavazza) consumer is faced with lot of choices, thus it will be difficult for Starbucks to influence buyers to pay for their premium products. 3

4. Comparative analysis Target market segmentation The marketing strategy will focus on targeting both groups – College and university students aged (18-25) in the short term and working professionals (25-40) in the medium to long run Starbucks to focus on Premium and high end customers mostly working professionals and students Economic factors Indian economy will grow an estimated 6.5 % this year , fastest among developing Asian economies excluding China (Source : Bloomberg ) The personal disposable income per Capita in India has doubled between 2001-2010 (By Deloite ) Legal factors FDI limit raised to 100 % for foreign retailers selling a single brand Joint venture (50-50) Between TATA and Starbucks Socio Cultural factors 69.9 % market dominated by Tea With more westernization and more young population (60% Below 30 – Deloite 2011 ) huge opportunity 4

5. Strengths International popularity of the Starbucks Brand Access to TATA’s premium Robusta and Arabica coffees (Agreement) Superb marketing and positioning skills of Starbucks Tata as a cultural fit for Starbucks will help in building core competences of each other One of the strongest franchises in the world with more than 6500 licenses shops around the world Sophisticated atmosphere , music , interior design and artwork Have a lot of flavour variations Weakness Image of luxury coffee outlets High prices of coffee is felt as a barrier in South and north India ( per capita income in India is as compared to other star buck's markets) Coffee dominant business, need for costa coffee to diversify Certain rigid standards and policies at outlet (They apply the same business model, regardless of culture and values of the country they are operating in) The entry of Starbucks aimed at out-of-home coffee consumption and this may effect alliance of Tata coffee with Barista Opportunities Huge market for coffee consumption English speaking population Growing middle class and increased spending power Young population Rating of coffee outside home is better than tea outside home specially in north and east India Favourable cost of labour Availability of workforce Tea based culture of India an opportunity to provide more tea based drink Threats India is a tea based culture (20 % global consumption ) Home-grown brands like CCD, Barista Low Per capita income, high price of coffee Increased health consciousness against foods offered by coffee chains Visiting cafes is not a frequent habit among Indian as compared to western world Fast food chains like McDonald's , burger king also adding quality coffee drinks to their menu Rising prices of coffee putting pressure on profit margins Comparative analysis SWOT (Conti.) 5

6. Business overview & strategy Business overview Mission statement Joint venture with TATA Coffee Ltd. (50-50 JV) Non binding agreement Starbucks and TATA Coffee ltd to work towards developing and improving the profile of Indian grown Arabica Coffee Per capita consumption from 85 grams in 2009 to 94 grams in 2012 (Data monitor ) Strategy Plans to open 50 stores in the country by the end of 2013 Plans to explore retail properties of Croma , Star bazaar , T rent and Indian hotels belonging to the Tata group to open stores Franchisee model for standalone cafes in future Plans to open kiosks at Airports Coffee shops normally close at around 11 pm, Starbucks considering the option of closing at midnight thus adding a unique feature 6

7. Conclusion Starbucks is another industry stalwart to enter the Indian markets due to vast potential and huge untapped market wher e Indians are influenced by western Lifestyles Indian consumers have always welcomed change when it comes to their taste buds World’s largest young people population (aged under 30) with growing Purchasing power Timing of their entry couldn’t be better with 100 % FDI in single brand retail It comes as a breath of fresh air with CCD’s, Barista, costa Coffee almost losing their sheen India which is the 5 largest producer of Coffee and cheap skilled manpower could mean more profit margins for the Company 50-50 JV with TATA will act as symbiotic relationship, both will improve each other’s core competencies Thus Coffee Culture is poised to be deeply in-grained into Indian culture in the near future and this will mean great opportunities for this partnership. 7