STARBUCKS COFFEE -

Starbucks The company

Started in 1971; based out of Seattle, Washington Started as a roaster and a retailer of coffee, tea and spices Starbucks has around 19,972 stores in 61 countries It has a presence of 12,937 stores in U.S alone

USP
Highest Quality Coffee The Starbucks Experience A place away from home and work

Product Lines
Coffee, Tazo Tea, Soda, Juices Pastries Whole Coffee Beans Merchandize Mugs, CDs

Market Presence
3 largest overseas markets Japan : 1000 outlets England : 750 China : 700 outlets

Coffee Market - India

While India is the world's seventh-largest coffee producer, Indian Coffee Market is worth $230 million Over the last 14 years, 1950 Cafes have been added in India, growing at about 30% annually Technopak Advisory consultancy predicts the caf market in India to grow to $410 million by 2017 with the number of stores growing to to 2,900 in the next five years It is expected to grow at a CAGR of 13-14 % over the next 5 years
Coffee Chain No. of outlets CCD 1350 Barista 318 Costa Coffee 100 Mocha 18 Gloria Jeans 17 BRU 7 Dunkin Donuts 5

Competition

Starbucks would face indirect competition from local chai stalls and local restaurants selling tea and coffee Starbucks would compete directly with Indian coffee chains because it would sell premium coffee, tea and food in its Indian stores. Apart from Caf Cofee Day and Lavazza Barista, there's Costa Coffee, Gloria Jeans, Coffee Bean and Tea Leaf and Bru World Caf that can boast a pedigree from Unilever, one of India's biggest marketers.

Competition

Barista: Barista, now a part of the Lavazza group has had an uneven growth
chart.
It began in India around the same time as Caf Coffee Day but hasnt seen the same success rate Lost its strong brand affinity due to frequent changes of ownership and lack of focus

CCD: The largest numbers are being added by the early-starter brand in

this race, Caf Coffee Day, which is set to touch the 2000 outlet mark by 2014. It has expanded across verticals and formats (cafs, lounges and square). The brand has been opening across metros and going down to tier-3 cities and towns

Competitive analysis
"Being able to use the highest quality espresso, sourced and roasted in India, is an important part of delivering a locally relevant experience to our customers in the market," John Culver, president of Starbucks China and Asia Pacific

Threat of New Entrant

Difficult for new firms to differentiate product. Existing firms have high product innovation Large opportunity to develop organized coffee market

Marketing consultant Harish Bijoor believes the market is underserviced, with a space for 6200 plus cafs in India as of today

Power of Supplier India currently has an over 100 per cent import tax on coffee
Quality beans will raise suppliers bargaining power Tata Coffee division to supply coffee to the JV

Competitive Rivalry
Compete directly with CCD,Costa, Gloria Jeans, Barista, and Dunkin Donuts and thousands of small local coffee shops and cafes.

Power of Buyers
Minimal switching cost with abundant offers available Brand Power, Quality and Taste force retailers to stock Starbuck products

Threat of Substitutes
Hot drink consumption is largely dominated by Tea than Coffee Pubs and Bars act as a substitute place for people to meet up

Starbucks India

Asia is Starbucks most profitable region and India and China are the two biggest consumer markets here. Its already present in China the worlds most populous country and entering India was the next logical step. Venu Madhav, COO, Caf Coffee Day believes that Starbucks coming in would be definite good news for the caf culture itself as it would change the overall profile of the industry Coffee intake has been high over the past few years and, as a result, overall domestic consumption of coffee rose to an estimated 108,000 metric tons in 2010, up 80% in the past decade. India is the 61st country in which Starbucks has entered 50:50 Joint Venture between Strabucks and Tata Global Beverages Tata Global Beverages earlier had a minority stake in Barista Tata Global Beverages is the largest coffee producer in India and will also supply to starbucks stores worldwide under the partnership Starbucks would save on the 100 percent duty that is slapped on imported coffee beans used by other international brands Plans to establish 50 stores by the end of calendar 2012.

Why Tata? Why Starbucks?

Tata Coffee the countrys biggest coffee grower to supply to the Indian venture, as well as to export to Starbucks for use in its stores worldwide Association with the TATA brand would be better realized when the firm expands to smaller tier towns where Starbucks is not recognized Outlets inside the Taj hotels are also extremely likely, so are the chances of this happening in airline caterers TAJsats For Tata, the venture with Starbucks serves as a second chance at creating a national cafe chain. It earlier had a minority stake in Barista, a chain now controlled by Lavazza. R. K. Krishnakumar, the vice chairman of Tata Global Beverages, said the company left that venture when two of its partners started fighting with each other. According to the JV partners, the new company provides new opportunities to collaborate in areas other than Out-Of-Home (OOH) beverage consumption experience, including the ability to partner in the area of consumer packaged goods to be sold and distributed through grocery channels in India Starbucks believes that India can be an important source for coffee in the domestic market. The Tatas, on the other hand brings a longstanding and powerful brand, as well intimate knowledge of the intricacies of the market dynamics in India.

Store Layout

Store size ranges from 10001500 Sq. ft Located at

Office Buildings Retail Centers Airport terminals University Campus areas Neighborhood shopping areas

No two Starbucks stores looks the same

Store Layout(Cont.)

Stores of the future team formed in 1995 The team:

Design Philosophy
An authentic coffee experience that conveyed the artistry of espresso making, a spot where people could gather and talk over a great cup of coffee, a comforting refuge that provided a sense of community, a place that welcomed people and rewarded them for coming, and a layout that could accommodate both fast service and quiet moments.
Howard Schultz

Researched the art and literature of coffee

Studied coffee growing and making techniques

And how Starbucks has evolved in terms of design, logos, colors and mood

Four store designs templates based on 4 stages of coffee making: Growing, Roasting, Brewing & Aroma Each store based on one template, with varied material and details to adapt to the store size and setting

Store Layout(Cont.)

Formats

Grand Cafes: At high visibility and traffic locations with fireplaces, leather chairs and lots of ambience Brevebar: A store-within-a-store for supermarkets or office-building lobbies Doppio: A self-contained 8-square-foot space that could be moved from spot to spot Everyday Stores & Drive Thrus

For India, company should open one Grand Caf per city and rest in Everyday store format in the first 2 years

Promotions

Aggressively promote Starbucks Card to increase loyalty and habituate customers

Point System instantly updated on the card (10 points per Rs. 100 purchase) Keep track of customer preferences

Merchandize can be given out at 100 points

Best of Starbucks, where the most popular Starbucks offerings from their worldwide stores would be offered at Indian stores

TARGET CITIES
Phase 3 BANGALORE

Phase 2 DELHI Phase 1 MUMBAI

Reasons: High buying power due disposable incomes 1. Accustomed to the coffee culture and frequent coffee shops 2. High degree of Commercialization 3. Lay emphasis on the whole experience of drinking coffee 4. Large youth population who are satisfied with this kind of format

Areas in these Cities

Mumbai BKC High commercialization Ideal TG for premium coffee Higher disposable incomes Palladium Mall Premium customers Customers willing to spend more for better experience In sync with their brand image Chatrapati Sivaji Airport Busiest airport in the country High domestic as well as expat footfall Transit point for customers

Delhi Connaught Place Centrally located Metro connectivity Heavily populated Presence of complimentary food joints Select City Walk Posh premium crowd High awareness of this brand Can become more of a status symbol Gurgaon Huge presence of working professionals Lots of gaming complexes(Ice skating , bowling etc.) can be targeted No other premium coffee chain in the vicinity

Bangalore MG Road Commercial area Numerous shopping complexes present too Guaranteed high footfalls Brigade Road Numerous shopping complexes Very high youth footfall ( Mid to high income people) Presence of high end food outlets in this area ITPB Extensive commercial areas Lots of flats and apartments coming up in this area Higher disposable incomes Location for informal meetings with clients etc.

Market Potential
PARTICULARS MUMBAI DELHI BANGALORE

TOTAL NUMBER OF HOUSEHOLDS( > RS. 20 LPA)

42665

54500

3312

NUMBER OF HOUSEHOLDS WHO WOULD VISIT CAFES 21332.5(50%) 27250(50%)

AVERAGE PURCHASE PER VISIT(RS.) AVERAGE NUMBER OF VISITS PER MONTH PURCHASE PER MONTH PER PERSON(RS.) PURCHASE PER YEAR PER PERSON(RS.) PURCHASE PER YEAR PER HOUSEHOLD(RS.) MARKET POTENTIAL(RS.) 200 6 1200 14400 200 6 1200 14400

2318.4(70%)
200 6 1200 14400 38880(X1.8) 10 cr

30240(X 1.4) 30240(X1.4) 64.5 cr 82.4 cr

Supply Chain

Tata Coffee is Indias largest coffee producer and exporter, so Starbucks will have no problem in that department Starbucks would save on the 100 percent duty that is slapped on imported coffee beans used by other international brands

Indian coffees have good potential, George Howell Coffee, considered one the best coffee buyers in the world, told The Seattle Times . TATAs supply chain would be beneficial in distribution of coffee to different parts of the country

Menu

Starbucks has to count on selling successful food and beverages beyond coffee. Caf Coffee day did the same.

According to a Forbes India blog post notes, for cafe chains, food accounts for up to 25 percent of revenues. The tie-up with Tata, which owns TajSATS, will be beneficial to supply the food for outlets

Indianising its menu to suit local tastes. There are some strong local touches on the menu too: Murgh Tandoori Kebab, Konkan Twist ands Elaichi Mawa Croissant. The venture promises to offer an expanded range of beverages to the Indian consumer. For this, the firms have agreed to jointly leverage assets and innovation to offer a premium tea product branded as Tata Tazo.

About the JV

Tata Global Beverages and Starbucks Coffee Co. announced a Joint Venture (JV), after the Government of India allowed up to 100 % FDI in single-brand retail

The 50/50 JV, to be called Tata-Starbucks Ltd. (TSL), will own and operate Starbucks cafs which will be branded as Starbucks Coffee - A Tata Alliance
India is the 58th country that Starbucks would have a presence in The initial investment would be Rs. 400 Crores from the two companies. The subsidiary will function as a separate entity and have three directors from each company, and led by a CEO appointed by Tata Global Beverages. The venture claims to bring the premium Starbucks experience to Indian consumers along with the trust and reliability of the Tata name Starbucks Coffee Co had signed a non-binding MoU with Tata Coffee, a subsidiary of Tata Global Beverages, which would create avenues of collaboration between the two companies for sourcing and roasting high-quality green coffee beans in Tata Coffees Kodagu (Coorg), India, facility. The TATA Starbucks Limited joint venture will operate cafs under the Quick Service Restaurant category.

Learnings from other countries

China: Create products tailored to the countrys unique cultural tastes (e.g. green tea drinks and Frappacinos). In China, Starbucks ensures stickiness by sealing customer loyalty with Xinxiang cards * It promoted more dine-in services in China vis--vis its take-away offers in US * Starbucks adapted locally popular flavours to its menu resulting in roaring success in China * The chain also redesigned the ambience and dcor to Chinese taste Differentiate itself from its competitors (spacious, comfortable air-conditioned or heated stores attracting professionals for business meetings). Position its brand as aspirational to allow higher product pricing.Ensure high quality customer service with a big focus on recruiting and training Brazil: The Brazilians way of drinking coffee fits well into Starbucks' highly milk and cream based product line. Starbucks have localized their traditional cappuccino with a "doce de leite" edition. Doce de leite is a traditional Brazilian cream made out of milk and sugar, not unlike caramel syrup. Starbucks have managed to differentiate themselves from their competitors through hiring the right people.

Scope of Growth

Over the last 14 years, a total of 1,920 cafs have been added in India, growing at about 30 percent annually and catering to a coffee-drinking market that is growing by 25 percent each year, according to a Time magazine story.

India is consumed by a growing middle class and a large youth population.

With the increase in retail consumption going up, with the number of malls coming up in india, Starbucks will find a lot of choices to open out and reach to various strata of Indian society

The cafs are spreading a culture that is not just about the beverage but more of a lifestyle shift. Multiple factors play a part - from food and beverage to the degree of non-intrusiveness and also the ambience.

Experts view it to be an under-penetrated market with a huge potential since the need for a hangout place is quite universal, providing a fertile opportunity for the caf culture to flourish.

Strategic Thinking

Seattle-based group was smart to use the trusted Tata name in introducing its product. India is a very slow market, and unlike China Starbucks probably understands that here it will take a lot of time.

Starbucks needs local insight into local taste, product mix which they want to leverage from Tatas experience
These cafes will be branded as Starbucks Coffee 'A Tata Alliance'.