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TATA STARBUCKS LTD.
A STRATEGIC ANALYSIS
TABLE OF CONTENTS
INTRODUCTION............................................................................................................................. 4
SITUATIONAL ANALYSIS.............................................................................................................. 4
STRATEGIC INTENT...................................................................................................................... 5
Starbucks Mission Statement.......................................................................................................... 5
SWOT ANALYSIS........................................................................................................................... 8
Internal Factor Analysis Summary (IFAS)....................................................................................... 8
External Factor Analysis Summary (EFAS)...................................................................................... 9
Strategic Factors Analysis Summary (SFAS).................................................................................. 10
Strengths...................................................................................................................................... 11
Weaknesses.................................................................................................................................. 11
Opportunities............................................................................................................................... 11
Threats........................................................................................................................................ 12
SCANNING THE ENVIRONMENT - PESTEL ANALYSIS............................................................. 13
Political Factors.......................................................................................................................... 13
Economic Factors........................................................................................................................ 13
Socio-Cultural Factors................................................................................................................ 13
Technological Factors.................................................................................................................. 14
Environmental Factors................................................................................................................. 14
Legal Factors.............................................................................................................................. 15
INDUSTRY ANALYSIS – PORTER’S FIVE FORCES FRAMEWORK............................................ 16
Industry Rivalry........................................................................................................................... 17
Potential for New Entrants........................................................................................................... 17
Threat of Substitute Products........................................................................................................ 18
Bargaining Power of Suppliers..................................................................................................... 18
Bargaining Power of Buyers......................................................................................................... 18
MARKET ANALYSIS - DAVID AAKER'S 7 DIMENSIONS OF
MARKET FORCES.............................................................. 19
Market Size....................................................................... 19
Market Growth Rate.......................................................... 19
Market Profitability........................................................... 19
Industry Cost Structure................................................................................................................ 20
Distribution Channel................................................................................................................... 20
Market Trends............................................................................................................................. 21
Key Success Factors.................................................................................................................... 22
COMPETITOR ANALYSIS - PORTER'S 4-CORNER ANALYSIS.................................................... 23
Market Share of Major Coffee Retail Chains in India, FY’2010...................................................... 23
Café Coffee Day.......................................................................................................................... 24
Barista......................................................................................................................................... 25
Costa Coffee................................................................................................................................ 26
Quiky's......................................................................................................................................... 26
EXECUTIVE SUMMARY.............................................................................................................. 27
REFERENCES................................................................................................................................ 28
INTRODUCTION
Tata Global Beverages Limited and Starbucks Coffee
Company launched a joint ventur between the iconic international
coffee brand and the 2nd largest branded tea company in the world.
The 50/50 joint venture, named TATA Starbucks Limited, owns and
operates Starbucks cafés, branded as Starbucks Coffee “A Tata
Alliance.” The first store has already opened and subsequent stores
are in line to be opened at Mumbai in India at the end of October, 2012. The alliance is expected to be
very fruitful to both the companies in the long run. The report seeks to strategically assess the viability
ofhis t strategic alliance by peeping into its myriads of dimensions.
SITUATIONALANALYSIS
India and China are the world‘s two fastest growing economies. Starbucks had already ventured
into the Chinese market and not surprisingly, their Chinese venture turned out to be much profitable
than that of their US business. Thus, they want to replicate their success in Chinese mainland in India.
Also, the Indian market is heavily driven by the upcoming youth culture which is totally driven by the
western trends. With growing disposable income of Indians, people tend to spend more towards apparels
and fast foods. With the success of Indian owned Café Coffee Day and Barista Coffee, it is a widely
proven fact that there is lot of scope for the development of coffee café culture in India. Thus, Starbucks
want to capitalize on this particular opportunity. They are planning to start with targeting the niche
upper class segment by opening their outlets in TAJ Hotels and Resorts. Their primary target market is
the younger generation of age 16-40years. They will also target the tourists who will be visiting India.
Since, most of the tourists coming to India are from the countries of U.S., England, Germany, and Japan
who are well aware of Starbucks brand name. Thus, there will not be the problem of brand name
recognition among them.
STRATEGIC INTENT
Starbucks Corp. is aiming India as its next major hub for
development. Starbucks want to replicate the success they had in
USA and more recently, in china. Surprisingly, their venturin
China proved to be more profitable than that of US. Here in
India, Starbucks entered into a deal with TATA Coffee Ltd, Asia's
largest publicly traded coffee grower. This is, in particular, a non-
binding agreement between two giants. There are plans to
combine the trust and legacy of TATA coffee with the iconic brand image of Starbucks which can
move on to development of Starbucks retail coffee chains in other parts of Asia. In addition to
sourcing coffee beans from TATA‘s Indian facilities, the companies will also work towards
developing Starbucks stores in retail outlets and hotels.
Starbucks Mission Statement
“To inspire and nurture the human spirit – one person, one cup and one neighborhood at a
time.”
Starbucks is very quality driven organization nda is passionate about
ethical
ly sourcing
the finest coffee beans, roasting them with great care and improving the
lives
of
people
who
grow them. They call their employees as their partners and treat each other with respect and dignity.
They believe in getting engaged with their customers and make connect with them so as
to laugh with them, uplift customers' lives even if it is just for moments. They believe in human
connection and developing the sense of belonging. They believe in creating good neighborhood and
each store is nourished as a community.
Tata has made the cultural fit for Starbucks which will
hel
p
i
n
building
core
competencies of each other. (Tata has met all the
stringent standards and conditions followed by
Starbucks such as quality, soil,water, pest, waste
an
d energy
management
, forest and
biodiversity conservation to workers’ welfare, wages a
n
benefi
ts,
livi
ng
conditio
ns,
health,
d
safety, etc.)
Starbucks is committed to a role of environmental
leadership in all facets of their business.They strive to fulfill
this mission by a commitment to:
Understanding of environmental issues and sharing information with their partners
 Developing innovative and flexible solutions to bring about change
 Striving to buy, sell and use environmentally friendly products.
 Recognizing that financial responsibility is essential to their environmental future
 Instilling environmental responsibility as a corporate value
 Measuring and monitoring their progress for each project.
 Encouraging all partners to share in their mission
Objective of Tata Coffee behind this Alliance:
 The agreement will allow Tata coffee to provide roast coffee bean to Starbucks in India.
 Get opportunity to jointly invest in additional facility for export to other markets.
 Starbucks will help by providing new technologies for the promotion of responsible
agronomy practices.
 A long term relationship will be formed with this Memorandum of Understanding with
Starbucks.
 After this deal, Tata Coffee is poised to become Asia’s biggest publicly traded coffee
grower.
Objective of Starbucks Corporation:
 To tap huge emerging market of India.
 Help increase its profitability due to its declining market and over dependence on US
market.
 To have access to the high quality Arabica coffee.
John Culver, president, Starbucks China and Asia Pacific on opening up of the first storein
India at Mumbai states, This“ is the first step Starbucks and Tata Coffee Limited are taking
toward developing and improving the profile of Indian-grown Arabica coffees around the world
by elevating the stature of Indian coffee, as well as
improving the quality of coffee through sustainable
practices.”
“Tata Global Beverages is a company known for
bringing memorable tea consumption moments to consumers in India," stated Harish Bhat, CEO,
Tata Global Beverages. “The joint
venture is in line with Tata Global Beverages’ strategy of growing through strategic alliances in
addition to organic growth. We are excited about the opportunity to innovate in the retail space
and bring new beverage moments to more consumers.”
As part of the agreement,
Starbuck
s
an
d Tata Coffee Limited will work toward
developing and improving the profile of Indian-grown Arabica coffees around the world by
elevating the stature of Indian coffee, as well as improving the quality of coffee through
sustainable practices and advanced agronomy solutions.Espresso sourced from India will be a
hallmark feature of all Starbucks stores in the market, highlighting the quality espresso available in
India and Tata Starbucks Limited’s commitment is to deliver a truly unique andauthentic Starbucks
Experience to customers throughout India.
Deepening its commitment to community, Tata Starbucks Limited will work to improve the
lives of coffee growing communities in the State of Karnatak. The joint venture, through an
initi
al
financi
al commitment,
will work to
supportSWASTHA,'' a school
for children
with
spec
ial needs
(in
partnership
with theCOORG Foundation).
Additionally,
Tata
Starbucks
Limited will work on initiatives including thepromotion of responsible agronomy practices and
training of local farmers, technicians and agronomists to improve their coffeegrowing- and
milling skills.
SWOT ANALYSIS
Internal Factor Analysis Summary (IFAS)
Internal Strategic Weigh
t
Ratin
g
Weighted Comments
Forces Score
Strengths
S1 - Brand Visibility 0.15 5 0.75 International popularity of the Starbucks
Brand.
S2 - Ethical and 0.10 3 0.30
Environmental Practices
S3 – Marketing Skills
0.10 3 0.30
S4 – Access to High
Quality 0.15 4 0.60 Sourcing Agreement.
Arabica Coffee
S5 – JV with Tata Coffee
0.15 4 0.60 Tata as a cultural fit for Starbucks will help
in building core competencies of each other.
Weaknesses
W1 - Image of luxury
coffee 0.10 4 0.40
outlets
W2 – Premium Pricing 0.05 2 0.10
High price of coffee is felt as a barrier as
per
Policies capita income is low in India.
W3 – Coffee Dominant 0.10 3 0.30 Need to diversify.
Business
W4 – Rigid Standards and 0.05 3 0.15
They apply the same business models and
formulas, regardless of culture and values of
Policies at Outlets
the country.
W5 – May affect JV
0.05 2 0.10
Tata Coffee also has a JV with Barista.between Tata Coffee and
Barista
TOTAL SCORES
1.00 3.60
External Factor Analysis Summary (EFAS)
External Strategic Weigh
t
Ratin
g
Weighted Comments
Forces Score
Opportunities
O1 – India Huge Market 0.15
4 0.60
India is the second most populated country
in
the world.
O2 – English Speaking 0.08 3 0.24
Market
O3 – Increasing Spending 0.15 4 0.60
Power
O4 – Young Population
0.07 4 0.28 Younger generation is more prone to visit
cafes.
O5 – Out-of-home Coffee 0.05 3 0.15 Rating for coffee outside home is better than
Drinking Culture catching tea outside home, specifically in the North
O6 – Favorable Cost of 0.05 2 0.10
Labor
O7 – Favorable 0.05 3 0.15
Infrastructure and Cost
O8 – Skilled Manpower 0.02 3 0.06
Availability
O9 – Opportunity to cater 0.03 2 0.06
Tea Drinking Segment
Threats
0.08 4 0.32
Most of the Indians consumed tea at least
T1 – Tea Drinking Country twice a day, in the morning and in the
afternoon.
T2 – Competition from 0.10 3 0.30
Coffee Café Day (CCD) pioneered the
concept of specialty coffee in India followed
Homegrown Brands
by Qwiky’s and Barista Coffee.
T3 – Low Per Capita
Income 0.05 3 0.15 Immense need to offer products at locally
competitive price.
0.02 3 0.06
Campaign worldwide against the high-
T4 – Health Consciousness calorie and high fat products that Starbucks
sells.
T5 – Rare habit of Visiting 0.02 3 0.06
Cafes
0.03 3 0.09
McDonalds, Dunkin Donuts, Burger King,
T6 – Competition from etc already have the infrastructure in place
Other Fast Food Chains and are instead adding quality coffee to their
menus.
T7 – Rising Prices of
Coffee
0.05 4 0.20 Rising prices of coffee are putting pressure
on the profit margins of the company.
TOTAL SCORES
1.00 3.42
Strategic Factors Analysis Summary (SFAS)
Strategic Factors Weigh
t
Ratin
g
Weighted Comments
Score
S1 - Brand Visibility 0.10 4 0.40 International popularity of the Starbucks
Brand could be capitalized.
S4 – Access to High
Quality
0.08
4 0.32 Arabica Coffee is of very high quality and
Arabica Coffee this could be hot selling products worldwide.
0.08 4 0.32
In addition to sourcing coffee beans from
S5 – JV with Tata Coffee
TATA‘s Indian facilities, the companies will
also work towards developing Starbucks
stores in retail outlets and hotels.
W1 - Image of luxury
coffee 0.12 4 0.48
Starbucks Coffee outlets have the image of
high end luxury café and customers may not
outlets
turn.
W3 – Coffee Dominant 0.10 3 0.30
Need to diversify well.
Business
O1 – India Huge Market
0.15 4 0.60
India is the second most populated country
in
the world.
O3 – Increasing Spending 0.07 5 0.35
Increasing job opportunities and advances in
services sector with globalization is raising
Power
standards of living in India.
O4 – Young Population
0.08 5 0.40 Younger generation is more prone to visit
cafes.
0.07 4 0.28
Most of the Indians consumed tea at least
T1 – Tea Drinking Country twice a day, in the morning and in the
afternoon.
McDonalds, Dunkin Donuts, Burger King,
T2 – Competition from 0.08 4 0.32 etc already have the infrastructure in place
Homegrown Brands and are instead adding quality coffee to their
menus.
T7 – Rising Prices of
Coffee
0.07 4 0.28 Rising prices of coffee are putting pressure
on the profit margins of the company
TOTAL SCORES
1.00 4.05
The Strategic Factors Summary shows that the most important factors overall received a score of
4.05 which is above average. This is positive for the company. They are responding well to their
strength, weaknesses, opportunities and threats. After some recent re purposing it is clear that the
company is focusing on its core competencies but has room to improve.
Strengths
 High Brand Visibility. (International popularity of the Starbucks
brand.)
 Ethical and Environmental Practices.
 Superb Marketing and positioning skills of Starbucks.
 Access to TATA's premium Robusta and Arabica coffees
(Sourcing Agreement).
 Tata as a cultural fit for Starbucks will help in building core
competencies of each other.
(Tata has met all the stringent standards and conditions followed by Starbucks such as
quality, soil, water, pest, waste and energy management, forest and
biodivers
ity
conservation to workers’ welfare, wages and benefits, living conditions, health, safety,
etc.)
Weaknesses
 Image of luxury coffee outlets.
 High price of coffee is felt as a barrier in the South and the NorthStarbucks.( products were
priced at a premium and the per capita income in India is lower compared to other markets
where it is already present, there is immense need to offer products at locally competitive
price.)
 Coffee dominant business. (Need to diversify)
 Certain rigid standards and policies at outlets. (They applythe same business models and
formulas, regardless of culture and values of the country they are operating in like no smoking
policy, etc.)
 The entry of Starbucks is aimed at the out-of-home coffee consumption market and this
may affect the alliance of Tata Coffee with Barista.
Opportunities
 India is the second most populated country in the world. Huge Market.
 English speaking populations
 Growing Middle Class and increasing spending power of Indian Population.
 Young Population (Consumers in the age group of20–45 years were emerging as the fastest
growing consumer group and the average age of an Indian in 2020 would be 29 years,
compared to 37 years in China and the United States, 45 years in Western Europe, and 48
years in Japan. Younger generation is more prone to visit cafes as per a research)
Rating for coffee outside home is better than tea outside home, specifically in the North
and the East. (The people in southern states of India largely consume coffee. The people in
the northern states are generally not coffee drinkers, but drink coffee and experiment with
various flavors as a fashion statement.)
 Favorable Cost of Labor
 Favorable cost and quality of telecom infrastructure
 Fair availability of workforce (Quantity as well as skilled)
 Tea-based culture of India could be used asopportunities by offering more teabased-
drinks.
Threats
 India is a tea-based culture. (The Indian hot-beverage market is dominated by tea. India was
the largest producer and consumer of tea in the world and accounted for 29% of eth total
production and over 20% of the total consumption globally.60 Most of the Indians
consumed tea at least twice a day, in the morning and in the afternoon.)
 Homegrown brands dominate the retail coffee market. Coffee Café Day (CCD) pioneered
the concept of specialty coffee in India followed by Qwiky’s and Barista Coffee.
 Lower per capita income in India. High price of coffee is felt as a barrier in the South and the
North. (Starbucks products were priced at a premium and the per capita income in India is
lower compared to other markets where it is already present, there is immense need to offer
products at locally competitive price.)
 Increasing Health Consciousness among consumers. (The increasing rate of obesity and
obesity related diseases such as diabetes, high blood pressure, and heart diseases in India.
Starbucks was said to have been on the target of many consumer health groups worldwide who
planned to campaign against the high-calorie and highfat products that Starbucks sold and which
could lead to increased obesity risk, heart diseases, and cancer.)
 Visiting cafes is not a frequent habit among most of the Indians.
 Other fast food chains like that of McDonalds, Dunkin Donuts, Burger King, etc., already
have the infrastructure in place and are instead adding quality coffee to their menus to
compete with Starbucks.
 Rising prices of coffee are putting pressure on the profit margins of the company.
SCANNING THE ENVIRONMENT - PESTELANALYSIS
Political Factors
“India’s young are becoming world-class consumers, and
multinationals are taking note,” reads the sub header for an article
titled “Hey, Big Spenders!” in the August 2003 issue of TIME
Magazine. This change can be attributed to many factors. For one,
the Indian economy went through a massive liberalization under
the new minority government of P.V. Narasimha Rao in 1991.
Further, the currentgovernment’s reform measures like approval to FDI in multi brand retail for up to
51% will surely add up to these factors.
Economic Factors
The factors like inadequate infrastructure, bureaucracy, regulatory and foreign investment
controls, the reservation of key products for small-scale industries, and high fiscal deficits are
constraining economic growth of India. However, the liberalization measures taken in 1 199 opened
the economy to foreign investment and trade: it dismantled important controls, lowered customs
duties, and devalued the currency: it virtually abolished licensing controls on private investment,
dropped tax rates, and broke public sector monopolies. Further, reforms have been seen in retail
industry with Indian government's approval on FDI upto 51% on multi brand retail. The country has
recently become is a major exporter of software services and software workers, and the information
technology sector leads the strong growth pattern. With a world changing from an industrial to an
informational economy, India is bound to play a monumental role in the future of the global industry.
Socio-Cultural Factors
As job opportunities increase in India, moneystays in the palms of the Indian consumers
enabling them to reinvest in the Indian economy. Attitudes towards money are also changing. The
mantra for the average Indian family, as in most of Asia, has
always beensaving, but young Indians today, inspired by job
opportunities, have switchedspendingto extravagantly. The
attitude of the young generation is to enjoy life and spend money.
However, India is a tea-based culture. Most of the Indians consumed tea at least twice a day,
in the morning and in theternoonaf. According to market research studies, coffee was
mainly consumed in the urban areas (71%) and to a much lesser extent in the rural areas (29%). The
people in southern states of India largely consumed coffee. The people in the northern states were
generally not coffee drinkers, but drank coffee and experimented with various flavors as a fashion
statement. The consumption of instant coffee and filter coffee was almost equal on the national level.
But region-wise, filter coffee was more popular in the south and the proportion of instant coffee was
very high in the non-south regions.
Technological Factors
The coffee beans and tea need be bought from local Indian farmers in order to support the local
agricultural economy, save money in transportation andtariffs, and gain tax benefits. Indians tend to
take more cream in their coffee. The association with the Tata Coffee Ltd for sourcing its Arabica
Coffee would surely help in the long run. Further,the skim milk option need
not be offered in India becausedieting is not a commonly accepted practice in the country. Indians will feel
that they are being cheated out of their money if skim milk is put in their beverages. Indians also like
spices in their tea and coffee, especially ginger and black clove. One
of India’s favorite fruit flavors in mango, and in factthe mango is India’s national fruit. The food
segment needs to take care of vegetarians segment as they form the good proportion of the target
market. However, Indians specially the affluent and youngclass will be delighted to have fast
and efficient Wi-Fi services at the cafe plus; people here love to be associated with their
traditional and rich heritage as well as its blending with modernity and this may be reflected in
the stores' ambience. The awareness about how varieties of coffee are sourced, roasted, brewed,
etc needed to make people more loyal to coffee specially the Starbuck's.
The inventory policy requires keeping the stores stocked but not overstocked to ensure
freshness of products. Better gauges of the numerical figures in the inventory policies can be made
after observing consumer trends. To begin with policies can be formulated assuming an average of
five hundred consumers per day.
Environmental Factors
Starbucks believe in the importance of caring for our planet
and working with and encouraging others to do the same. As a
company that relies on an agricultural product, it makes good
business sense. It engages itself in recycling, energy management,
water conservation,
green building, and in reducing carbon footprints wherever possibleWith. these integrated
environmental responsibilities, the company will obviously build its image in the eyes of Indian
Consumers as well. The ecological concerns regarding the farming of Arabica coffeemust also be
addressed in order to ensure consistency in productivity.
Legal Factors
Companies may be public or private but the common public is not allowed to buy shares of
the company and there can only be up to fifty shareholders. Import duties areiedapplto almost all
goods entering India. The tariff system is based on the Harmonized System (HS) and
tariffs are in the 40 to 60 percent range for basic raw materials, 60 to 100 percent for- semi processed
goods, and 100 percent and above on finished and consumer goods. Shipments to India require a
commercial invoice, a packing list and bill of lading. A certificate of origin is not required on imports
originating in the United StatesFDI. approval though has come to relaxation.
INDUSTRY ANALYSIS – PORTER’S FIVE FORCES
FRAMEWORK
One of the widely held assessment tools of an industry’s
competitive forces is thefive forces model of competition
created by Michael Porter. These five forces are: the competitive
force of rivalry among sellers, the competitive force of potential
new entrants, the competitive
force of substitute product, the competitive force of supplier bargaining
power, and the competitive force of buyer bargaining power (Porter, 1980).
Threat of
Substitutes
Bargaining Industrial Bargaining
Power of Rivalry
Power of
Buyers
Suppliers
Threat of New
Entrants
Industry Rivalry
Major competition for Starbucks in India comes from that of Café coffee day. The abbreviation
CCD is known to most of the people in urban parts of India. Their positioning is same as what Starbucks
have in US. The other competitors include Barista Lavazza, Quicky's, Barista and Costa Coffee, which
are also the multinational brands, and widely recognized. Apart from them, secondary competitors
include the Georgia Coffee, served in fast food joints like that
of Mc Donald’s and KFC, etc.
Potential for New Entrants
The entry barriers in the coffee retail industry are relatively low in India, particularly for the
foreign players. This is possible owing to the fact that 51 % FDI is allowed in India in retail sector.
Any large or well-funded company having the thorough understanding of the market can enter into
retail sector in IndiaGiven. the fact that Starbucks is a global, it is having its own advantages when it
comes to achieving the economies of scale. Starbucks being the global coffee retail chain, they are not
going to haveany particular capital related problems. Also, they are having MoU being signed with
TATA‘s for opening their outlets in theirTAJ group of hotels and resorts. India, being the sixth largest
producer of coffee in the world is having the largest home grown supply of coffee beans and thus,
sourcing coffee in this industry is not going to be much of the problem.
Customer or Supplier Loyalty - Indian market is already being captured by the long established
brands like Café coffee day, Barista, Barista Lavazza and Costa Coffee. Thus, it is going to be pretty
much difficult for any of the new entrant to establish its brand name in the Indian market. However,
Starbucks being the international brand will definitely help in attracting
the educated Indian crowd.
Market Experience - The existing players in the Indian coffee retail industry have been
here in the market from last 10 years. Thus, their management must be having greater understanding of the
Indian markets and Pallets. Therefore, for Starbucks, it is go ingbe t important to first understand the Indian
preferences, before making any major move.
Differentiation - Coffee is not the product where there is a
great scope for product differentiation. However, it depends on
most of the cases on the store ambience, which can act as
the point of differentiation.
Threat of Substitute Products
India has predominantly tea-based culture
thus; awareness about coffee need to be
created more and more tea-based drinks in association of TATA coffee needs to be included in
its offerings. Besides tea, other product
substitutes
,
he
re, will
include
other
beverages
,
f
o
r
example, soda, fruit juices, water, beer or other
liqui
d
and/
or carbonated
beverages
.
Sin
ce
Starbucks also sells fast foods, other fast food beverages like burgers, etc. The lower end local coffee
houses or other snack shops which are less luxurious will also act as substitutes to Starbucks. These are
places which provide people with the place to sit, chat and relax atorem affordable rates.
Bargaining Power of Suppliers
In the case of coffee retail, the suppliers, supplying the retailer with the coffee beans are not having
much of the bargaining power. This is particularly because of the fact that coffee retailers like that of
Starbucks tend to be very big buyers for any of the supplier to lose as a whole. This also gives the
Starbucks to dictate terms to the supplier. However, this sourcing would be done on ethical norms of
Starbucks and TATA Coffee. Similarly, suppliers of other resources like that
of paper products etc., will not be having much of the bargaining power as there are many sources from
which the company can source them. However, this is not valid in the case of the suppliers supplying the
technological machinery and equipments as there are not many suppliers
here.
Bargaining Power of Buyers
In the past, buyers in India were not having much of the bargaining power as there were not
many food retail giants which were present in the country. However, with the advent of multinational
food retail giants in India, like that of Mc Donalds, Barista Lavazza, Café Coffee
Day and Costa Coffee, consumer is faced with lots of choices. Thus,
it will be difficult for
Starbucks to influence the Indian buyers to pay premium f
o
r their products. As also the per
capita income of Indian Customers is low and their mindset i
s not so affirmative with coffee
culture, however it is catching up among youths, the pricing need to be highly competitive and on
zonal basis.
MARKET ANALYSIS - DAVID AAKER'S 7 DIMENSIONS OF MARKET FORCES
Market Size
The recent past has witnessed an upward shift in the per capita consumption of coffee in
India, with growing preference amongst the young population. With a young population of about
35% below the age group of 40 spending most of their time at workor outside home, the out of home
consumption of coffee is spreading rapidly. Moreover, the increasing spending propensity of the
young Indians and their changing lifestyle has increased thedemand for coffee in India. As compared
to FY’2005 a clear growth can be witnessed in FY’2010 in per capita consumption. The per capita
consumption in FY’2010 increased to 89.3 grams as compared to 70.9 grams in FY’2005 due to
presence of a strong preference towards instant coffee.
Market Growth Rate
The consumption of coffee in India has grown steadily at a historical CAGR of 6.3% during
FY’2005-FY’2010 and is expected to pace at a CAGR of 4.9% in the near future. In FY’2010, the per
capita consumption has increased to 89 grams from 85 grams in 2005 at a growth rate of 5%. The
Indian coffee market has witnessed a steady growth in the past 5 years
due to
the
growin
g preference for instant and organic coffee amongst the coffee drinkers.
Moreover, rising consumer expenditure and export promotion schemes implemented by
government has influenced the growth of the market in India. Thecoffee market in India has also
witnessed
a growth
in
the demand for -ofout-home consumption of coffee because to the
majority of time spent by the young adults at work or out-of-home. This potential of the market
and the preference of the young population have led many global players to foray into the domestic
market.
Market Profitability
The revolution in the Indian coffee market has changed the
tastes of the consumers and overwhelmed them with arietyv of new
options. Thus, a change is witnessed in the coffee drinking habits
amongst Indians. Today people prefer instant coffee over the traditional coffee,
because of the busy lifestyle and changes in their tastes and preference towards instant coffee. The
Indian coffee market is dominated by big players such as Nescafe who has a share of 68.8% followed
by BRU and Tata Coffee with 13.5% and 3.2% respectively. Marketerstoday see a lot
of potential in the instant coffee segment, which is one of the reason many big companies are
adopting various strategies to capture it. The out-of-home coffee drinking culture is also gaining pace.
Keeping all these in mind that the costs for the coming operating years will reduce and revenues
will increase, profit is expected to escalate. After the end of the first fiscal year, the company may
determine whether or not it should expand in the country of India. If the first year proves to be a
success, Starbucks Coffee can open over 200 location in the subcontinent of India, taking advantage of
their international partnerships with Sheraton (Starwood) Inn, and Hyatt Inn. Starbucks will also try to
win accounts with local airlines companies, so that they may serve Starbucks drink on flight. In three
years profits are expected to exceed one million dollars per annum as per the research conducted.
Industry Cost Structure
Competitive pricing is necessary for the success of thevnture; hence Starbucks must take
various costs into consideration. Because of the costs involved instartup, transportation and imported
goods, the price need to be set at about USD 1 per drink using the concept of zone pricing to make the
coffee affordable to the target audience. Exchanges need to be done in rupees
so that would be about 55 rupees. The prices for all goods need to be relative to the others. With the
use of this pricing policy, Starbucks prices would be 20% lower than those of the Barista Company.
This use of penetration pricing will ease the company’s slide into the market place. Though, it is
possible to get a cup of coffee formerely 5 rupees in small stalls on the street, the success of the
Barista Coffee Companyshow that the customers are willing to pay for better quality, service, and
environment.
Distribution Channel
As its distribution strategy, the Starbucks has already started
its first store at Mumbai. This flagship store is located at the historic
Elphinstone Building, Horniman Circle, Mumbai and marks the
beginning of the iconic brand’s India journey. In addition to the
flagship store at
Horniman Circle, Tata Starbucks Limited will launch two more stores in near future at Oberoi Mall
and the Taj Mahal Palace Annexe in Mumbai. Subsequently, the other stores will be opened
at other metropolitan areas. The urban areas are thus thefirst choice of Starbucks as its both
primary market of youths and secondary market of tourists from other countries are catered here.
Market Trends
A major part of the country’s foreign exchange earnings come from the Coffee industry. Since the
inception of coffee in India, the production has been rising along with changes experienced in the
consumption pattern over the years.
Increasing Per Capita Consumption - Due to the constant increase in population over the
period, the per capita consumption hasalso increased from 85 grams in 2009 to 89 grams in
2010.This increase in the per capita consumption has influenced the overall growth of the Indian
coffee market.
Evolving Coffee Retail Chain Concept - The Indian coffee market has been experiencing
activities in form of increasing coffee retailshops. This has been the result of the growing trend of
out-of-home consumption andincreasing propensity of young population to spend. Many coffee
parlors or cafes such asCafe Coffee Day (CCD), Barista and Costa Coffee are spreading their
distribution network to cater to coffee drinkers across India. There are 1,503 coffee retail outlets
across India to serve the out-of-home coffee drinkers across India.
Global players foraying into the Indian market - The increasing disposable income of young
Indians and their changing preference towardscoffee consumption have led many global players to
foray into the domestic market. For example, Britain’s Costa Coffee entered the Indian coffee market
in 2005. Moreover,Starbucks, one of the leading global players is planning to enter Indian market in
the near future.
Increasing preference towards Instant Coffee - After Nestle and HUL launched their product
in the Indian coffee market, the popularity of instant coffee has increasedrauallyg. Today, people
prefer instant coffee over the traditional coffee because of their changing life style and variety of
options available in the instantcoffee market. About 23.1% of the market is
captured by instant coffee and is expected toincrease further in
the near future with a strong preference among the age group of
20-45years.
Growing preference towards organic coffee - Organic
Coffee is usually considered to be normal coffee beans that are
produced without theuse of pesticides or herbicides. The
growing health concerns and the preference of consumersto
consume healthy beverage have led the marketers and producers
adapt to organically grown coffee.
Key Success Factors
The Primary target market for Starbucks Coffee Co. in India is the youngboth male and female
from the ages of 16-38. This market is well educated and comes from middle class to upper middle
class population and out-of-home coffee drinking culture is catching up. The international appeal of
Starbucks will add up to the promotion of this culture. The highly trained baristas of Starbucks, its
technologies and processes by which it sources high quality coffee, roasts, brews and serves to its
customers will surely act as Key Success Factors of the Company. Besides its alliance with Tata
Coffee to source high quality Arabica Coffee will also help.
COMPETITOR ANALYSIS -
PORTER'S 4-CORNER
ANALYSIS
Drivers
 Financial Goals
 Corporate Culture
 Organizational Structure
 Leadership team
background
 External Constraints
 Business Philosophy
Current Strategy
 How the business
creates value?
 Where the
business is
choosing to
invest?
 Relationships and
networks the business
has developed
COMPETITORS FUTURE STRATEGY
Management
Assumptions
 Company's
perception of its
strengths and
weaknesses
 Cultural traits
 Organizational value
 Perceived industry
forces
 Belief about
competitors’ goals
Capabilities
 Marketing skills
 Ability to service
channels
 Skills and
training to
workforce
 Patents and copyrights
 Financial strength
 Leadership qualities
of CEO
Market Share of Major Coffee Retail Chains in India, FY’2010
The Indian coffee market is passing through an evolutionary
phase whereconsumers ‘preference towards out-of home consumption
is developing. The exceptional growth of out-of - home consumption of
coffee in the coffee chains has been triggered by the young adults. The
young adults segment of the population pends major time outside home
or at work, which has influenced the growth of the coffee chains in
India. The retail coffee market in India is majorly dominated by Cafe
Coffee Day with 1,134 chainsacross India followed by Barista with 230
Starbucks India marketing strategy
coffee serving chains and Cost Coffee with 74 chains. It is being observed that almost 96% of
the coffee retail market has been held by these three players and the rest 4% being held by
other small and new players.Overwhelmed by the response in India, coffee retail giantsare
expected
to expand their network in India in the near future.
Café Coffee Day
CCD Mission statement - "To be the best café chain in the country by offering a
world class coffee experience at affordable prices."
Business Overview - CCD, India’s first coffee bar was established in 1996 in Bangalore
by the largest exporter of coffee in India, the Amalgamated Bean Coffee Trading Company
(ABCTCL).Dominates the market with a share of 75.5% in 2010 with total retail outlets of
1,034
in over 100 cities.
Products and Offerings - The company offers numerous options in the product
offerings such as cappuccino, Espresso, Café Latte, Cafe Mocha, Irish coffee and Ice
teaalong with wide variety of eatables such as sandwich, cakes, burger and others. The
products are offered to be
consumed in the cafe as well as in take away format. The company also offers various merchandise
products such as coffee mugs, gift vouchers and others.
Geographical Reach - The Company has major presence in Delhi with 121 retail
outlets, Bangalore with 172 stores, Maharashtra with 225 stores and AP with 84 stores.
Customer Profile at CCD - Other brands are also promoted in a CCD outlet through
innovative and interactive use of posters, cards, danglers, leaflets, contest forms, etc. CCD
has tied up with popular television serials and also ran promotion contests for many brands.
It had also tied up with some popular Indian movies where CCD was featured in some of the
scenes. CCD has six café formats; Music Cafés, Book Cafés, Highway Cafés, Lounge
Cafés, Garden Cafés & Cyber Cafés. Music Cafés provided customers with the choice of
playing their favorite music tracks on the digital audio jukeboxes installed in the café. CCD
has been also coming out with more formats like sports Café, singles café, and fashion café.
Speaking on competition with other players,
Sudipta Sen Gupta, Marketing Head, CCD said:
“We don’t have any competition because we are
not competing with the others. In fact we
are aiding each other in creating and growing the coffee culture. All of us have a
distinct identity. We sure do!”
Barista
Business Overview - Founded in 2000, the company is a pioneer of Indian Cafe
culture. The company has positioned the brand as a joint where people canindulge in
conversations with
a cup of coffee. The target segments for the company are the youth and young adults, who
are aware about the global lifestyles and enjoy new flavors and taste of coffee. Barista is
planning to expand its latest chain of cafes “Barista Creme Lavazza” to more parts of the
country. Presently the company owns app. 15 such stores.
Products and Offerings - Along with offering coffee, the company also offers fresh
salads, sandwiches, pizzas, pastas and desserts. The company offers in-stores promotions
from time to time along with other promotions in commercials and films.
Geographical Reach - Barista has a pan India presence with more than 230 retail
outlets. 45 of the top outlets offerWi-Fi availability along with 75 outlets offering Blu-Fi
for mobile savvy generation.
Coffee and other products at Barista were priced high and its target audiences were
youth from the upper-middle-class segment. The coffee at Barista was made with high-
quality Arabica coffee beans and baristas (brew masters) were invited from Italy to emaknew
blends. Brotin Banerjee, Vice President of Marketing, Barista, said, “Our inspiration was the
traditional Italian Espresso bars where the idea is to create a ‘home away from home." In
2001, Barista entered into a strategic alliance with Tata Coffee Ltd. (Tata), the largest coffee
producer in India. Tata later acquired a 35% stake in Barista. The alliance allowed Barista to
enlarge its distribution
network and set up outlets in the Taj Group of
hotels owned
by
Tata
and
i
t
s
other
allied
businesses.
In 2004, Amit Judge, its promoter, sold 65.4%take sof
the
compan
y
t
o an NRI
businessman, Sivasankaran (Siva), who later in 2004
bought the remaining stakes from Tata as well. After the acquisition, Siva revamped the
chain, opened more Barista outlets in Southern cities, and began franchising its outlets. It
started opening up a new outlet every 10 days. A new
look was given to its outlets by making
changes in its seating arrangements,-
store
i
n
merchandise, and providing a better youthful ambience of the storerew.Themastersb
maintained friendly relations with the customers and called them by their first names.
Barista joined with specialty retailers such as the music retailer Planet M, the book
retailer Crossword, and the Taj Group of hotels for setting up espressocorners in their premises.
It also launched a concept called BanCafe, a coffee shop within the bank premises and
joined with the bank ABN AMRO.
Costa Coffee
Business Overview - Costa Coffee was incorporated in India in 2005 with a tie up with
Devyani International Limited, head quartered in New Delhi, the Company serves the coffee
lovers across India. Company inaugurated its launch with 4 cafes in Bangalore. The company
commands a share of 4.9% in the Indian coffee market in 2010.
Products and Offerings - The Company offers different variety of coffee such as
Espresso, cappuccino, cafe latte and others. Some of the premium offerings which the
company offers are muffins, cakes, desserts, sandwiches, wraps and pastas. The company
operates with nearly 74 stores across India.
Geographic Reach - The Company is planning to focus on the prominent cities such
as Pune, Delhi, Mumbai and Bangalore. The company is planning to predominantly expand
in the metros.
Quiky's
Two software engineers, Shashi Chimala and Shyam, opened the first Qwiky’s outlet
in Chennai in 1999. They were inspired by the specialty coffee bars in the United States.
The menu
at Qwiky’s included varieties in hot Italian coffee, Indian coffee, specialty hot coffee, cold
coffee, frappes, milk shakes, tea, other beverages, desserts, and snacks. It targeted youths in the
age group of 18 to 30 years. By 2002, the annual revenues of Qwiky’s were 43 million INR.
Qwiky’s had three types of formats; Qwiky’s
Coffee Pubs were stand-alone coffee bars, Qwiky’s Coffee
Islands were outlets within big stores, multiplexes, and
movie theatres, and Qwiky’s Coffee Xpress were coffee
kiosks. By 2006 it had over 20 outlets in nine cities in
India
and one franchise in Sri Lanka. Qwiky’s had plans to open more outlets inropolitanmet
and large cities in India and abroad through franchising its business. It had joined with
retailers such as Lifestyle, Music World, and Ebony to open store-in-store outlets.
EXECUTIVE SUMMARY
Starbucks is another industry stalwart to enter the dianIn markets due to vast
potential and the huge untapped market. Indian market is always influenced by the
traditions followed in the Western counterparts hence the success of Mconald’s,D KFC, etc
to name a few. With access to Hollywood movies where thesebrands are flashed quite
often, the aura surrounding brands such as Starbucks scale new heights.
Indian consumers have always welcomed change when it comes to their taste buds.
Cappuccinos, Latte have eclipsed the traditional Espresso filter coffee. Filter coffee seems like
an archaic notion, only restricted to the elderly people. In fact the coffee shops have itself
undergone a tremendous transformation, with them replacing a hang-out joint for the teenagers.
The timing of their entry could not have beenbetter. With Barista, Café Coffee Day
and Costa coffee almost losing their sheen, Starbucks comes in like a breath of fresh air.
The future outlook of any company is not complete without an analysis of the industry in
which it operates.
The coffee industry of India is the sixth largest producer of coffee in the world,
accounting for over four percent of world coffee production, with the bulk of all production
taking place in its Southern states. India is most noted for its Monsooned Malabar variety. It is
believed that coffee has been cultivated in India longer than anywhere outside of the Arabian
Peninsula.
Tata Starbucks Limited, the 50/50 joint venture between Starbucks Coffee Company
(Nasdaq: SBUX) and Tata Global Beverages Limited is bringing an unparalleled experience to
Indian customers. Both companies have a history of delivering product innovation and the
highest quality experience to customers around the globe. They are delighted to come together
today and transform the coffee experience for consumers across India, while providing a
community gathering place to connect with family
and friends. Thus, Coffee culture is poised to be
deeply in-grained into Indian culture in the near
future, if this strategic alliance succeeds.
REFERENCES
Vrushali Paunikar, 2011, "International Business Plan Starbucks
India", A proposal
Ruchi Mankad and Joel Sarosh Thadamalla, 2011, "Case: Starbucks Coffee Company, The Indian
Dilemma", Strategic Management and Business Policy, 13th Edition, Thomas L. Wheelen, J. David
Hunger
Herve R., Dec 21, 2004, "The Starbucks Corporation: Past, Present and Future", Auch-Roy-
Pen: 1207HA Harold Brown, 2011, "External Environmental Analysis of Starbucks and the
Coffee Industry"
Flight, Georgia. “Grinding Out Success Next to Starbucks” Business 2.0, Oct. 2006. Vol. 7, Issue-9
Ryan C. Larson, 2008, "Starbucks a Strategic Analysis-Past Decisions and Future Options",
Brown University Economics Department
http://news.starbucks.com/article_display.cfm?article_id=707 accessed on Oct 15, 2012
http://news.starbucks.com/article_display.cfm?article_id=703 accessed on Oct 15, 2012
http://www.starbucks.in/about-us/company-information/mission-statement accessed on
Oct 15, 2012 http://www.starbucks.in/responsibility accessed on Oct 15, 2012
http://www.tatacoffee.com/corporate/company_profile.htm accessed on Oct 15, 2012
http://www.indiacoffee.org/indiacoffee.php?page=CoffeeData accessed on Oct 17, 2012
http://www.indiacoffee.org/userfiles/RFP-FINAL-SEP12.pdf Oct 17, 2012
http://www.cafecoffeeday.com/company-mission.php?mnid=3&lmids=3 accessed on Oct
17, 2012 http://www.cafecoffeeday.com/our-business.php?mnid=3&lmids=1 accessed on
Oct 17, 2012

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Starbucks India marketing strategy

  • 1. TATA STARBUCKS LTD. A STRATEGIC ANALYSIS
  • 2. TABLE OF CONTENTS INTRODUCTION............................................................................................................................. 4 SITUATIONAL ANALYSIS.............................................................................................................. 4 STRATEGIC INTENT...................................................................................................................... 5 Starbucks Mission Statement.......................................................................................................... 5 SWOT ANALYSIS........................................................................................................................... 8 Internal Factor Analysis Summary (IFAS)....................................................................................... 8 External Factor Analysis Summary (EFAS)...................................................................................... 9 Strategic Factors Analysis Summary (SFAS).................................................................................. 10 Strengths...................................................................................................................................... 11 Weaknesses.................................................................................................................................. 11 Opportunities............................................................................................................................... 11 Threats........................................................................................................................................ 12 SCANNING THE ENVIRONMENT - PESTEL ANALYSIS............................................................. 13 Political Factors.......................................................................................................................... 13 Economic Factors........................................................................................................................ 13 Socio-Cultural Factors................................................................................................................ 13 Technological Factors.................................................................................................................. 14 Environmental Factors................................................................................................................. 14 Legal Factors.............................................................................................................................. 15 INDUSTRY ANALYSIS – PORTER’S FIVE FORCES FRAMEWORK............................................ 16 Industry Rivalry........................................................................................................................... 17 Potential for New Entrants........................................................................................................... 17 Threat of Substitute Products........................................................................................................ 18 Bargaining Power of Suppliers..................................................................................................... 18 Bargaining Power of Buyers......................................................................................................... 18 MARKET ANALYSIS - DAVID AAKER'S 7 DIMENSIONS OF MARKET FORCES.............................................................. 19 Market Size....................................................................... 19 Market Growth Rate.......................................................... 19 Market Profitability........................................................... 19
  • 3. Industry Cost Structure................................................................................................................ 20 Distribution Channel................................................................................................................... 20
  • 4. Market Trends............................................................................................................................. 21 Key Success Factors.................................................................................................................... 22 COMPETITOR ANALYSIS - PORTER'S 4-CORNER ANALYSIS.................................................... 23 Market Share of Major Coffee Retail Chains in India, FY’2010...................................................... 23 Café Coffee Day.......................................................................................................................... 24 Barista......................................................................................................................................... 25 Costa Coffee................................................................................................................................ 26 Quiky's......................................................................................................................................... 26 EXECUTIVE SUMMARY.............................................................................................................. 27 REFERENCES................................................................................................................................ 28
  • 5. INTRODUCTION Tata Global Beverages Limited and Starbucks Coffee Company launched a joint ventur between the iconic international coffee brand and the 2nd largest branded tea company in the world. The 50/50 joint venture, named TATA Starbucks Limited, owns and operates Starbucks cafés, branded as Starbucks Coffee “A Tata Alliance.” The first store has already opened and subsequent stores are in line to be opened at Mumbai in India at the end of October, 2012. The alliance is expected to be very fruitful to both the companies in the long run. The report seeks to strategically assess the viability ofhis t strategic alliance by peeping into its myriads of dimensions. SITUATIONALANALYSIS India and China are the world‘s two fastest growing economies. Starbucks had already ventured into the Chinese market and not surprisingly, their Chinese venture turned out to be much profitable than that of their US business. Thus, they want to replicate their success in Chinese mainland in India. Also, the Indian market is heavily driven by the upcoming youth culture which is totally driven by the western trends. With growing disposable income of Indians, people tend to spend more towards apparels and fast foods. With the success of Indian owned Café Coffee Day and Barista Coffee, it is a widely proven fact that there is lot of scope for the development of coffee café culture in India. Thus, Starbucks want to capitalize on this particular opportunity. They are planning to start with targeting the niche upper class segment by opening their outlets in TAJ Hotels and Resorts. Their primary target market is the younger generation of age 16-40years. They will also target the tourists who will be visiting India. Since, most of the tourists coming to India are from the countries of U.S., England, Germany, and Japan who are well aware of Starbucks brand name. Thus, there will not be the problem of brand name recognition among them.
  • 6. STRATEGIC INTENT Starbucks Corp. is aiming India as its next major hub for development. Starbucks want to replicate the success they had in USA and more recently, in china. Surprisingly, their venturin China proved to be more profitable than that of US. Here in India, Starbucks entered into a deal with TATA Coffee Ltd, Asia's largest publicly traded coffee grower. This is, in particular, a non- binding agreement between two giants. There are plans to combine the trust and legacy of TATA coffee with the iconic brand image of Starbucks which can move on to development of Starbucks retail coffee chains in other parts of Asia. In addition to sourcing coffee beans from TATA‘s Indian facilities, the companies will also work towards developing Starbucks stores in retail outlets and hotels. Starbucks Mission Statement “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” Starbucks is very quality driven organization nda is passionate about ethical ly sourcing the finest coffee beans, roasting them with great care and improving the lives of people who grow them. They call their employees as their partners and treat each other with respect and dignity. They believe in getting engaged with their customers and make connect with them so as to laugh with them, uplift customers' lives even if it is just for moments. They believe in human connection and developing the sense of belonging. They believe in creating good neighborhood and each store is nourished as a community. Tata has made the cultural fit for Starbucks which will hel p i n building core competencies of each other. (Tata has met all the stringent standards and conditions followed by Starbucks such as quality, soil,water, pest, waste an d energy management , forest and biodiversity conservation to workers’ welfare, wages a n benefi ts, livi ng conditio ns, health,
  • 7. d safety, etc.) Starbucks is committed to a role of environmental leadership in all facets of their business.They strive to fulfill this mission by a commitment to:
  • 8. Understanding of environmental issues and sharing information with their partners  Developing innovative and flexible solutions to bring about change  Striving to buy, sell and use environmentally friendly products.  Recognizing that financial responsibility is essential to their environmental future  Instilling environmental responsibility as a corporate value  Measuring and monitoring their progress for each project.  Encouraging all partners to share in their mission Objective of Tata Coffee behind this Alliance:  The agreement will allow Tata coffee to provide roast coffee bean to Starbucks in India.  Get opportunity to jointly invest in additional facility for export to other markets.  Starbucks will help by providing new technologies for the promotion of responsible agronomy practices.  A long term relationship will be formed with this Memorandum of Understanding with Starbucks.  After this deal, Tata Coffee is poised to become Asia’s biggest publicly traded coffee grower. Objective of Starbucks Corporation:  To tap huge emerging market of India.  Help increase its profitability due to its declining market and over dependence on US market.  To have access to the high quality Arabica coffee. John Culver, president, Starbucks China and Asia Pacific on opening up of the first storein India at Mumbai states, This“ is the first step Starbucks and Tata Coffee Limited are taking toward developing and improving the profile of Indian-grown Arabica coffees around the world by elevating the stature of Indian coffee, as well as improving the quality of coffee through sustainable practices.” “Tata Global Beverages is a company known for
  • 9. bringing memorable tea consumption moments to consumers in India," stated Harish Bhat, CEO, Tata Global Beverages. “The joint
  • 10. venture is in line with Tata Global Beverages’ strategy of growing through strategic alliances in addition to organic growth. We are excited about the opportunity to innovate in the retail space and bring new beverage moments to more consumers.” As part of the agreement, Starbuck s an d Tata Coffee Limited will work toward developing and improving the profile of Indian-grown Arabica coffees around the world by elevating the stature of Indian coffee, as well as improving the quality of coffee through sustainable practices and advanced agronomy solutions.Espresso sourced from India will be a hallmark feature of all Starbucks stores in the market, highlighting the quality espresso available in India and Tata Starbucks Limited’s commitment is to deliver a truly unique andauthentic Starbucks Experience to customers throughout India. Deepening its commitment to community, Tata Starbucks Limited will work to improve the lives of coffee growing communities in the State of Karnatak. The joint venture, through an initi al financi al commitment, will work to supportSWASTHA,'' a school for children with spec ial needs (in partnership with theCOORG Foundation). Additionally, Tata Starbucks Limited will work on initiatives including thepromotion of responsible agronomy practices and training of local farmers, technicians and agronomists to improve their coffeegrowing- and milling skills.
  • 11. SWOT ANALYSIS Internal Factor Analysis Summary (IFAS) Internal Strategic Weigh t Ratin g Weighted Comments Forces Score Strengths S1 - Brand Visibility 0.15 5 0.75 International popularity of the Starbucks Brand. S2 - Ethical and 0.10 3 0.30 Environmental Practices S3 – Marketing Skills 0.10 3 0.30 S4 – Access to High Quality 0.15 4 0.60 Sourcing Agreement. Arabica Coffee S5 – JV with Tata Coffee 0.15 4 0.60 Tata as a cultural fit for Starbucks will help in building core competencies of each other. Weaknesses W1 - Image of luxury coffee 0.10 4 0.40 outlets W2 – Premium Pricing 0.05 2 0.10 High price of coffee is felt as a barrier as per Policies capita income is low in India. W3 – Coffee Dominant 0.10 3 0.30 Need to diversify. Business W4 – Rigid Standards and 0.05 3 0.15 They apply the same business models and formulas, regardless of culture and values of Policies at Outlets the country. W5 – May affect JV 0.05 2 0.10 Tata Coffee also has a JV with Barista.between Tata Coffee and Barista
  • 13. External Factor Analysis Summary (EFAS) External Strategic Weigh t Ratin g Weighted Comments Forces Score Opportunities O1 – India Huge Market 0.15 4 0.60 India is the second most populated country in the world. O2 – English Speaking 0.08 3 0.24 Market O3 – Increasing Spending 0.15 4 0.60 Power O4 – Young Population 0.07 4 0.28 Younger generation is more prone to visit cafes. O5 – Out-of-home Coffee 0.05 3 0.15 Rating for coffee outside home is better than Drinking Culture catching tea outside home, specifically in the North O6 – Favorable Cost of 0.05 2 0.10 Labor O7 – Favorable 0.05 3 0.15 Infrastructure and Cost O8 – Skilled Manpower 0.02 3 0.06 Availability O9 – Opportunity to cater 0.03 2 0.06 Tea Drinking Segment Threats 0.08 4 0.32 Most of the Indians consumed tea at least T1 – Tea Drinking Country twice a day, in the morning and in the afternoon. T2 – Competition from 0.10 3 0.30 Coffee Café Day (CCD) pioneered the concept of specialty coffee in India followed Homegrown Brands by Qwiky’s and Barista Coffee. T3 – Low Per Capita Income 0.05 3 0.15 Immense need to offer products at locally
  • 14. competitive price. 0.02 3 0.06 Campaign worldwide against the high- T4 – Health Consciousness calorie and high fat products that Starbucks sells. T5 – Rare habit of Visiting 0.02 3 0.06 Cafes 0.03 3 0.09 McDonalds, Dunkin Donuts, Burger King, T6 – Competition from etc already have the infrastructure in place Other Fast Food Chains and are instead adding quality coffee to their menus. T7 – Rising Prices of Coffee 0.05 4 0.20 Rising prices of coffee are putting pressure on the profit margins of the company. TOTAL SCORES 1.00 3.42
  • 15. Strategic Factors Analysis Summary (SFAS) Strategic Factors Weigh t Ratin g Weighted Comments Score S1 - Brand Visibility 0.10 4 0.40 International popularity of the Starbucks Brand could be capitalized. S4 – Access to High Quality 0.08 4 0.32 Arabica Coffee is of very high quality and Arabica Coffee this could be hot selling products worldwide. 0.08 4 0.32 In addition to sourcing coffee beans from S5 – JV with Tata Coffee TATA‘s Indian facilities, the companies will also work towards developing Starbucks stores in retail outlets and hotels. W1 - Image of luxury coffee 0.12 4 0.48 Starbucks Coffee outlets have the image of high end luxury café and customers may not outlets turn. W3 – Coffee Dominant 0.10 3 0.30 Need to diversify well. Business O1 – India Huge Market 0.15 4 0.60 India is the second most populated country in the world. O3 – Increasing Spending 0.07 5 0.35 Increasing job opportunities and advances in services sector with globalization is raising Power standards of living in India. O4 – Young Population 0.08 5 0.40 Younger generation is more prone to visit cafes. 0.07 4 0.28 Most of the Indians consumed tea at least T1 – Tea Drinking Country twice a day, in the morning and in the afternoon. McDonalds, Dunkin Donuts, Burger King, T2 – Competition from 0.08 4 0.32 etc already have the infrastructure in place Homegrown Brands and are instead adding quality coffee to their
  • 16. menus. T7 – Rising Prices of Coffee 0.07 4 0.28 Rising prices of coffee are putting pressure on the profit margins of the company TOTAL SCORES 1.00 4.05 The Strategic Factors Summary shows that the most important factors overall received a score of 4.05 which is above average. This is positive for the company. They are responding well to their strength, weaknesses, opportunities and threats. After some recent re purposing it is clear that the company is focusing on its core competencies but has room to improve.
  • 17. Strengths  High Brand Visibility. (International popularity of the Starbucks brand.)  Ethical and Environmental Practices.  Superb Marketing and positioning skills of Starbucks.  Access to TATA's premium Robusta and Arabica coffees (Sourcing Agreement).  Tata as a cultural fit for Starbucks will help in building core competencies of each other. (Tata has met all the stringent standards and conditions followed by Starbucks such as quality, soil, water, pest, waste and energy management, forest and biodivers ity conservation to workers’ welfare, wages and benefits, living conditions, health, safety, etc.) Weaknesses  Image of luxury coffee outlets.  High price of coffee is felt as a barrier in the South and the NorthStarbucks.( products were priced at a premium and the per capita income in India is lower compared to other markets where it is already present, there is immense need to offer products at locally competitive price.)  Coffee dominant business. (Need to diversify)  Certain rigid standards and policies at outlets. (They applythe same business models and formulas, regardless of culture and values of the country they are operating in like no smoking policy, etc.)  The entry of Starbucks is aimed at the out-of-home coffee consumption market and this may affect the alliance of Tata Coffee with Barista. Opportunities  India is the second most populated country in the world. Huge Market.  English speaking populations  Growing Middle Class and increasing spending power of Indian Population.  Young Population (Consumers in the age group of20–45 years were emerging as the fastest growing consumer group and the average age of an Indian in 2020 would be 29 years,
  • 18. compared to 37 years in China and the United States, 45 years in Western Europe, and 48 years in Japan. Younger generation is more prone to visit cafes as per a research)
  • 19. Rating for coffee outside home is better than tea outside home, specifically in the North and the East. (The people in southern states of India largely consume coffee. The people in the northern states are generally not coffee drinkers, but drink coffee and experiment with various flavors as a fashion statement.)  Favorable Cost of Labor  Favorable cost and quality of telecom infrastructure  Fair availability of workforce (Quantity as well as skilled)  Tea-based culture of India could be used asopportunities by offering more teabased- drinks. Threats  India is a tea-based culture. (The Indian hot-beverage market is dominated by tea. India was the largest producer and consumer of tea in the world and accounted for 29% of eth total production and over 20% of the total consumption globally.60 Most of the Indians consumed tea at least twice a day, in the morning and in the afternoon.)  Homegrown brands dominate the retail coffee market. Coffee Café Day (CCD) pioneered the concept of specialty coffee in India followed by Qwiky’s and Barista Coffee.  Lower per capita income in India. High price of coffee is felt as a barrier in the South and the North. (Starbucks products were priced at a premium and the per capita income in India is lower compared to other markets where it is already present, there is immense need to offer products at locally competitive price.)  Increasing Health Consciousness among consumers. (The increasing rate of obesity and obesity related diseases such as diabetes, high blood pressure, and heart diseases in India. Starbucks was said to have been on the target of many consumer health groups worldwide who planned to campaign against the high-calorie and highfat products that Starbucks sold and which could lead to increased obesity risk, heart diseases, and cancer.)  Visiting cafes is not a frequent habit among most of the Indians.  Other fast food chains like that of McDonalds, Dunkin Donuts, Burger King, etc., already have the infrastructure in place and are instead adding quality coffee to their menus to compete with Starbucks.  Rising prices of coffee are putting pressure on the profit margins of the company.
  • 20. SCANNING THE ENVIRONMENT - PESTELANALYSIS Political Factors “India’s young are becoming world-class consumers, and multinationals are taking note,” reads the sub header for an article titled “Hey, Big Spenders!” in the August 2003 issue of TIME Magazine. This change can be attributed to many factors. For one, the Indian economy went through a massive liberalization under the new minority government of P.V. Narasimha Rao in 1991. Further, the currentgovernment’s reform measures like approval to FDI in multi brand retail for up to 51% will surely add up to these factors. Economic Factors The factors like inadequate infrastructure, bureaucracy, regulatory and foreign investment controls, the reservation of key products for small-scale industries, and high fiscal deficits are constraining economic growth of India. However, the liberalization measures taken in 1 199 opened the economy to foreign investment and trade: it dismantled important controls, lowered customs duties, and devalued the currency: it virtually abolished licensing controls on private investment, dropped tax rates, and broke public sector monopolies. Further, reforms have been seen in retail industry with Indian government's approval on FDI upto 51% on multi brand retail. The country has recently become is a major exporter of software services and software workers, and the information technology sector leads the strong growth pattern. With a world changing from an industrial to an informational economy, India is bound to play a monumental role in the future of the global industry. Socio-Cultural Factors As job opportunities increase in India, moneystays in the palms of the Indian consumers enabling them to reinvest in the Indian economy. Attitudes towards money are also changing. The mantra for the average Indian family, as in most of Asia, has always beensaving, but young Indians today, inspired by job opportunities, have switchedspendingto extravagantly. The attitude of the young generation is to enjoy life and spend money.
  • 21. However, India is a tea-based culture. Most of the Indians consumed tea at least twice a day, in the morning and in theternoonaf. According to market research studies, coffee was
  • 22. mainly consumed in the urban areas (71%) and to a much lesser extent in the rural areas (29%). The people in southern states of India largely consumed coffee. The people in the northern states were generally not coffee drinkers, but drank coffee and experimented with various flavors as a fashion statement. The consumption of instant coffee and filter coffee was almost equal on the national level. But region-wise, filter coffee was more popular in the south and the proportion of instant coffee was very high in the non-south regions. Technological Factors The coffee beans and tea need be bought from local Indian farmers in order to support the local agricultural economy, save money in transportation andtariffs, and gain tax benefits. Indians tend to take more cream in their coffee. The association with the Tata Coffee Ltd for sourcing its Arabica Coffee would surely help in the long run. Further,the skim milk option need not be offered in India becausedieting is not a commonly accepted practice in the country. Indians will feel that they are being cheated out of their money if skim milk is put in their beverages. Indians also like spices in their tea and coffee, especially ginger and black clove. One of India’s favorite fruit flavors in mango, and in factthe mango is India’s national fruit. The food segment needs to take care of vegetarians segment as they form the good proportion of the target market. However, Indians specially the affluent and youngclass will be delighted to have fast and efficient Wi-Fi services at the cafe plus; people here love to be associated with their traditional and rich heritage as well as its blending with modernity and this may be reflected in the stores' ambience. The awareness about how varieties of coffee are sourced, roasted, brewed, etc needed to make people more loyal to coffee specially the Starbuck's. The inventory policy requires keeping the stores stocked but not overstocked to ensure freshness of products. Better gauges of the numerical figures in the inventory policies can be made after observing consumer trends. To begin with policies can be formulated assuming an average of five hundred consumers per day. Environmental Factors Starbucks believe in the importance of caring for our planet and working with and encouraging others to do the same. As a company that relies on an agricultural product, it makes good business sense. It engages itself in recycling, energy management,
  • 24. green building, and in reducing carbon footprints wherever possibleWith. these integrated environmental responsibilities, the company will obviously build its image in the eyes of Indian Consumers as well. The ecological concerns regarding the farming of Arabica coffeemust also be addressed in order to ensure consistency in productivity. Legal Factors Companies may be public or private but the common public is not allowed to buy shares of the company and there can only be up to fifty shareholders. Import duties areiedapplto almost all goods entering India. The tariff system is based on the Harmonized System (HS) and tariffs are in the 40 to 60 percent range for basic raw materials, 60 to 100 percent for- semi processed goods, and 100 percent and above on finished and consumer goods. Shipments to India require a commercial invoice, a packing list and bill of lading. A certificate of origin is not required on imports originating in the United StatesFDI. approval though has come to relaxation.
  • 25. INDUSTRY ANALYSIS – PORTER’S FIVE FORCES FRAMEWORK One of the widely held assessment tools of an industry’s competitive forces is thefive forces model of competition created by Michael Porter. These five forces are: the competitive force of rivalry among sellers, the competitive force of potential new entrants, the competitive force of substitute product, the competitive force of supplier bargaining power, and the competitive force of buyer bargaining power (Porter, 1980).
  • 27. Bargaining Industrial Bargaining Power of Rivalry Power of Buyers Suppliers Threat of New Entrants
  • 28. Industry Rivalry Major competition for Starbucks in India comes from that of Café coffee day. The abbreviation CCD is known to most of the people in urban parts of India. Their positioning is same as what Starbucks have in US. The other competitors include Barista Lavazza, Quicky's, Barista and Costa Coffee, which are also the multinational brands, and widely recognized. Apart from them, secondary competitors include the Georgia Coffee, served in fast food joints like that of Mc Donald’s and KFC, etc. Potential for New Entrants The entry barriers in the coffee retail industry are relatively low in India, particularly for the foreign players. This is possible owing to the fact that 51 % FDI is allowed in India in retail sector. Any large or well-funded company having the thorough understanding of the market can enter into retail sector in IndiaGiven. the fact that Starbucks is a global, it is having its own advantages when it comes to achieving the economies of scale. Starbucks being the global coffee retail chain, they are not going to haveany particular capital related problems. Also, they are having MoU being signed with TATA‘s for opening their outlets in theirTAJ group of hotels and resorts. India, being the sixth largest producer of coffee in the world is having the largest home grown supply of coffee beans and thus, sourcing coffee in this industry is not going to be much of the problem. Customer or Supplier Loyalty - Indian market is already being captured by the long established brands like Café coffee day, Barista, Barista Lavazza and Costa Coffee. Thus, it is going to be pretty much difficult for any of the new entrant to establish its brand name in the Indian market. However, Starbucks being the international brand will definitely help in attracting the educated Indian crowd. Market Experience - The existing players in the Indian coffee retail industry have been here in the market from last 10 years. Thus, their management must be having greater understanding of the Indian markets and Pallets. Therefore, for Starbucks, it is go ingbe t important to first understand the Indian preferences, before making any major move.
  • 29. Differentiation - Coffee is not the product where there is a great scope for product differentiation. However, it depends on most of the cases on the store ambience, which can act as the point of differentiation. Threat of Substitute Products India has predominantly tea-based culture thus; awareness about coffee need to be created more and more tea-based drinks in association of TATA coffee needs to be included in its offerings. Besides tea, other product substitutes , he re, will include other beverages , f o r example, soda, fruit juices, water, beer or other liqui d and/ or carbonated beverages . Sin ce Starbucks also sells fast foods, other fast food beverages like burgers, etc. The lower end local coffee houses or other snack shops which are less luxurious will also act as substitutes to Starbucks. These are places which provide people with the place to sit, chat and relax atorem affordable rates. Bargaining Power of Suppliers In the case of coffee retail, the suppliers, supplying the retailer with the coffee beans are not having much of the bargaining power. This is particularly because of the fact that coffee retailers like that of Starbucks tend to be very big buyers for any of the supplier to lose as a whole. This also gives the Starbucks to dictate terms to the supplier. However, this sourcing would be done on ethical norms of Starbucks and TATA Coffee. Similarly, suppliers of other resources like that of paper products etc., will not be having much of the bargaining power as there are many sources from which the company can source them. However, this is not valid in the case of the suppliers supplying the technological machinery and equipments as there are not many suppliers here. Bargaining Power of Buyers In the past, buyers in India were not having much of the bargaining power as there were not many food retail giants which were present in the country. However, with the advent of multinational food retail giants in India, like that of Mc Donalds, Barista Lavazza, Café Coffee
  • 30. Day and Costa Coffee, consumer is faced with lots of choices. Thus, it will be difficult for Starbucks to influence the Indian buyers to pay premium f o r their products. As also the per capita income of Indian Customers is low and their mindset i s not so affirmative with coffee
  • 31. culture, however it is catching up among youths, the pricing need to be highly competitive and on zonal basis. MARKET ANALYSIS - DAVID AAKER'S 7 DIMENSIONS OF MARKET FORCES Market Size The recent past has witnessed an upward shift in the per capita consumption of coffee in India, with growing preference amongst the young population. With a young population of about 35% below the age group of 40 spending most of their time at workor outside home, the out of home consumption of coffee is spreading rapidly. Moreover, the increasing spending propensity of the young Indians and their changing lifestyle has increased thedemand for coffee in India. As compared to FY’2005 a clear growth can be witnessed in FY’2010 in per capita consumption. The per capita consumption in FY’2010 increased to 89.3 grams as compared to 70.9 grams in FY’2005 due to presence of a strong preference towards instant coffee. Market Growth Rate The consumption of coffee in India has grown steadily at a historical CAGR of 6.3% during FY’2005-FY’2010 and is expected to pace at a CAGR of 4.9% in the near future. In FY’2010, the per capita consumption has increased to 89 grams from 85 grams in 2005 at a growth rate of 5%. The Indian coffee market has witnessed a steady growth in the past 5 years due to the growin g preference for instant and organic coffee amongst the coffee drinkers. Moreover, rising consumer expenditure and export promotion schemes implemented by government has influenced the growth of the market in India. Thecoffee market in India has also witnessed a growth in the demand for -ofout-home consumption of coffee because to the majority of time spent by the young adults at work or out-of-home. This potential of the market and the preference of the young population have led many global players to foray into the domestic market. Market Profitability The revolution in the Indian coffee market has changed the tastes of the consumers and overwhelmed them with arietyv of new options. Thus, a change is witnessed in the coffee drinking habits
  • 32. amongst Indians. Today people prefer instant coffee over the traditional coffee,
  • 33. because of the busy lifestyle and changes in their tastes and preference towards instant coffee. The Indian coffee market is dominated by big players such as Nescafe who has a share of 68.8% followed by BRU and Tata Coffee with 13.5% and 3.2% respectively. Marketerstoday see a lot of potential in the instant coffee segment, which is one of the reason many big companies are adopting various strategies to capture it. The out-of-home coffee drinking culture is also gaining pace. Keeping all these in mind that the costs for the coming operating years will reduce and revenues will increase, profit is expected to escalate. After the end of the first fiscal year, the company may determine whether or not it should expand in the country of India. If the first year proves to be a success, Starbucks Coffee can open over 200 location in the subcontinent of India, taking advantage of their international partnerships with Sheraton (Starwood) Inn, and Hyatt Inn. Starbucks will also try to win accounts with local airlines companies, so that they may serve Starbucks drink on flight. In three years profits are expected to exceed one million dollars per annum as per the research conducted. Industry Cost Structure Competitive pricing is necessary for the success of thevnture; hence Starbucks must take various costs into consideration. Because of the costs involved instartup, transportation and imported goods, the price need to be set at about USD 1 per drink using the concept of zone pricing to make the coffee affordable to the target audience. Exchanges need to be done in rupees so that would be about 55 rupees. The prices for all goods need to be relative to the others. With the use of this pricing policy, Starbucks prices would be 20% lower than those of the Barista Company. This use of penetration pricing will ease the company’s slide into the market place. Though, it is possible to get a cup of coffee formerely 5 rupees in small stalls on the street, the success of the Barista Coffee Companyshow that the customers are willing to pay for better quality, service, and environment. Distribution Channel As its distribution strategy, the Starbucks has already started its first store at Mumbai. This flagship store is located at the historic Elphinstone Building, Horniman Circle, Mumbai and marks the beginning of the iconic brand’s India journey. In addition to the
  • 35. Horniman Circle, Tata Starbucks Limited will launch two more stores in near future at Oberoi Mall and the Taj Mahal Palace Annexe in Mumbai. Subsequently, the other stores will be opened at other metropolitan areas. The urban areas are thus thefirst choice of Starbucks as its both primary market of youths and secondary market of tourists from other countries are catered here. Market Trends A major part of the country’s foreign exchange earnings come from the Coffee industry. Since the inception of coffee in India, the production has been rising along with changes experienced in the consumption pattern over the years. Increasing Per Capita Consumption - Due to the constant increase in population over the period, the per capita consumption hasalso increased from 85 grams in 2009 to 89 grams in 2010.This increase in the per capita consumption has influenced the overall growth of the Indian coffee market. Evolving Coffee Retail Chain Concept - The Indian coffee market has been experiencing activities in form of increasing coffee retailshops. This has been the result of the growing trend of out-of-home consumption andincreasing propensity of young population to spend. Many coffee parlors or cafes such asCafe Coffee Day (CCD), Barista and Costa Coffee are spreading their distribution network to cater to coffee drinkers across India. There are 1,503 coffee retail outlets across India to serve the out-of-home coffee drinkers across India. Global players foraying into the Indian market - The increasing disposable income of young Indians and their changing preference towardscoffee consumption have led many global players to foray into the domestic market. For example, Britain’s Costa Coffee entered the Indian coffee market in 2005. Moreover,Starbucks, one of the leading global players is planning to enter Indian market in the near future. Increasing preference towards Instant Coffee - After Nestle and HUL launched their product in the Indian coffee market, the popularity of instant coffee has increasedrauallyg. Today, people prefer instant coffee over the traditional coffee because of their changing life style and variety of options available in the instantcoffee market. About 23.1% of the market is
  • 36. captured by instant coffee and is expected toincrease further in the near future with a strong preference among the age group of 20-45years. Growing preference towards organic coffee - Organic Coffee is usually considered to be normal coffee beans that are produced without theuse of pesticides or herbicides. The growing health concerns and the preference of consumersto consume healthy beverage have led the marketers and producers adapt to organically grown coffee. Key Success Factors The Primary target market for Starbucks Coffee Co. in India is the youngboth male and female from the ages of 16-38. This market is well educated and comes from middle class to upper middle class population and out-of-home coffee drinking culture is catching up. The international appeal of Starbucks will add up to the promotion of this culture. The highly trained baristas of Starbucks, its technologies and processes by which it sources high quality coffee, roasts, brews and serves to its customers will surely act as Key Success Factors of the Company. Besides its alliance with Tata Coffee to source high quality Arabica Coffee will also help.
  • 37. COMPETITOR ANALYSIS - PORTER'S 4-CORNER ANALYSIS Drivers  Financial Goals  Corporate Culture  Organizational Structure  Leadership team background  External Constraints  Business Philosophy Current Strategy  How the business creates value?  Where the business is choosing to invest?  Relationships and networks the business has developed COMPETITORS FUTURE STRATEGY
  • 38. Management Assumptions  Company's perception of its strengths and weaknesses  Cultural traits  Organizational value  Perceived industry forces  Belief about competitors’ goals Capabilities  Marketing skills  Ability to service channels  Skills and training to workforce  Patents and copyrights  Financial strength  Leadership qualities of CEO Market Share of Major Coffee Retail Chains in India, FY’2010 The Indian coffee market is passing through an evolutionary phase whereconsumers ‘preference towards out-of home consumption is developing. The exceptional growth of out-of - home consumption of coffee in the coffee chains has been triggered by the young adults. The young adults segment of the population pends major time outside home or at work, which has influenced the growth of the coffee chains in India. The retail coffee market in India is majorly dominated by Cafe Coffee Day with 1,134 chainsacross India followed by Barista with 230
  • 40. coffee serving chains and Cost Coffee with 74 chains. It is being observed that almost 96% of the coffee retail market has been held by these three players and the rest 4% being held by other small and new players.Overwhelmed by the response in India, coffee retail giantsare expected to expand their network in India in the near future. Café Coffee Day CCD Mission statement - "To be the best café chain in the country by offering a world class coffee experience at affordable prices." Business Overview - CCD, India’s first coffee bar was established in 1996 in Bangalore by the largest exporter of coffee in India, the Amalgamated Bean Coffee Trading Company (ABCTCL).Dominates the market with a share of 75.5% in 2010 with total retail outlets of 1,034 in over 100 cities. Products and Offerings - The company offers numerous options in the product offerings such as cappuccino, Espresso, Café Latte, Cafe Mocha, Irish coffee and Ice teaalong with wide variety of eatables such as sandwich, cakes, burger and others. The products are offered to be consumed in the cafe as well as in take away format. The company also offers various merchandise products such as coffee mugs, gift vouchers and others. Geographical Reach - The Company has major presence in Delhi with 121 retail outlets, Bangalore with 172 stores, Maharashtra with 225 stores and AP with 84 stores. Customer Profile at CCD - Other brands are also promoted in a CCD outlet through innovative and interactive use of posters, cards, danglers, leaflets, contest forms, etc. CCD has tied up with popular television serials and also ran promotion contests for many brands. It had also tied up with some popular Indian movies where CCD was featured in some of the scenes. CCD has six café formats; Music Cafés, Book Cafés, Highway Cafés, Lounge Cafés, Garden Cafés & Cyber Cafés. Music Cafés provided customers with the choice of playing their favorite music tracks on the digital audio jukeboxes installed in the café. CCD has been also coming out with more formats like sports Café, singles café, and fashion café.
  • 41. Speaking on competition with other players, Sudipta Sen Gupta, Marketing Head, CCD said: “We don’t have any competition because we are not competing with the others. In fact we
  • 42. are aiding each other in creating and growing the coffee culture. All of us have a distinct identity. We sure do!” Barista Business Overview - Founded in 2000, the company is a pioneer of Indian Cafe culture. The company has positioned the brand as a joint where people canindulge in conversations with a cup of coffee. The target segments for the company are the youth and young adults, who are aware about the global lifestyles and enjoy new flavors and taste of coffee. Barista is planning to expand its latest chain of cafes “Barista Creme Lavazza” to more parts of the country. Presently the company owns app. 15 such stores. Products and Offerings - Along with offering coffee, the company also offers fresh salads, sandwiches, pizzas, pastas and desserts. The company offers in-stores promotions from time to time along with other promotions in commercials and films. Geographical Reach - Barista has a pan India presence with more than 230 retail outlets. 45 of the top outlets offerWi-Fi availability along with 75 outlets offering Blu-Fi for mobile savvy generation. Coffee and other products at Barista were priced high and its target audiences were youth from the upper-middle-class segment. The coffee at Barista was made with high- quality Arabica coffee beans and baristas (brew masters) were invited from Italy to emaknew blends. Brotin Banerjee, Vice President of Marketing, Barista, said, “Our inspiration was the traditional Italian Espresso bars where the idea is to create a ‘home away from home." In 2001, Barista entered into a strategic alliance with Tata Coffee Ltd. (Tata), the largest coffee producer in India. Tata later acquired a 35% stake in Barista. The alliance allowed Barista to enlarge its distribution network and set up outlets in the Taj Group of hotels owned by Tata and i t s other allied businesses. In 2004, Amit Judge, its promoter, sold 65.4%take sof the compan y t o an NRI businessman, Sivasankaran (Siva), who later in 2004
  • 43. bought the remaining stakes from Tata as well. After the acquisition, Siva revamped the chain, opened more Barista outlets in Southern cities, and began franchising its outlets. It started opening up a new outlet every 10 days. A new look was given to its outlets by making changes in its seating arrangements,- store i n merchandise, and providing a better youthful ambience of the storerew.Themastersb maintained friendly relations with the customers and called them by their first names. Barista joined with specialty retailers such as the music retailer Planet M, the book retailer Crossword, and the Taj Group of hotels for setting up espressocorners in their premises. It also launched a concept called BanCafe, a coffee shop within the bank premises and joined with the bank ABN AMRO. Costa Coffee Business Overview - Costa Coffee was incorporated in India in 2005 with a tie up with Devyani International Limited, head quartered in New Delhi, the Company serves the coffee lovers across India. Company inaugurated its launch with 4 cafes in Bangalore. The company commands a share of 4.9% in the Indian coffee market in 2010. Products and Offerings - The Company offers different variety of coffee such as Espresso, cappuccino, cafe latte and others. Some of the premium offerings which the company offers are muffins, cakes, desserts, sandwiches, wraps and pastas. The company operates with nearly 74 stores across India. Geographic Reach - The Company is planning to focus on the prominent cities such as Pune, Delhi, Mumbai and Bangalore. The company is planning to predominantly expand in the metros. Quiky's Two software engineers, Shashi Chimala and Shyam, opened the first Qwiky’s outlet in Chennai in 1999. They were inspired by the specialty coffee bars in the United States. The menu at Qwiky’s included varieties in hot Italian coffee, Indian coffee, specialty hot coffee, cold coffee, frappes, milk shakes, tea, other beverages, desserts, and snacks. It targeted youths in the age group of 18 to 30 years. By 2002, the annual revenues of Qwiky’s were 43 million INR.
  • 44. Qwiky’s had three types of formats; Qwiky’s Coffee Pubs were stand-alone coffee bars, Qwiky’s Coffee Islands were outlets within big stores, multiplexes, and movie theatres, and Qwiky’s Coffee Xpress were coffee kiosks. By 2006 it had over 20 outlets in nine cities in India
  • 45. and one franchise in Sri Lanka. Qwiky’s had plans to open more outlets inropolitanmet and large cities in India and abroad through franchising its business. It had joined with retailers such as Lifestyle, Music World, and Ebony to open store-in-store outlets. EXECUTIVE SUMMARY Starbucks is another industry stalwart to enter the dianIn markets due to vast potential and the huge untapped market. Indian market is always influenced by the traditions followed in the Western counterparts hence the success of Mconald’s,D KFC, etc to name a few. With access to Hollywood movies where thesebrands are flashed quite often, the aura surrounding brands such as Starbucks scale new heights. Indian consumers have always welcomed change when it comes to their taste buds. Cappuccinos, Latte have eclipsed the traditional Espresso filter coffee. Filter coffee seems like an archaic notion, only restricted to the elderly people. In fact the coffee shops have itself undergone a tremendous transformation, with them replacing a hang-out joint for the teenagers. The timing of their entry could not have beenbetter. With Barista, Café Coffee Day and Costa coffee almost losing their sheen, Starbucks comes in like a breath of fresh air. The future outlook of any company is not complete without an analysis of the industry in which it operates. The coffee industry of India is the sixth largest producer of coffee in the world, accounting for over four percent of world coffee production, with the bulk of all production taking place in its Southern states. India is most noted for its Monsooned Malabar variety. It is believed that coffee has been cultivated in India longer than anywhere outside of the Arabian Peninsula. Tata Starbucks Limited, the 50/50 joint venture between Starbucks Coffee Company (Nasdaq: SBUX) and Tata Global Beverages Limited is bringing an unparalleled experience to Indian customers. Both companies have a history of delivering product innovation and the highest quality experience to customers around the globe. They are delighted to come together today and transform the coffee experience for consumers across India, while providing a
  • 46. community gathering place to connect with family and friends. Thus, Coffee culture is poised to be deeply in-grained into Indian culture in the near future, if this strategic alliance succeeds. REFERENCES Vrushali Paunikar, 2011, "International Business Plan Starbucks India", A proposal Ruchi Mankad and Joel Sarosh Thadamalla, 2011, "Case: Starbucks Coffee Company, The Indian Dilemma", Strategic Management and Business Policy, 13th Edition, Thomas L. Wheelen, J. David Hunger Herve R., Dec 21, 2004, "The Starbucks Corporation: Past, Present and Future", Auch-Roy- Pen: 1207HA Harold Brown, 2011, "External Environmental Analysis of Starbucks and the Coffee Industry" Flight, Georgia. “Grinding Out Success Next to Starbucks” Business 2.0, Oct. 2006. Vol. 7, Issue-9 Ryan C. Larson, 2008, "Starbucks a Strategic Analysis-Past Decisions and Future Options", Brown University Economics Department http://news.starbucks.com/article_display.cfm?article_id=707 accessed on Oct 15, 2012 http://news.starbucks.com/article_display.cfm?article_id=703 accessed on Oct 15, 2012 http://www.starbucks.in/about-us/company-information/mission-statement accessed on Oct 15, 2012 http://www.starbucks.in/responsibility accessed on Oct 15, 2012 http://www.tatacoffee.com/corporate/company_profile.htm accessed on Oct 15, 2012 http://www.indiacoffee.org/indiacoffee.php?page=CoffeeData accessed on Oct 17, 2012 http://www.indiacoffee.org/userfiles/RFP-FINAL-SEP12.pdf Oct 17, 2012 http://www.cafecoffeeday.com/company-mission.php?mnid=3&lmids=3 accessed on Oct 17, 2012 http://www.cafecoffeeday.com/our-business.php?mnid=3&lmids=1 accessed on Oct 17, 2012