CHAPTER 2 ANALYSIS

STARBUCKS
Starbucks is another industry to enter the Indian 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 Mc Donalds, !", etc to name a few.
With access to #ollywood movies where these brands are flashed $uite often, the aura
surrounding brands such as Starbucks scale new heights.
Indian consumers have always welcomed change when it comes to their taste buds.
"appuccinos, %atte have eclipsed the traditional &spresso filter coffee. !ilter 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 (oint
for the teenagers.
)he timing of their entry could not have been better. With *arista, "af+ "offee Day and
"osta coffee almost losing their sheen, Starbucks comes in like a breath of fresh air. )he
future outlook of any company is not complete without an analysis of the industry in
which it operates.
)he coffee industry of India is the si,th 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 -rabian .eninsula.
)ata Starbucks %imited, the /01/0 (oint venture between Starbucks "offee "ompany and
)ata 2lobal *everages %imited is bringing an unparalleled e,perience to Indian
customers. *oth companies have a history of delivering product innovation and the
highest $uality e,perience to customers around the globe. )hey are delighted to come
together today and transform the coffee e,perience for consumers across India, while
providing a community gathering place to connect with family and friends. )hus, "offee
culture is poised to be deeply in'grained into Indian culture in the near future, if this
strategic alliance succeeds.
STARBUCKS CORPORATION
Starbucks "orporation is an -merican global coffee company and coffeehouse chain
based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world,
with 30,456 stores in 73 countries, including 68,395 in the :nited States, 6,83; in
"anada, 545 in <apan, 4/6 in the .eople=s >epublic of "hina, 407 in the :nited ingdom,
//7 in South orea, 899 in Me,ico, 356 in )aiwan, 307 in the .hilippines, 695 in )urkey,
696 in )hailand, and 679 in 2ermany
Starbucks Mission? @ur mission? to inspire and nurture the human spirit A one person,
one cup and one neighbourhood at a time.
Our Coff! Weve always believed in serving the best coffee possible. It=s our goal for
all of our coffee to be grown under the highest standards of $uality, using ethical sourcing
practices. @ur coffee buyers personally travel to coffee farms in %atin -merica, -frica
and -sia to select the highest $uality beans. -nd our master roasters bring out the balance
and rich flavour of the beans through the signature Starbucks >oast.
TATA "LOBAL BE#ERA"ES AN$ TATA CO%%EE
)ata 2lobal *everages is a part of the global )ata 2roup. )ata 2lobal *everages is a
global beverage business and the worlds second largest tea company. )he groups annual
turnover is :S B6./ bn and it employs around 8000 people worldwide. )he "ompany
focuses on Cgood for you beverages and has a stable of innovative regional and global
beverage brands , including )ata )ea, )etley, #imalayan natural mineral water and &ight
@ "lock "offee.
)ata "offee is a subsidiary of )ata 2lobal *everages. It is -sias largest coffee plantation
company and the 8rd largest e,porter of instant coffee in the country. )he "ompany
produces more than 60,000 M) of shade grown -rabica and >obusta coffees at its 65
estates in South India and its two Instant "offee manufacturing facilities have a combined
installed capacity of 7000 metric tonnes.

TATA STARBUCKS& 'OINT #ENTURE TO OPEN CA%ES IN IN$IA
Starbucks is the number one specialty coffee retailer in the world. )he company wants to
deliver the finest coffee products and offers handcrafted beverages. Starbucks is not only
about drinking coffee but about a uni$ue e,perience. )he company follows an
international e,pansion strategy through strategic alliances. Starbucks wants to prevent
competitors from having a head start, build upon the growing interest for Western brands
and take advantage of the higher coffee consumption rates. -fter building a successful
brand in <apan and "hina, Starbucks wants to enter the Indian market. Starbucks found a
local supplier for their coffee, )ata.
M:M*-I, India, <anuary 80, 3063 ' )ata 2lobal *everages %imited and Starbucks
"offee "ompany today announced a (oint venture between the iconic international coffee
brand and the 3nd largest branded tea company in the world. )he /01/0 (oint venture,
named )-)- Starbucks %imited, will own and operate Starbucks caf+s which will be
branded as Starbucks "offee D- )ata -lliance.E
)he retail stores had started developing in cities across the country, beginning with stores
in Delhi and Mumbai in calendar 3063.
In a separate sourcing and roasting agreement between Starbucks "offee "ompany and
)ata "offee %imited, )ata "offee %imited will roast coffee to supply )-)- Starbucks
%imited, and to e,port to Starbucks "offee "ompany. )his agreement paves the way for
consumers in India to en(oy the premium Starbucks &,perience, while further discovering
the uni$ue taste of high'$uality Indian arabica coffee worldwide. )-)- Starbucks
%imited brings together two companies with a rich heritage in and passion for coffee, tea
and innovative beverages. )ogether, the <F will enable an e,panded range of beverage
offerings for Indian consumers.
PROMOTION STRATE"Y
MEANIN" !
.romotional activities will not be analysed in details as they should be in line with
Starbucks promotions worldwide. *esides, retailers in India rely heavily on wordof
mouth Gpersonal communicationH. )he Starbucks "ard will be introduced A a convenient
way to pay for your drinks and earn rewards for your purchase. !urthermore, Dinstore
promotions accompanied by new products such as drinks and accessories sourced from
the regionsE should be present in India as well.
Starbucks might consider the idea of advertising on television. In the :S, there are three
places that the average -merican spend his time during weekdays at home, in the work
place and in Starbucks. So, they should somehow show the western lifestyle to the Indian
and a )F advertisement. !urthermore, it is the first /01/0 (oint venture for StarbucksI so,
both Starbucks and )-)- 2roup will benefit from comarketing activities.
Pro(otion is one of the market mi, elements or features, and a term used fre$uently in
marketing. )he specification of five promotional mi, or promotional plan. )hese
elements are personal selling, advertising, sales promotion, direct marketing, and
publicity.
J
- promotional mi, specifies how much attention to pay to each of the five
subcategories, and how much money to budget for each. - promotional plan can have a
wide range of ob(ectives, including? sales increases, new product acceptance, creation of
brand e$uity, positioning, competitive retaliations, or creation of a corporate image.
!undamentally, however there are three basic ob(ectives of promotion. )hese are?
J3K
6. )o present information to consumers as well as others.
3. )o increase demand.
8. )o differentiate a product.
)here are different ways to promote a product in different areas of media. .romoters use
internet advertisement, special events, endorsements, and newspapers to advertise their
product. Many times with the purchase of a product there is an incentive like discounts,
free items, or a contest. )his is to increase the sales of a given product.
)he term LpromotionL is usually an LinL e,pression used internally by the marketing
company, but not normally to the public or the market ' phrases like Lspecial offerL are
more common. -n e,ample of a fully integrated, long'term, large'scale promotion are
My "oke >ewards and .epsi Stuff. )he : version of My "oke >ewards is "oke Mone.
.romotional activities to push a brand enabling social media channels to spread content
making something viral such as the advertising by "oke

using the release of a new bond
film creating a huge amount of attention which then gets promoted across all social
channels by people spreading the information due to e,citement.
.romotion can be done by different Media=s, namely print media which includes
Newspaper and magaOines, &lectronic media which includes radio and television, Digital
media which includes internet, social networking and social media sites and lastly
outdoor media which includes banner ads, @@# .
PESTLE ANALYSIS
)he .&S)%& analysis is a tool which provides insight of the e,ternal environment in
which organiOations operate or will operate and aids the strategy formulation of those
organiOations. "onsidering the fact that Starbucks is planning to enter the market in India,
the .&S)%& analysis is going to evaluate favorable and unfavorable conditions in the
countrys political, economic, social, technological, legal and environmental setting.
a) Po*itica* factors
)he political factors have strong influence upon the regulation and controlling of business
and the spending power of consumers and other businesses. We must consider those
factors as very important and even crucial depending on the political system of the
country we are operating in and the political condition of the country as a whole.
)he Indian economy has been sub(ect to series of positive economic reforms since 6556
which had created a better working environment for foreign companies and has made it
possible for foreign investors to operate in the country more easily. )he reforms have also
resulted in higher growth rates, lower inflation and increase and ease of the foreign
investments. )he current Indian government ' :nited .arties -lliance G:.-H, headed by
the Indian National "ongress party GIN"H has shown more tolerance towards foreign
countries in general and towards !DI in numerous economic sectors. )hese reforms have
placed India in a favorable position in the world economic stage.
)aking into consideration the political environment in India as a whole, the bureaucracy
complications and the regulatory !DI controls and regulations, it is safer for Starbucks to
enter India via a (oint venture or a strategic alliance with an Indian company that can
provide a buffer from possible political tension. !urthermore, Starbucks can face some
opposition from the e,isting competitors G""D, *arista, etc.H through the use of political
influence and delaying tactics. -lthough situations like these are possible to happen, the
chance is low taking into account that the Indian market is large enough to hold more
companies and the leaders in the Indian gourmet coffee industry will not be strongly
affected by Starbucks entry.
b) Econo(ic factors
)he factors like inade$uate 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. #owever, the liberaliOation measures taken in
6556 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 ta, rates, and broke public sector
monopolies. !urther, reforms have been seen in retail industry with Indian government=s
approval on !DI up to /6P on multi brand retail. )he country has recently become is a
ma(or e,porter 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.
c) Socio&Cu*tura* factors
-s (ob opportunities increase in India, money stays in the palms of the Indian consumers
enabling them to reinvest in the Indian economy. -ttitudes towards money are also
changing. )he mantra for the average Indian family, as in most of -sia, has always been
saving, but young Indians today, inspired by (ob opportunities, have switched to spending
e,travagantly. )he attitude of the young generation is to en(oy life and spend money.
-ccording to sources the population of the country consists of more than 70P of the
people between the age of 6/'/5. -lso with the westerniOation of the social trends more
and more young people trust western brands and prefer foreign goods. )hey also go for
the same trends and try to mimic the same status of e,clusivity young people in the :S
and &urope look for. )his places Starbucks at a very dynamic position, where it has a
good opportunity and much possibility to capture $uick customers. )he only problem is
that they will not be the first on the market with specialty coffee offering and their
otherwise leadership position could strongly be undermined and only sustained by their
brand image.
Ne,t to that, the culture and cuisine of India poses a very interesting challenge. )he mi,
of traditional tea'drinking population together with the various differences between
Muslim and #indu and the growing difference among various regions of the country,
make it e,tremely to divide and place is concrete consumer groups. Still the most obvious
separation with regard to coffee consumption is visible in the city versus rural areas
separation with the urban population having distinctly higher preferences for coffee. Still
the numbers of coffee consumers remains low with slow negative growth figure between
3000 and 300/ ' 7.9P and 3.0P respectively.
+) Tc,no*o-ica* factors
Starbucks entered into a strategic alliance with )ata "offee %)D., the largest coffee
producer in India. With signing this agreement, Starbucks finally found the partner it
needed. - company which met all the conditions and standards followed by Starbucks.
)ata proved its $uality standard by winning a gold medal for the best >obusta coffee in
the world.
)he factor of $uality is very important at the Indian market as high $uality coffee beans
are easily available. With this strategic relation with the )ata 2roup, the company,
Starbucks, might be able to succeed with competitive pricing in India.
-nother important technological factor is the lack of infrastructure in India. #owever,
having such an e,perienced local partner, Starbucks does not face any problems with this
issue. It also provides free Wifi at all its outlets in India, with a great ambience.
) L-a* factors
"ompanies may be public or private but the common public is not allowed to buy shares
of the company and there can only be up to fifty shareholders. Import duties are applied
to almost all goods entering India. )he tariff system is based on the #armoniOed System
G#SH and tariffs are in the ;0 to 70 percent range for basic raw materials, 70 to 600
percent for semi'processed goods, and 600 percent and above on finished and consumer
goods. Shipments to India re$uire a commercial invoice, a packing list and bill of lading.
- certificate of origin is not re$uired on imports originating in the :nited States. !DI
approval though has come to rela,ation. %ower tariffs and lower barriers to enter have
made the Indian market e,tremely promising and willing to change.
f) En.iron(nta* factors
Starbucks believe in the importance of caring for our planet and working with and
encouraging others to do the same. -s 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 possible. With
these integrated environmental responsibilities, the company will obviously build its
image in the eyes of Indian "onsumers as well. )he ecological concerns regarding the
farming of -rabica coffee must also be addressed in order to ensure consistency in
productivity.

COMPETITION

"af+ coffee day has 3,000 locations mostly in India, with plans to reach /,000 stores
worldwide in the ne,t five years, whereas Starbucks has only 6/ till now. It has created a
stir in the coffee industry with (ust 6/ cafes which are doing very well. In the days after
its first store opened in @ctober in a chic area of Mumbai, lines stretched so long that
security guards were forced to implement a one'in, one'out policy. Starbucks plans to
setup many such cafes in the near future and give a tough competition. "urrently in 3068,
Starbucks has 9 outlets in Delhi and 4 in Maharashtra. &ven though Starbucks has a
number of competitors it has adapted well in the Indian markets and giving a tough
competition to the other brands.
PRO$UCT LI%E CYCLE
Since Starbucks has (ust entered the Indian markets a year back, it shall come under the
introduction stage which is slowly moving towards the growth stage.
Intro+uction
Starbucks is currently in the introduction stage. It has started earning sales. )his stage
re$uires a good deal of promotion. It is a /0'/0 partnership with )-)- and thus becomes
easier for Starbucks to get into the Indian market. Since )-)- group is in India since
years. It knows the Indian market well. )hus, can develop marketing strategies according
to the Indian tastes and needs more efficiently. )his stage involves high costs and
investments to be made, less sales and profits. )he company has to make it aware to the
people of their entry.
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""D
Starbucks is making its way towards the growth stage. It has already e,panded its outlets
in India with 6/ cafes in India and plans to set up a total of /0 Starbucks cafes. )his stage
has a high growth rate, which means higher sales and more profits. )here is lot of
promotion and advertisements. -lso the cost per unit decreases. "ompetition is also high?
e.g. 2loria (eans, costa coffee, coffee bean and tea leaf as well as caf+ coffee day and
barista.
Maturit0
In the maturity stage, the end of stage of the growth rate and sales slowdown as the
product has already achieved acceptance in the market. )here is severe competition, and
need for innovation in order to compete in the market. -s we can see from the graph,
"af+ coffee day has already gained acceptance in the market, having a huge number of
outlets. It is now facing tough competition from new entry Starbucks and other prevalent
brands.
$c*in
When sales decrease and continue to drop to lower levels, the product has entered the
decline stage of the product life cycle. In the decline stage, changes in consumer
preferences, technological advances, and alternatives that satisfy the same need can lead
to a decrease in demand for a product.
-s we can see from the above graph, *arista %avaOOa is almost at the verge of declining,
but if it gets more innovative and competitive, it can strive in the market. )here has been
a decline in the number of outlets of barista due to losses. It has also got new competition
from Starbucks.

PERCEPTUAL MAP
)he graph shows that? as far as $uality is concerned, Starbucks is better than both *arista
as well as caf+ coffee day. *ut pricing wise, Starbucks has a slightly higher price than the
other two. It clearly shows that *arista has the lowest $uality of the two having a little
high price than ""D. -nd ""D is in a good position of fairly good $uality and affordable
price.
Starbucks, with )atas as partner, has opted for competitive pricing that is nearly half the
coffee chain=s charges elsewhere in the world '' with a cup of coffee costing about Rs. 40
for a small offering and Rs. 67/ for a large one. Starbucks is known for its high product
$uality and as a premium brand.
- hot coffee at Starbucks will range from Rs. 40 to Rs. 67/, while a cold coffee will cost
anywhere between Rs. 630 and Rs. 300. )he ""D sells hot coffee at about Rs. 40 and
cold coffee at about Rs. 6/0. )hough ""D has a number of branches in India, Starbucks
has created a buOO and penetrated in the Indian market and differentiates itself from other
cafes already prevalent.
-s far as for *arista, it is not doing well, since there is no innovation. )he $uality is not
that good as compared to others having almost the same price range as "af+ "offee Day.
Q6 Why did you decide to come into India with a partnerR We do not have any
restrictions in !DI in single brand retail. Why did not you (ust do it on your ownR
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#oward SchultO? India is like no other market in the world. )ata=s position in India is very
uni$ue. It is a company that has uni$ue capabilities in terms of infrastructure. *ut mostly
their values were so consistent with ours, building a company with a conscience, treating
people well, taking care of the communities and we thought this was an opportunity to do
something together that we (ust could not do ourselves.
Q3 No doubt )ata is one of the biggest corporate houses in India. It is their second
coming in the coffee space. )hey ventured into the coffee retail space with *arista by
holding a minority stake and that really did not go very well. #ow did they sell
themselves to you toR
#oward SchultO? )he coffee market here is ferocious in terms of competition. )here are
so many players trying to do what we think we can do better. What )ata brings is a
uni$ue perspective in terms of real estate ac$uisition capabilities, the opportunity to
integrate Starbucks into )a( #otels, the ability to bring food from the )a( into Starbucks
stores and the capability that we (ust could not do on our own (ust in terms of the
infrastructure and distribution. )heir previous e,perience had no bearing whatsoever on
what we thought would be a fantastic partnership.
We are here to build a ma(or business and when I say ma(or business, we think over time
India will be one of the largest markets in the world for Starbucks. We also think that the
competition has done us a favour. )hey have educated the market and created lots of
consumers. @ur own research suggests that this market is perhaps like no other. )he
awareness of Starbucks is so large here and there is so much pent'up demand that we
think that over time this is going to be one of the best markets in the world for Starbucks.
I do not think we could have done it without )ata.
Q8 &arlier we were given to believe that you had a /0 outlet target for Starbucks in India
by the end of 3063. Do you have a revised plan now on how you are going to be
e,pandingR
#oward SchultO? I do not know where that number originally came from, but I am not
here to say how many stores or how soon. I will tell you we are going to build a very
large successful business here.
Q; Sour pricing is significantly lower from the way you price a cup of coffee in the :S.
Starbucks has a policy of not bending their pricing too much. 2iven that, why did you
break the rules for IndiaR
#oward SchultO? I do not know if we broke the rules. We want to create a value
proposition and as much accessibility as possible. We are sourcing and roasting coffee in
India. )his is the first time we have ever done that anywhere outside of North -merica
for store opening. )his gives us a competitive advantage as well, but we want to win here
and we have created a pricing strategy that will be very competitive and put us in a
position to succeed.
Q/ #ow will you ensure that the Starbucks e,pansion in India will be both sustainable
and profitable given that a lot of premium players who entered the market, to name a few
such as "osta "offee, 2loria <ean=s, "offee *eans, are all struggling and have not yet
been able to make a dent in the Indian marketR
#oward SchultO? Ses. We have heard this many'many times in <apan, in "hina, in
&urope, in Me,ico that Starbucks is not going to succeed here, no one else has, you are
an outsider, etc. We are going to take the long view. )his is not a sprint, it is a marathon.
We are going to bring a $uality product that does not e,ist. )he e,perience will be so
significantly different. @ur people will be passionately committed to service and are
highly trained and the e,perience of the store will be significantly different. Sou can not
compare the Starbucks brand and reputation what we are going to bring to this market to
what e,ists here. What we are bringing is going to be new and e,citing and completely
different.
Q7 What is your purpose in the Indian market considering we are populated with
restaurants, roadside eateries, etcR
#oward SchultO? We want to create a coffee e,perience that is a stunning e,perience in
terms of $uality. We want to create a physical environment that does not e,ist and when
people see it, it will become the third place Gthird most popular place after home and
workH. !rom a reputation standpoint, we also want to create the kind of company that is
steeped in humanity and gives back to the community and we will do that here as well.
Q9 Sou have specialised food menus, catering to the Indian palette. What is so special
about the menu that you deemed it right to be served at a Starbucks outletR
#oward SchultO? We got great advise from the people at the )a( about the kind of food
that would appeal to the Indian customer. .eople have been pretty e,cited about the food
at all the tastings that we have done. )he food is very different than anything we have
done anywhere else because it is cue to the Indian palette. It will be hot, it will be cold, it
will be savoury and sweet and will be vegetarian as well as meat. I suspect that the food
will be a higher percentage of sales than we have seen in other markets.
Q4 What about the fact that India is traditionally not a coffee drinking nation, but a tea
loving nationR
#oward SchultO? Not any more. Walk the streets of India. )here are so many coffee
players doing pretty well. )hat gives us a lot of confidence that the winds are going to be
at our back.
Q5 Is there an element of customisation that has gone into designing outlets for city 1
localityR #ow does the balance between standardisation of the brand and customisation
for city 1 locality work for StarbucksR
)he stores are a critical part of the Starbucks e,perience that we offer to consumers. &ach
and every one of our flagship store actually incorporate very significantly the culture and
the tradition of the country. )he designers marry the elements of Indian tradition and
craftsmanship with the modernity elements of Starbucks. I give full credit to our
designers as they balance the elements as there is a high e,pectation that people have
from a Starbucks store that they have visited abroad.
)he designers have worked across many markets and their understanding of the Indian
ethos that they have incorporated well and it differs from store to store. )here is no magic
number saying that this much of Indian sensibility and this much of core Starbucks will
be there. Its a fine balance they maintain.