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TATA STARBUCKS COFFEE INDIA

By, Arjun SinghDivision BRoll no. 18Batch 2013-15 SIMS, pune

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Generic view Coffee kiosk market • Starbucks is the largest coffee house company in the world 17012 stores in

50 countries

Parameters CCD Barista Costa Coffee Starbucks

Market Share 2011

75.5 % 19% 4.6% -

Stores 2011 1100 240 90 4 (2013)Products & Offerings

Cappuccino, expresso, café mocha, Irish coffee, ice teaSandwiches, burgers, cakes

Cappuccino, expresso, café mocha, Irish coffee, ice teaSandwiches, burgers, cakes + Salads, desserts, pastas

Cappuccino, expresso, café mocha, Irish coffee, ice teaSandwiches, burgers, cakes , muffins, wraps, pastas

Cappuccino, expresso, café mocha, Irish coffee, ice teaSandwiches, burgers, cakes + Salads, desserts, pastas

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Indian Coffee market Analysis

Industry rivalry :Major rivals- Café Coffee day (900 Stores), Barista (200) Other new players- Costa Coffee, Coffee bean

Threat of substitute Product Consumers may opt to reduce Caffeine intake due to health reasonsTea is very popular in India

Bargaining Power of Suppliers Arabica Coffee Prices soared 77 % from 2010-12 (Data monitor) which has hurt bottom lines for competitionBut Starbucks getting coffee from partner (TATA), so power of suppliers can be regarded as weak

Threats of entry Entry barriers are relatively low FDI in retail was 51 % which is now increased to 100 %Starbucks being a global coffee chain, don’t have much capital problems and they have the experience to manage large economies of scale India is the 6 the largest producer of coffee (310000 tonnes annually) so sourcing coffee wont be a problem

Bargaining power of buyerswith the advent of MNC in food and beverage sector (McDonalds', barista lavazza) consumer is faced with lot of choices, thus it will be difficult for Starbucks to influence buyers to pay for their premium products.

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Comparative analysis

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

7.40%

22.70%

69.90%

CoffeeTea Other hot drinks

India hot drinks market segmentation :Source Data-monitor

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Strengths International popularity of the Starbucks BrandAccess to TATA’s premium Robusta and Arabica coffees (Agreement)Superb marketing and positioning skills of StarbucksTata as a cultural fit for Starbucks will help in building core competences of each other One of the strongest franchises in the world with more than 6500 licenses shops around the world Sophisticated atmosphere , music , interior design and artwork Have a lot of flavour variations

WeaknessImage of luxury coffee outlets High prices of coffee is felt as a barrier in South and north India (per capita income in India is as compared to other star buck's markets)Coffee dominant business, need for costa coffee to diversify Certain rigid standards and policies at outlet (They apply the same business model, regardless of culture and values of the country they are operating in)The entry of Starbucks aimed at out-of-home coffee consumption and this may effect alliance of Tata coffee with Barista

Opportunities Huge market for coffee consumption English speaking population Growing middle class and increased spending

power Young population Rating of coffee outside home is better than tea

outside home specially in north and east India Favourable cost of labour Availability of workforce Tea based culture of India an opportunity to

provide more tea based drink

Threats India is a tea based culture (20 % global consumption ) Home-grown brands like CCD, Barista Low Per capita income, high price of coffee Increased health consciousness against foods offered

by coffee chains Visiting cafes is not a frequent habit among Indian as

compared to western world Fast food chains like McDonald's , burger king also

adding quality coffee drinks to their menu Rising prices of coffee putting pressure on profit

margins

Comparative analysis SWOT (Conti.)

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Business overview & strategy •Business overview

Mission statement

Joint venture with TATA Coffee Ltd. (50-50 JV)

Non binding agreement

Starbucks and TATA Coffee ltd to work towards developing and improving the profile of Indian grown Arabica Coffee

Per capita consumption from 85 grams in 2009 to 94 grams in 2012 (Data monitor )

•Strategy Plans to open 50 stores in the country by the end of 2013

Plans to explore retail properties of Croma, Star bazaar , Trent and Indian hotels belonging to the Tata group to open stores

Franchisee model for standalone cafes in future

Plans to open kiosks at Airports

Coffee shops normally close at around 11 pm, Starbucks considering the option of closing at midnight thus adding a unique feature

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Conclusion • Starbucks is another industry stalwart to enter the Indian markets due to vast potential and

huge untapped market where Indians are influenced by western Lifestyles • Indian consumers have always welcomed change when it comes to their taste buds • World’s largest young people population (aged under 30) with growing Purchasing power • Timing of their entry couldn’t be better with 100 % FDI in single brand retail• It comes as a breath of fresh air with CCD’s, Barista, costa Coffee almost losing their sheen • India which is the 5 largest producer of Coffee and cheap skilled manpower could mean more

profit margins for the Company • 50-50 JV with TATA will act as symbiotic relationship, both will improve each other’s core

competencies

Thus Coffee Culture is poised to be deeply in-grained into Indian culture in the near future and this will mean great opportunities for this partnership.