Starbucks, the world's largest coffeehouse chain, has finally opened its doors to Indian consumers with the launch of its first store in a Tata-owned property in south Mumbai. And the Seattle-based company had a few surprises up its sleeve for those who thought that the firm would outprice itself in the Indian market, keeping with its premium positioning.
The 18,000-outlet company, which operates in 60 countries, has opted to price a cup of coffee in India between Rs 80 and Rs 200, while the food, an assortment of which is on offer at the store, is also priced in the range of Rs 80-200.
When compared with the entry-level price of coffee at rival Cafe Coffee Day or the UK-based Costa Coffee, then Starbucks is pricey. An espresso at Cafe Coffee Day is available at Rs 45. At Costa Coffee, it comes for Rs 65.
However, compared to Starbucks’s pricing in the US, the brand has come down a few notches here. A cup of coffee in the US, for instance, is priced at $3.5 or Rs 188 (where 1$ equals Rs 53.84). In neighbouring China, Starbucks is priced more or less in line with its rates in the US — at about $3 to $3.5 a cup.
Analysts say that Starbucks has opted to take the middle road with its pricing in India. That is, it is neither too high nor too low. Harish Bijoor, CEO of Harish Bijoor Consults, says: “Effectively what Starbucks has done is that it stratified the market by adding one more layer to it. So you have Cafe Coffee Day at the bottom, Costa Coffee in the middle and Starbucks at the top. So even without being too expensive, Starbucks has in a sense stayed true to its brand promise — of delivering a premium service.”
According to Howard Schultz, chairman, president and CEO of Starbucks Coffee Company, the idea is to reach as many consumers as possible with its pricing in India. Experts say that while the average college student, an audience that cafe chains have traditionally targeted in India, may find Starbucks a little on the higher side, the young working professional will not. It is this market that Starbucks appears to be targeting.
This again ties in with Starbucks stated premise of being the "third place" outside of home and the workplace to hang out. Young adults, say experts, enjoy that.
Why the attention to detail?
According to the 59-year-old Schultz, who has been credited with changing the fortunes of Starbucks after joining the company in 1982 as director, operations & marketing, India is too large an opportunity to ignore. He is speaking of the potential that the market here presents. At Rs 1,000 crore, the coffee chain market is growing at about 25 per cent per annum. Schultz says that he sees the Indian operation growing into one of the largest for Starbucks going forward. He declines, though, to indicate specific numbers.
The company proposes to be aggressive with its foray here, according to Schultz and R K Krishnakumar, vice-chairman, Tata Global Beverages (TGB), the company with whom Starbucks has a 50:50 joint venture in India. Next week, two more Starbucks outlets will open in Mumbai - one at the Taj Mahal Palace in Colaba and the other at the Oberoi Mall in Goregaon.
A few more stores will dot the city, said TGB executives, and then brand will expand its footprint to Delhi. The Delhi leg, says Schultz, will kick off early next year.
According to persons in the know, Bangalore could be next up, although neither Schultz nor Krishnakumar confirmed it.
The partnership with Starbucks, however, would be extended beyond coffee into areas such as exotic teas and packaged water, said Krishnakumar. TGB is also speaking to Starbucks on the possibility of taking its Himalayan packaged water to outlets across the globe. At the moment, Himalayan retails at Starbucks stores in India only. “Exploratory talks have begun and we are looking at how this partnership can be expanded," said Krishnakumar.
