Going forward, India will play a big role in Starbucks' international strategy: Michael Conway

[L-R] Emmy Kan, president, Starbucks coffee, Asia Pacific; Michael Conway, group president, International and Channel Development, Starbucks and Sushant Dash, CEO, Tata Starbucks at the launch of India’s first Starbucks Reserve store in Mumbai

In October 2012, Howard Schultz and Ratan Tata launched the first ever Tata Starbucks store in India at the iconic Elphinstone Building, Fort, in Mumbai. On October 18, Tata Starbucks marked 10 years of its presence in India. The first ever Tata Starbucks store has now been revamped and relaunched as the first Starbucks Reserve store in India. The concept of Reserve stores is to provide "the signature Starbucks coffee experience”, with a special coffee and food menu for its customers.

Starbucks in India launched as a 50:50 joint venture between Starbucks Coffee Company and Tata Consumer Products. Currently, there are more than 300 stores in 36 cities across the country. This year, Tata Starbucks also marked its largest store expansion in a single year, with its entry into 14 cities. Forbes India spoke with Michael Conway, group president, international and channel development, Starbucks, and Sushant Dash, CEO at Tata Starbucks, on the company's India growth story.

Edited excerpts:

Q. What has been the growth story for Starbucks in India, which is traditionally a chai-drinking market?
Sushant Dash: I think it has been a phenomenal journey. In 10 years, we are at 300 stores and what gives us the most pleasure is that it's not just the metros and the large cities… today we are there across the length and breadth of the country. We are present in 36 cities, including Tier I and II cities. It gives you the confidence that while it is still a predominantly tea-drinking market, coffee is indeed growing and that there are consumers who want this experience.

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Q. How important is the Indian market for Starbucks globally?
Michael Conway: There has been an acceleration of store growth in this market, making India one of the fastest growing markets from a store growth perspective. For us, any market with over 100 stores is a meaningful-sized market, so at 300, we are getting to a massive size.

It is indeed a tea-drinking market, but over the last 10 years, we've seen that there has been a significant acceleration of coffee consumption—still small compared to Europe and Japan. But we're confident that India has a lot more potential going ahead and the [Indian] market will play a big part for our international strategy.

Q. How have you tackled the local competition over the last 10 years, especially in Tier II cities?
Dash: With India, there is no shortage in terms of consumers. Though it is a tea-drinking market, and coffee is small, it is definitely growing at a fast pace. In that sense, competition is great because it helps the category grow faster. As far as we are concerned, it’s all about providing our customers with the "Starbucks Experience", getting the right stores, right ambience, making the right coffee, craftsmanship, innovation and connection with the consumer. As long as we do these things right, we are confident that we'll continue growing.

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Q. Traditionally, India is known to be a price-sensitive market. What kind of changes did you have to make for the pricing here?
Dash: I don't think we've made too many major changes to the pricing strategy. I don't think Indians are price conscious, I think they are value conscious. There is a difference; it's not always about the prices being lower… it is about the total value proposition. We have managed to grow well because we provide consumers with total value proposition—the store, ambience, coffee, food menu. That's what the consumer is looking for.

Q. Would you say Starbucks is a premium brand the world over?
Conway: Yeah, I think the brand has a premium positioning—in terms of how people view it, and aspire, and that's why whenever we open in a new market or city, people queue around the corner because they want to experience that. We are working on making it a premium brand, but not so special for special occasions. We want you to feel like you can come any time, sit and enjoy.

Q. Given that it is a premium brand, what has been the reception of the brand for Tier II cities?
Dash: It has been very positive, and that's given us the confidence to expand. Last year, we opened in eight new cities. This year, in the first half, we have already opened in 10 new cities, including places like Siliguri, Calicut, Bhubaneswar, Guwahati, Jalandhar, Ludhiana, Anand and more. For openings, customers in all these locations queued up, which just shows that there are consumers who want the Starbucks experience.

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Q. What kind of strategies have you adopted, specifically for the Indian market?
Conway: A challenge we have in many markets that we enter into is balancing the global menu with the local tastes and influences. Getting that balance right is what is important, and this team has been doing the same from the very beginning—not just with the food menu, but also finding the right locations for stores. So I think this is just the beginning and we're starting to realise our full potential here.
While we might not take the exact food menu from India to other global markets, I think it’s the principle of being able to adapt which is very interesting. When I travel to Japan or Korea, I look forward to seeing not just those common items that you see around the world… I get excited to see how the local market has adapted to the local customers. That's what makes every customer say, "That's my Starbucks".

Dash: It's about getting that balance right. When a customer walks into a Starbucks [store], they have certain expectations. You need to be true to those. At the core, you need to be about coffee, connection, warmth, and you can't compromise on that. But while focusing on them, you also need to bring in a bit of familiarity. So the innovation is in how we balance out the core and familiarity. For instance, a food menu… while we might want to give a taste profile that is Indian, we'll do it in a bread or croissant form—core to Starbucks' global menu.

Q. Tell us about the launch of India's first Starbucks Reserve store?
Conway: Reserve allows us to take coffee craft and push it even further. So, we have Reserve stores in markets all across the world. It allows us to first find the world's best coffee, small lots, ones we can't take to every store, but we can take to Reserve stores. We roast these in different unique ways to get the right profile and then we bring it in a store like this [Reserve] and we have different ways to brew, which allows customers to have an elevated coffee experience. We think the Indian market is completely ready for a store like this now.