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“Our focus is to grow the brand and to build the retail network. If we find something attractive, we would look at it. These are Board decisions and we have great leaders on the Board who will evaluate opportunities already available in the market or as and when they come,” said Avani Davda, chief executive (CEO) of Tata Starbucks, the 50-50 joint venture with India’s Tata Global Beverages.
Starbucks’ statement on being open to negotiation comes at a time when there are some indications about feelers being sent to at least one coffee chain in India. However, declining comment on any particular opportunity under the scanner at present, Davda said, “When opportunities come our way, we are open to assessing them and our focus is to build each store very thoughtfully and be true to the experience we are providing. The challenges in growth for a retail brand are the same in any Asian economy or in the US, be it the supply chain or real estate.” Starbucks, the world's largest coffee retail chain, has been making some acquisitions recently to strengthen its portfolio and grow beyond coffee. Its has used its $30-million acquisition of juice maker Evolution Fresh in November 2011 and $100 million acquisition of Bay Bread LLC’s La Boulange bakery chain in July 2012 to strengthen its existing cafes. It also acquired specialty tea retailer Teavana Holdings Inc for over $600 million and opened its first tea-bar in Manhattan this year, with the brand being retained. Starbucks sells packs of tea in some of its cafes.
Starbucks has a delayed entry into Bangalore. Its first store at Koramangala in Bangalore is surrounded by three Cafe Coffee Day outlets, which are just 500 metres from each other. The presence of global coffee retail chains Barista and Costa Coffee in India are also significant but the number of their outlets put together is only about a third of the 1,500 outlets operated by India’s home-grown Cafe Coffee Day. Starbucks plans to open two more outlets in mall locations by the end of 2013 in Bangalore, home to Barista’s 30 cafes and Cafe Coffee Day’s 191 cafes, 11 lounges and one super premium outlet besides 93 express formats.
However, Starbucks is not deterred by the omnipresent Cafe Coffee Day, saying the response received by its stores in other parts of the country has exceeded its own expectations and sees a “huge pent-up demand” for the Starbucks brand of coffee. “The Indian consumer is seeking novel and international experiences and if you see the numbers on Indians drinking coffee outside home, it is a very encouraging prospect,” said Davda.
Tata Starbucks is present in Mumbai, Delhi national capital region and Pune.
John Culver, group president — China and Asia-Pacific (channel development and emerging brands), said the response received by Seattle, Washington-based coffee retail chain in India displays “tremendous opportunity” in the country. “Over a period of time, India will emerge as one of the top-five markets we operate in. When we came to India, we not only saw a huge market but a large opportunity to source our coffee, roast it and perfect it to serve in our 90,000 stores across the network.”
Culver said he visited Karnataka along with chairman and CEO of Starbucks Howard Schultz and visited the coffee plantations and saw great opportunity to source high quality coffee grown in the region. Davda said the company has also made financial commitments to community projects in the region.
“India is the source of high-quality coffee and Starbucks sources the top three per cent of the Arabica in the world. We’ve worked very closely from the coffee here and developed an Indian estates blend. What we like is the hint of cocoa and spice in the medium roast,” said Culver, adding the firm is evaluating opportunities to take Indian coffee to its international stores as the Arabica grown and procured in India can be roasted at its facility in Coorg in Karnataka, one of only six such roasting facilities across the globe but said determining a timeline for the same is still work-in-progress.
“We’re continuing to evaluate it. I cannot give an immediate timeline but knows that this is part of our story and growth going forward, India is going to play a big role in it.”
THE COFFEE CHALLENGE
* Tata Starbucks' first store in Bangalore, after Mumbai, New Delhi & Pune, surrounded by three Cafe Coffee Day outlets
* 1,500 outlets operated by Cafe Coffee Day across India
* 500 outlets operated by Costa Coffee and Barista combined
* India set to be among Starbucks' top five markets, says John Culver, group president, China and Asia-Pacific (channel development and emerging brands)
