From coffee to masala chai: Decoding the Indianisation of Starbucks

Tata Starbucks will be celebrating 10 years in India this year. It has introduced a range of beverages to cater to Indian tastes, including Cardamom Chai, Masala Chai and Filter Coffee at its outlets in Bengaluru, Bhopal, Indore and Gurugram. So what took the brand 10 years to ‘Indianize’ its offering, introduce an entry level Picco size for its beverages and what are the company’s expansion plans for the India market. Storyboard 18 caught up with Sushant Dash, CEO, Tata Starbucks to find out more.

You have introduced an Indianised Starbucks menu. How has it fared and what is the consumer reaction to it?

What we are doing as a pilot in these four cities are three things. First part is the launch of a new size Picco. It is 6 oz. It is the first time that we are launching it in India and it is specific to the Indian market. The reason behind launching a smaller size is that in India the amount of beverage that we consume even when we have chai at home or when we go to a ‘tapri’, we don’t consume huge quantities of liquid. The share of stomach that Indians are used to is much lower as compared to what the West is used to. So there are some people who want a smaller size beverage. That was the idea.

The second thing is that we realized that when people come in groups, there will be somebody who doesn’t want the offering that we have or the coffees that we have and want something that is more familiar. So what better than ‘filter coffee’ and ‘masala chai’. So that is the reason why we did the second set of launches which is three items-filter coffee, tea in two variants: masala chai and cardamom and milkshakes. Milkshakes again, many times we see only on weekends families come together with kids and Indian families do not want their kids to have tea or coffee. The idea was to provide for that, hence milkshakes.

Similarly in terms of food, one of the complaints that people had about our food was that portion size was way too large many times. And many people when they come between two meals or after lunch, they don’t want to have a huge portion of dessert or sandwich. Hence we have launched three categories of food-bite size, which is for these in-between occasions. The other thing which again solves one of the consumer issues is that when people come in groups they want to share. What we have also launched is something called 'shareable'. And the last thing we have launched is freshly assembled sandwiches. And yes, some of the items that we have do have regional flavors.

So I would look at it as, the core still remains but a few more items that makes Starbucks more familiar to the Indian consumer and makes it more inclusive.

It has been 10 years since Starbucks entered India. What took you so long to ‘Indianise’ the offering?

There is always a good time to do this and this might be the right time for us. When you have a new brand come into the country, there are certain expectations. Mainly a brand like Starbucks, which many people have experienced, people know about. So, I think in the first phase you need to establish what the brand stands for in terms of its core competence. What the brand is known for. Because if we had not done that and made the brand strong enough then I don’t think we would have won the right to go ahead and do the new thing. That’s the fundamentals of marketing.

What does it take for a global brand to Indianize?

You need to remain true to what the brand stands for at the core. We will always be about coffee, we will always be about food that goes as a supplement with coffee or food that Starbucks is globally known for. You can’t compromise on that. I cannot become ‘hot tea’ or ‘Indian tea house’ in that sense. That is not what Starbucks is. This can only be the periphery. This can be to give comfort to the Indian consumer or those who come in a group who don’t want the core offering to provide for them.

“What we have always believed is that Indians are value conscious, they are not price conscious. I don’t look at Picco size from that perspective. Yes, in a sense, it could be a secondary benefit that the entry price point now at Starbucks becomes lower than what it used to be. And hence there could be more comfort. Because there was a perception that Starbucks is very expensive”

It is a challenge. Which is why we have launched it only in four cities we want to learn. It is a learning experience for us. While we know what the consumer wants. But how we do it, that balance is very important to get. Hence, the pilot.

Is Picco also introduced to make the offering more affordable and reach out to a larger audience?

I think for us the more important point was the consumer insight that many a time, I find my drink too big. That is a truer insight, price is more of a value connotation. We have always believed that Indians are value conscious; they are not price conscious. I don’t look at Picco size from that perspective. Yes, in a sense, it could be a secondary benefit that the entry price point now at Starbucks becomes lower than what it used to be.

10 years of Starbucks, 30 cities and 280 stores. How do expansion plans stand?

Last year was the highest number of stores that we opened. We opened 50 stores in the calendar year. We will continue with the expansion. Growth is one of the things we believe in. We believe in expansion both in the cities that we are currently in and we will continue to look out for opportunities in the near future.

How are the global macro-economic factors and inflationary headwinds impacting your business?

Inflation has been a part of business reality since the second half of last year. Logistics, supply chain has been an issue because of various macroeconomic reasons. In terms of coffee bean prices, there has been an inflation there. Inflation has been to the range of 8 to 10 percent. We have to live with that. And we will have to live with the fact that it is a part and parcel of what is happening across the board. It is not just something that is affecting us, it is a part of the reality of the larger ecosystem.

How are you dealing with it as a company?

So we have looked at a lot of areas to optimize. We have to ensure that we are as competitive as we can be and try to absorb as much of the inflationary pressures and not pass it on, to the extent that we can. That is what we have been doing till now. We will wait and watch as we go forward.