Starbucks and the battle of the bean

Battle of the bean

Starbucks enters the Indian Coffee Chain industry

Starbucks launched its first two outlets in India in partnership with the Tata Group with much fanfare. And why not? It’s the most cherished coffee shop brand the world over. So what does it mean for Starbucks, the coffee chains in the market and the consumers?

Starbucks has been known for its amazing flavors of coffee in both hot and cold drinks segment. The entire experience of going to their coffee shop is something people mention in literature, conversations and FourSquare check-in’s. But in India, they have just been stories being told by travellers and nothing more. Yet, they had a reputation of being a high-end coffee shop to go to for the best coffee experience.

What ever the reason for the delayed entry into the Indian market, I don’t think it is late for them, even remotely.  And so, I think there is going to be an interesting competition taking place over here which will delight the consumers and benefit not just the patrons of coffee shops but also the coffee industry at large.

The Indian Market
Coffee has always been a South Indian drink for as long as I know. To be more specific, its been filter coffee or nothing. The rest of India is predominantly a tea drinking population. So the challenge for coffee shops came not only from the tea drinking consumers but also from coffee loving folks.

Coffee shops have established themselves by offering consumers more than mere coffee flavors, they offered them experience. It’s a place for socializing, corporate meetings, waiting, dating and probably finding some me-time too. People read books, surf the internet, chat with friends and have their regular handouts at.

The rise in coffee consumption can be probably be attributed to habit. Offices have vending machines which dispense coffee made from crushed coffee beans and fresh milk. No premixed powder canisters or refill bags here. And as occasional coffee drinkers too you will find the change in taste and flexibility to personalize your coffee the way to would like it.

Starbucks has entered at a time when coffee has settled on the taste palette of the entire nation (in metro cities at least). Saved them a lot of effort, I must add here.

The brand loyalty factor
Indians are not very brand loyal. I know a lot of people would not agree with me and whip out examples of brand loyalty across industries. But you need to understand one thing here, the economy of the country is being driven by two different markets – Cosmopolitan and Rural. Coffee shops are targeting cities and its the rising middle class that is driving the growth. This segment is very cost conscious and they always look for the next best bargain, if ever the opportunity arises.

The industry, most of the time, offers no help when they try to balance costs by affecting the product and service quality. This, as any brand guru would tell you, will make the consumer suspect any brand.

The coffee chain Barista suffered the consequence of this error of judgement and so have other coffee chains over the years. Starbucks might have made a wise choice by partnering with a local conglomerate like the Tata. Two supporting arguments include –

  1. The Tata’s are a reputed brand in India and aligns well with Starbucks corporate social initiatives
  2. Instead of following a licensing model, a partnership will ensure better control over the quality of their entire operation.
  3. Tata’s are in the hospitality business for ages. Starbucks can leverage this in the long run to expand their services beyond coffee shops. Also, the fact that the Tata’s are a big and successful group of companies means that your partner never be a weak link in your India plans.

Freshness for the consumer
Any competition is good for the market and the consumers. The entry of Starbucks will only ensure that the rest of the coffee chains buckle up and get their acts freshened up. There might be pricing wars, more flavors, offers and loyalty programs on the cards in future. What ever they might be, the fact remains that consumers always benefit from a good and healthy competition.

A win-Win situation
The industry as a whole should look at this development as a positive one. The entry of Starbucks will create excitement in the market and in the minds of consumers alike. The coffee industry will continue to benefit from the rising consumption of coffee by the masses.

Perhaps its time for tea manufacturers to take note and bring innovation in their products to avoid any major shift in equilibrium. It might not happen now, but you cannot be very sure. Its better than being told to walk up and smell the coffee.

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