What we've learned over the years is that the novice generally starts off with a less intimidating beverage maybe black coffee in a small size but over a year or so they begin to move up to a more complex beverage, a stronger beverage and a larger size
Ahead of the opening of Starbucks store in Mumbai’s tony Horniman Circle neighbourhood Howard Schultz spoke exclusively to Forbes India on the store, the coffee, its pricing and why they plan to go slow initially. Also read our story where Forbes India was the first to report on the location of Starbucks’ stores as well as the timing of the launch.
Q. Starbucks has set shop in several emerging markets. What are your thoughts on coffee chains already present in India?
The most encouraging thing is that the execution of the existing players is not up to the Starbucks’ standards in terms of the quality of the coffee and the experience. Yet. So the opportunity here is big for us unlike China. When we went to China 13 years ago we were pioneers and so we had to educate the consumer.
That’s not the case here. This gives us great confidence. We have to earn the respect of the Indian consumer and that of the market.
Q. What has your research on the Indian consumer shown?
We are not heavily dependent on consumer research. I am not a huge fan of it as a discipline. Having Tata’s as a partner and visiting coffee stores has given us all the insight we need. The amount of people who have been to Starbucks (overseas) and live in India is a very large number and the awareness of the brand is huge. The fact that Indians are drinking a lot of coffee whose quality according to us is not good gives us a lot of confidence. We’re doing something here that we have never done before – we’re sourcing and roasting Indian coffee.
We’re going to play that up in a big way. The core product is sourced and roasted here. It is going to be ultra fresh. We have taken a lot of effort to produce the perfect blend.
Q. India is a price sensitive market. How does Starbucks plan to address that?
We decided early on that we have to be highly accessible and approachable from a price value proposition. I’ll leave it at that.
You’ll see the pricing once we open the store. We recognize in the pricing architecture of opening a market and we did not want to price Starbucks in a manner that would be off-putting or intimidating. Some of that leverage comes from the fact that we are doing local sourcing but we would have not come to this market and used price as a barrier. We want to appeal to a broad base of people.
Q. How rapidly will you rolling out stores? Will it be a full throttle roll out?
We’re going to start here in Mumbai. We’ve got the Horniman Circle store opening first and then we have two stores that follow in the next week; one at the Taj Palace and the other at Oberoi Mall. From there we will see additional openings in office buildings, malls, high streets and airports. After Jan 1, 2013 we will move into Delhi.
We have locations there that we have identified and teams are working on those stores. We’re excited about the growth and we will accelerate but we’ll do it in a thoughtful way. From Mumbai we’ll look at major metros – Bangalore and then others to follow. Given the growth of the Indian coffee market that is growing at more than 25 percent a year we will capture our fair share but we’ll do it thoughtfully.
Q. Indian coffee chains have found that food contributes to a high percentage of revenue. How is Starbucks going about tapping that opportunity?