Home >companies >We are making significant investments in India: Starbucks’ John Culver

New Delhi: US-based coffee chain Starbucks Corp. plans to keep investing in India, a market it entered two years ago through a joint venture with the Tata group. It currently runs 59 outlets across six cities.

John Culver, group president of Starbucks China and Asia Pacific, and Avani Davda, chief executive officer, Tata Starbucks Ltd, the local arm of the coffee chain, spoke in an interview about the company’s long-term plans for India, traditionally a nation of tea drinkers. Edited excerpts:

So, what brings you here?

Culver: We are here to celebrate two years in India. Last two years have exceeded our expectations in the response that we have received from the Indian customers. They’ve embraced Starbucks and they are beginning to make it a part of their daily rituals and frequenting our stores on a daily basis. Equally what we have seen is that they are using our store as the third place between their work and their home and they come to our stores with friends and families and use Starbucks as a gathering place.

You’ve opened 59 outlets in the past two years. Will you be able to keep up the momentum?

Culver: What we have seen over the last two years is this response and this pent-up demand in the market for our brand and for the future we are very optimistic of the market...At the same time we want to be thoughtful about how we build our company here in India that not only has successful stores but that takes care of its partners. We want to continue make investments in them and even in the local community.

You recently increased the investment in the market—about Rs350 crore? Where will the funds be deployed?

Davda : We are growing at a good pace and we are committed to this market for the long term, and we are making the right investments, be it creating our stores, be it expansion,creating the right training facilities and having the right structures for our partners. So investment is just one area not just for the business but for partner development—which is a large area of this process. You will get different numbers as we raise the capital, but behind the investment is the philosophy with which we want to run the company. Yes, we will go and make investments but in the right things.

So will growth trickle down to smaller markets?

Culver: Over time we will look at the thoughtful expansion in the market. I think the six cities that we operate in today, we will continue expanding in those markets, and as we grow our business we will thoughtfully expand in those markets. We’ve got to show up in a way, that gets customers back to our stores, so innovation for that is critical.

Since the last few months large coffee chains in India—such as Costa Coffee—have either scaled back operations or changed partners, suggesting that selling coffee in India is still not a profitable business? Your thoughts.

Davda : For Starbucks and Tata, this market is very significant and over a period of time we want to grow. We are in very early stages of setting up our business here and for us the landscape is not about getting to the lamppost out there that we have opened so many stores, although success is defined by the store counts. But for us it’s about being thoughtful, which allows us to grow with financial discipline.

With parents like Tata and Starbucks, we have very good direction as to how we want to be in the market. We have elevated the coffee house experience in the market and we have created spaces that people love... We’ve also redefined about how coffee is experienced; we’ve been talking to customers about novel coffee experiences, about how it’s paired with food, etc.

For us, profitability will be important as we nurture the market, but we are doing this the right way. Our investments will be about growing our partners, recreating customer experience, bringing in innovations, etc.

So by when will Starbucks be profitable in India?

Culver: I can’t comment on the financials at all but I can say that we are making significant investments in this country—in our business here in terms of our people and building capability and infrastructure.

We are localizing a lot of resources here in the market and we are localizing our sourcing in the market. We feel that the investments that we are making are setting us up for a long-term success.

And we think that as a company we’ve been operating for 43 years now, we have 21,000 stores across the globe and I think as we have entered markets and done business in new markets, India, for a new market, has been the fastest growth market we have ever witnessed, and so for us we are going to continue to be thoughtful and make investments and follow what we have done in the past.

Within the countries that you look at, where does India fit in?

Culver: When we look at India in the long-term perspective, India is one of our newest markets, we see a long-term growth opportunity here. One day it will the top five largest market across the globe. But at the same time we have to realize that we have to be very thoughtful.

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