Howard Schultz | We are not coming to India with arrogance6 min read . Updated: 15 Jan 2011, 12:18 AM IST
Howard Schultz | We are not coming to India with arrogance
Howard Schultz | We are not coming to India with arrogance
Mumbai: On his first visit to India, Howard Schultz, chairman, Starbucks Coffee Co., met potential retail partners; visited Tata Coffee Ltd’s Coorg coffee plantations; and had coffee at rival coffee retail chains, before signing an agreement with Tata Coffee that initially involves sourcing and roasting coffee beans but will, eventually, lead to the opening of Starbucks outlets in India.
He is in no hurry to build the India business. A day after forming an alliance with the Tata group, Schultz spoke to Mint on the Seattle-based world’s largest coffee chain’s India plans. Edited excerpts:
You have signed a non-binding agreement with the Tatas. Is it an escape route, in case something doesn’t work out?
I would not get caught onto the term. These partnerships are based on personal relationships and my personal relationship is at the highest level with Tata and I can assure you everything is going to go well.
What can we expect from this partnership?
The partnership for sourcing and roasting gives us a major strategic advantage. Due to the systemic legal issues that are there in India, we felt that it is very important from a supply point of view to locally source and roast coffee here. To be able to partner with one of the world’s great companies that has a long history of sourcing and roasting coffee gives us a great move forward.
How will this benefit the Starbucks consumers?
This partnership will give us the ability to offer our customers fantastic coffee sourced by Tata and roasted to our high quality expectations. Starbucks has 17,000 stores in 55 countries serving 60 million customers every week. We believe that over the last few years we have demonstrated in many other products, including coffee, that Starbucks is a market maker.
Our intent is to globally create a market for coffee from India. We can brand coffee from India and do that in a way that makes people from India proud and, certainly, the coffee farmers. Because of the Tata’s long-standing relationships on the coffee side and their values, we will be able to co-author a strategy, not only for the consumer but also to give back to the coffee farmer in ways that is consistent with the heritage and tradition of social conscience of our company.
Can you share your retail plan for India?
In addition to the sourcing agreement, we see the opportunity to open Starbucks stores in Tata’s hotels and other retail properties. Over the next few months, we will come back and make an announcement on how and with who we are going to open retail stores as operating partners.
How do you see the ‘made in India’ packaged coffee opportunity?
In our history, we have small batch or very micro lots of coffee that are super premium. The most recent example being coffee from Guatemala. We make a market for those coffees in a way that no one else can because of the history, tradition and reputation of the company. We can do the same for coffee. India, traditionally, has not been known for coffee. With Tata’s capability for sourcing and our global footprint, we can do something for coffee from India and the Indian farmer that they have not been able to do on their own.
How would be the Starbucks experience in India?
Despite the success we have had as a company, we are not coming to India with any degree of hubris or arrogance. I think very strongly that we have to earn the respect and loyalty of the Indian consumer, not because we are Starbucks but because we are highly relevant to the experience that we are going to create in our store.
We have done a very good job in many places—most recently in China—in creating locally relevant products, mostly on the food side, consistent with the culinary experience and expectations that the customers have. We will do the same here.
How would you differentiate from the dozen-odd coffee retail chains?
I have visited lots of coffee stores—our competitors, who are doing lots of business. What encourages me is that they are doing lots of business but there is a big, big gap. I am not trying to be disparaging in any way. But there is a big gap between execution and what they are doing in their stores compared to what we do.
The stores that we will open in India will not be watered down in terms of quality and execution. We want to bring the iconic store experience that we have been able to create all over the world to India. In many ways, the stores that exist today—the physical environment, design, quality—it’s a different market in many ways than what we do. We can create significant separation between what is in the market today. It is not bad but it is different compared to what we will do here. We will elevate the coffee experience—the sense of community and the environment will be at a level that will position Starbucks differently, based on what we have done around the world.
Beginning with Tata, we are partnering with a world class company. Our retail partner will be analogous of that as well.
What will be the roll-out strategy?
Due to the strategic relationship with the Tatas, we will have a great advantage of opening stores at the group’s properties. On a parallel track, once we make an announcement for our retail partner, there will be free standing mall stores as well. We can’t build a major business by just going into Tata properties. The iconic nature of Starbucks brand has many developers and mall owners interested.
Indians are price-sensitive consumers.
We have to be ultra-sensitive to creating a value proposition and some entry points. But, I think the experience we create will be at a different level and there will be different levels of pricing.
Are you looking at a larger mass market offering?
We are not going to create a mass-market offering. There is going to be only one kind of Starbucks store, and that will offer a very high quality experience that people will want to seek out. I also think the gap in the market is because there are not many places to go that provide this deep sense of community and social experience and we will create that place between work and home area.
Can you share your investment plans for India?
We will take a long-term view. This is one of the biggest opportunities that we have in the world and we want to get it right early, and that means not go too fast. We are here to build a major business and the investments that we make, or the people we employ, or the reputation that we build, will be the kind that the Indian consumer will be proud of.
Is the India opportunity as big as China?
Everyone asks me the same question. There are people a lot smarter than me who are trying to assess India’s ability to rival China in terms of growth and development. I can’t say who is going to be bigger or smaller. It does say a lot though that, over the last 12 years, we have been able to build a major business in China with a fantastic reputation; and this is highly profitable. We are not coming here assuming success; we know we will have to earn it.
Would you look at franchise operations here?
We are not looking at franchise, that is not our strategy.