CASE STUDY PRESENTATION ON
The Starbucks Joint Venture in India: Making Expansion in India as Successful as It
Was in China
INTRODUCTION
Starbucks is an American coffee company and coffee house chain. It was founded in Seattle, Washington in 1971
Starbucks is founded as most famous coffee in around the world. It is a successful company in selling coffee and it
has been attractive many people.
CEO : Laxman Narasimhan
HISTORY
The first Starbucks store opened in Seattle’s pike place market in 1971.
In 1981, Howard Schultz reorganized a great opportunity and began working with the founder jerry Baldwin.
Schultz wanted to bring the Italian café culture to the united states. Selling espresso by the cup was the first test.
STRATEGIC INTENT
India and China are the world’s two fastest growing economies. Starbucks had already ventured into the Chinese
market and not surprisingly, their Chinese venture turned out to be much profitable than that of their US business.
Thus, they want to replicate their success in Chinese mainland in India. Also, the Indian market is heavily driven
by the upcoming youth culture which is totally driven by the western trends.
With the success of Indian owned Café Coffee Day and Barista Coffee, it is a widely proven fact that there is lot of
scope for the development of coffee café culture in India.
Thus, Starbucks want to capitalize on this particular opportunity.
STARBUCK’S PREVIOUS ATTEMPTS TO ENTER INDIA
Starbucks had tried to enter India by striking an alliance with Kishore Biyani’s Future Group three years ago, but
these plans were rejected by the Foreign Investment Promotion Board.
A year ago, Starbucks revive its plans for India and began talks with Shyam and Hari Bhartia-controlled Jubilant
Group for a possible alliance.
ALLIANCE
On January 2011, Starbucks Corporation and Tata Coffee, Asia’s largest coffee plantation company, announced plans for
a strategic alliance to bring Starbucks to India.
. Starbucks has announced its entry to India by signing a non-binding Memorandum of Understanding (MoU) with Tata
Coffee Limited.
The MoU will create avenues of collaboration between the two companies for sourcing and roasting high-quality
green coffee beans in Tata Coffee’s Coorg,
India is one of the fastest growing coffee markets in the world with a potential for over 5,000 coffee bars. The coffee
retail market in the country is expected to grow at an annual rate of over 40%. So, there seems to be enough room for
all to brew and grow.
. In accordance with the MoU, the two companies will collaborate on the promotion of responsible agronomy
practices, including training for local farmers, technicians and agronomists to improve their coffee-growing and
milling skills.
JOINT VENTURE WITH TATA
Leveraging the Share common
50/50 joint venture global in-home values of Quick
between Starbucks expertise of Tata responsible Service NO OF
OUTLETS
Coffee and Tata Global Beverages business ethics Restaurant =337 Starbucks
Global Beverages: and the global out- and a category
stores in India as
of September 27,
MoU of-home expertise commitment to 2023
of Starbucks community
SWOT ANALYSIS
Strengths Weaknesses
1.Tall management structure
1.High quality of products
2.High pricing
2.Premium HR practices contributes to employee morale
3.Coffee Dominant Business
3.Tata alliance (Partner and Supplier) 4.Limited Locations
4.Strategic relationships with suppliers 5.Rented Land
5.Sustainable practices and advanced agronomy 6.Positioning
solutions 7.Bargaining Power of Suppliers
Opportunities
Threats
1.India is a huge market.
2.Customize Products 1.Frequent changes in the market trends
3.Diversity 2.Better value offered by local cafes
4.Rise in economy and disposable income
3.MoU with Tata
5.Target Population rise
4.Awareness
6.Increase in Coffee Culture
5.Tea Culture
DIFFERENCE
INDIA CHINA
Stores = 337 Store = 6,243
Revenue = ₹636 crore (US$80 Revenues = $822 million
million) FY(22)
CHALLENGES FACED BY STARBUCKS IN THE INDIAN MARKET
1. Price sensitivity: Starbucks is currently considered expensive in the price-sensitive Indian market, making it
difficult to attract a wider customer base and become profitable.
2. Tea-drinking culture: India has a strong tradition of tea consumption, and while the number of coffee drinkers is
increasing, coffee still lags behind tea in popularity. This cultural preference for tea poses a challenge for Starbucks in
promoting coffee consumption.
3. Costly retail space: Retail space in India is expensive, making it challenging for Starbucks to establish
profitable locations.
THE CHALLENGES FACED BY STARBUCKS IN CHINA
1. Premium pricing: Starbucks was able to charge a 20% premium in China compared to the rest of the world due to
favorable consumer perception and acceptance of Western goods and status symbols.
2. Cultural interest in Western goods: Chinese consumers have a strong interest in Western goods, services, cultural
icons, and status symbols, which contributed to Starbucks’ success in China.
3. Joint venture strategy: Starbucks entered the Chinese market through a joint venture, which helped them
navigate the local market and establish a strong presence.
STARBUCKS ATTEMPTED TO ADAPT TO THE INDIAN MARKET, PARTICULARLY
IN TERMS OF CULTURAL DIFFERENCES AND THE PREFERENCE FOR TEA
1. Introduction of tea-based beverages: Recognizing the strong preference for tea in India, Starbucks introduced a range of
tea-based beverages to its menu. In 2017, Tata Starbucks introduced 18 different varieties of tea across its outlets in India
through the Starbucks tea brand, Teavana, including the India Spice Majesty Blend, which was specifically developed for
the Indian market.
2. Localization of the menu: Starbucks has also localized its menu to cater to Indian tastes and preferences. They have
introduced food items that are popular in India, such as samosas and tandoori paneer rolls, alongside their global offerings.
3. Collaboration with local partners: Starbucks entered the Indian market through a joint venture with Tata Global
Beverages, forming Tata Starbucks Private Limited (TSPL). This collaboration with a local partner has helped Starbucks
navigate the Indian market and understand the local preferences and cultural nuances.
4. Store design and ambiance: Starbucks has adapted its store design and ambiance to create a more welcoming and
comfortable environment for Indian customers. They have incorporated Indian elements into the store design, such as
traditional Indian artwork and locally sourced materials.
FINANCIAL DIFFICULTIES IN INDIA
1. Expensive store fronts: The heavy up-front cost of expensive retail space in India has been a significant financial
burden for Starbucks. The cost of retail space in India is high, making it difficult for Starbucks to establish profitable
locations.
2. Slow sales growth: Starbucks experienced its slowest sales growth in India in 2017, leading to a net loss of $4.9
million. The price sensitivity of the Indian market, coupled with the preference for tea over coffee, has contributed to
slower sales growth for Starbucks.
3. Cost of operations: Starbucks has faced high expenses in India, including the cost of sourcing Indian-grown coffee
and operating its stores. In 2017, Starbucks had expenses of over INR 3.04 billion ($5 million) in India, contributing
to its net loss.
4. Time to profitability: Similar to Starbucks’ experience in China, it takes time for the company to achieve
profitability in new markets. Starbucks projected that it would start seeing a net profit in India by 2020, but it has
taken several years of investment and expansion to reach that point.
CONCLUSION
The challenges faced by Starbucks in expanding into the Indian market and the adaptations made to overcome
these challenges. Despite the initial optimism and success in China, Starbucks has struggled to achieve
profitability in India. The challenges include price sensitivity, the preference for tea over coffee, and the high cost
of retail space. To adapt to the Indian market, Starbucks has introduced tea-based beverages, localized the menu,
collaborated with a local partner, and adapted store design and ambiance.The financial difficulties faced by
Starbucks in India are attributed to factors such as expensive store fronts, high operational costs, slow sales
growth, and the time required to achieve profitability. These challenges have impacted Starbucks' financial
performance and hindered its expansion plans in India.However, Starbucks remains committed to the Indian
market and continues to invest in strategies to overcome these challenges. It emphasizes the importance of
understanding and adapting to cultural differences and preferences in a new market. By tailoring its offerings and
operations to suit the Indian market, Starbucks aims to achieve long-term profitability in India. The Starbucks
Joint Venture in India: Making Expansion in India as Successful as It Was in China.
