From new menu items to a tiny cup size, the CMO spills all the beans.
By spreading the country’s coffee cafe culture across the world, Starbucks has done more for the United States’ soft power than most individuals or government activities.
The lengthy queue outside Starbucks’ Mumbai outlet in November 2012, when the global coffee chain first entered India, is proof of this power. It is now part of India’s business and marketing folklore.
Today, Starbucks has 272 stores in 29 Indian cities and, as per The Times of India, it reported a 76% revenue growth - Rs 636 crore - in FY22.
Since its debut in India, Starbucks has gone on to become an indispensable part of some people’s lives and, at the same time, a sort of an aspiration for another group of consumers. The menu, with its western influences of Frappuccino, New York Cheesecake and Croissant, is representative of this notion.
A decade later, in 2022, Starbucks seems to have turned to a new desi flavour. It recently introduced tea flavours, like masala and cardamom, filter coffee, along with milkshakes and bite-sized snacks to its menu. It also launched Picco, a new cup size shorter than Short, its smallest global size.
Talking about the reason behind this localisation push, Starbucks India CMO Deepa Krishnan says, “As we expand and get a more diverse set of consumers inside (our outlets), we have to think about what they want.”
She feels that when you've been in a country for a long time and have established your coffee credentials, “it is time to experiment and get into localised offerings.” The earlier journey, she remarks, was about establishing the Starbucks experience in India.
Picco is an interesting announcement because of its size (180ml), which falls in line with India’s love for small plates and drinks. On the other hand, Short measures 240ml.
“We are used to having smaller sizes,” adds Krishnan. The new offerings won’t be available pan-India, but only in four cities, i.e., Bengaluru, Gurugram, Indore and Bhopal.
For KS Narayanan, a food and beverages industry expert (formerly with McCain Foods and Unilever), Starbucks, by introducing these items to its menu, is “addressing a larger diaspora to get repeat customers, as food is a local and cultural issue for most people.”
He also says that many people are put off when they see coffee prices upwards of Rs 300. “With Picco (price starting from Rs 175), the brand is showing a lower unit price to put people’s minds at rest.”
With its brand proposition now established, “we are seeing its expansion drive deeper into Tier-I cities, where it already has a presence, and in Tier-II and III cities,” states Narayanan.
Coffee, a young person’s drink?
Watch the last few ads from Starbucks India and you will spot two things. One, they feature a Starbucks outlet setting. Two, most, if not all the, actors in them are young. Starbucks India’s consumer priorities are evident.
“We've looked at the next set of customers in these markets. They are not necessarily only Gen Z or millennials… we have a pretty wide spectrum of customers, right up to the age of around 45,” says Krishnan.
Referring to the four cities that Starbucks India chose for its new menu offerings, she says that they are representative of the coffee giant’s established markets (Bengaluru and Gurugram), while Indore and Bhopal are alien territories.
Brewing hyperlocal delicacies
“Our expansion strategy is a combination of both breadth and depth,” says Krishnan. As more Starbucks stores open in India, customers are bound to find local or hyperlocal items, considering the country’s diverse food habits.
Turns out, Starbucks is not new to brewing and cooking such offerings. Think of a thandai-based beverage, a Tiramisu Chomchom, a Chhole Paneer Kulcha or a Malabari Egg Croissant, and they’re already on the Starbucks India menu.
In 2021, Starbucks partnered with celebrity chef Sanjeev Kapoor to introduce delicacies such as Masala Chicken Croissant, Bhuna Murgh Pie and Red Poha with Coconut Stew.
“There is a massive trend in the overall QSR or HoReCa segment of the country… food is undergoing a renaissance in India,” feels Saurabh Uboweja, managing partner, BOD Consulting.
As this trend of fusion dishes and experimental customers is growing, “there is this pressure to innovate and everybody is doing a lot of consumer behaviour research. If Starbucks doesn't do it, it will be seen as outdated and not contemporary enough,” remarks Uboweja.
A noteworthy aspect of Starbucks’ new food menu is the introduction of vegan cuisine in collaboration with Impossible Meats, a company run by celebrity couple Genelia D’Souza and Riteish Deshmukh. It is currently available in eight cities.
“This is, once again, something which has come out from consumers asking for vegan food,” reveals Krishnan. So, has Starbucks fallen for a fad? Krishnan “does not see veganism as a fad. We see it as a strategic lifestyle choice that customers are making.”
Starbucks’ two-pronged battle
The Starbucks outlet is one of the brand’s most immersive experiences. In India, it faces stiff competition from new-age coffee chains like Blue Tokai and Third Wave Coffee Roasters. Then there are the incumbents like Cafe Coffee Day, Coffee by Di Bella, Costa, and even QSRs’ cafes like Burger King Cafe and McCafe.
Also, it is up against the Indian beverage and food menus of Chaayos and Chai pe Charcha. Is the Indian consumer witnessing the start of a coffee outlet expansion battle?
Krishnan feels that it can never be a battle of the number of stores you have, but the quality of experience one offers.
“I think this battle, or whatever you call it, is going to be probably sustained by those brands that have very strong fundamentals. It means fantastic coffee, a great in-store experience, but more than anything else, the kinds of relationships and connections you can form with customers.”
For Uboweja, “you can’t think about scale for the sake of scalability.” So, Starbucks won’t expand only because of rising competition. He adds that the brand took nearly six years to reach 100 stores in India because the country didn’t have a coffee cafe culture.
And, speaking about the rise in online deliveries, Krishnan reveals that “delivery contribution to revenue, before the COVID pandemic, was around 4%. Today, it hovers around 13-14%.”
Then there is Starbucks merchandise, which is available on e-commerce platforms like Tata CLiQ luxury and Flipkart.
As normalcy returns, Starbucks will continue its outlet push. It wants to be on top of people’s minds. Be it spending money on “digital, OTT, radio, print, outdoor and local store marketing, or having close to 1.2 million members, who are part of our loyalty program,” mentions Krishnan.
Nothing better than a Cappuccino to get the brand all charged up.
Cover photo by Photo by Dom J from Pexels