The Hindu Business Line : Coffee and more ...

An increasingly brand-aware group of consumers, rising income levels and a booming economy - India is now on the radar of every major MNC brand ... and the others better wake up and smell the coffee, for this is where the next big market is.

With demonstrated willingness to embrace Western concepts such as coffee bars, India is too important and big a market to be ignored. At the same time, the `value for money' factor also plays a crucial role in determining an MNC's success in India. With its mandate of representing an `affordable luxury' brand, it is no surprise that Starbucks, the US-based coffeehouse chain, is planning an Indian footprint this year.

A chain with thousands of outlets in 39 countries, the company could have entered India earlier, but the delay can be traced to not finding the right strategic partner, according to Dr Joseph Michelli, author of The Starbucks Experience: 5 Principles for Turning Ordinary Into Extraordinary (www.tatamcgrawhill.com) .

He says working with strategic partners is an important part of Starbucks's approach to global expansion.

"They have a track record of benefiting from cultural and local business practice expertise from these country-based partners. Besides, Starbucks has a strategic plan for rollout of international operations. An example of this plan involves focused growth in China ahead of the 2008 Summer Olympics."

In his book, Dr Michelli focuses on Starbucks' leadership principles that he gleaned from working with the CEO all the way down to frontline workers. "It also shares how experiential variables enhance the value of goods and services from the customer's perspective."

Won't the Starbucks `experience' be out of reach for the majority of people in India? Dr Michelli doesn't think so. He says Starbucks represents an "affordable luxury" brand in all of its markets.

"While coffee is a commodity, the environment in which it is served at Starbucks represents a comfortable upscale feel. The `cup experience' is also premium quality. The company has grown in markets where the economies have produced an expansion of the aspirational middle class with greater discretionary income for personal pleasures."

And the pleasure that Starbucks provides is "premium quality coffee served in a aesthetically pleasing environment."

Not all MNC brands have tasted success in the complex and intriguing Indian market. But Dr Michelli believes that Starbucks could well fashion a success story in India, on the strength of recognising that all business is personal.

"People want to matter. They want to be more than a wallet with legs attached. Starbucks has shown that you can turn a commodity like coffee into an uplifiting and memorable experience. Once that is done, customers make an emotional bond with the Starbucks product, which in turn produces brand loyalty and international success."

And part of connecting well with the consumer is providing nutritional information on their products. "They hold the view, which I believe is scientifically supported, that caffeine use in moderation is benign, if not positive, in health effects."

Going beyond coffee varieties, the company serves pastries, salads and sandwiches. Through its Starbucks Entertainment division and Hear Music brand, the company has ventured beyond refreshments into books, music and film. It has also launched music kiosks, which had difficulty in gaining traction, "maybe because they deviate from the personal touch. The idea is to offer an opportunity for discovery. Customers are able to not only discover nuances of coffee varieties and new food offerings but new musical artists as well."

Though Starbucks does not have a presence on the ground in India, it has been sourcing beans from the country for quite some time now. The company has initiated a relationship with Tata Coffee, which produces millions of pounds of coffee every a year from 17,300 acres of plantations, mostly in Karnataka.

Its rapid growth and spread have also resulted in labour disputes and criticism of its practices. But Starbucks is working hard to ensure that its employees and sourcing partners remain happy, even as it reinvests its profits in the building of six new stores a day.

"The general picture is: Starbucks contracts with coffee farmers and processors at a price point above fair market value, if those producers agree to economic transparency right down to the coffee pickers, assurance of quality living conditions for those pickers and a commitment to environmental impact of their operations."

Dr Michelli has had hands-on experience with the company's practices. "I spent time in Central America doing everything from picking coffee cherries and experiencing both wet and dry processing plants. I did coffee tastings of prospective crops (known as cupping) and went on calls with Starbucks agronomists working to improve coffee quality and decrease pesticide usage... "

"I also met with farmers and saw the living conditions of migrant farm workers. In North America, I experienced roasting and packaging operations and conducted cuppings of processed product."

On employees, who are referred to as partners, he says that they are paid well above the quick restaurant sector standards in the US. "Everyone who works more than 20 hours a week is afforded healthcare benefits. Partners are given a pound of coffee each week and are afforded stock options in the company."

But whether Starbucks is able to win over Indian tastebuds remains to be seen.

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