John Culver, President, Starbucks (China and Asia Pacific), is upbeat about the India business.
It’s a warm day in Kushalnagar, Kodagu district, in Karnataka. A big day for Tata Coffee and Starbucks as John Culver, President, Starbucks Coffee, China and Asia Pacific, inaugurates the coffee plantation company’s brand new roasting unit which will supply Arabica coffee beans to the chain in India.
A former Nestle executive, Culver is a ten-year veteran at Starbucks and is now responsible for growing and developing Starbucks joint ventures and licensed operations in the Asian as well as Pacific region. Culver is delighted with the response Starbucks stores have received in India – the iconic coffee brand has opened seven stores, four in Mumbai and three in Delhi, along with the Tata group. After the inauguration, Culver spoke at length to BrandLine on how he views Starbucks’ growth in India. Along with him were Hameed Huq, Managing Director, Tata Coffee, and Stephen Lovejoy, senior vice-president, global supply chain, Starbucks Coffee, China and Asia Pacific. Excerpts:
Do you think the timing of your entry into the Indian market is just right or should you have been here earlier?
It’s absolutely the right time. What you see is coffee cafés growing over 20 per cent a year; you see a rise of the middle class, levels of disposable incomes are growing, so we feel good about our position in the market.
You’ve studied the Indian market closely. How large is the coffee café market? How will your focus be different?
There are figures out there in terms of how big it is today. But, we will focus on earning the trust, respect and the business of our customers. For us success is not an entitlement, we have to focus on the customers who walk in, focus on the beverages served, and we get to build that personal connection with our customers.
What is driving repeat customers in your stores?
The reception we have got from our customers is phenomenal. Feedback and comments about the experience at our stores has been overwhelming. We see customers coming back and that’s a testimony to the experience they have had in the stores. We attract both a young and older crowd; the Starbucks experience is universal, it’s wanting to come to a place you feel comfortable in, having great-quality coffee and food. That’s what we focus on, and also how we attach our stores to the local community. It’s about doing business the right way and giving back to the community. That’s why this partnership for us with the Tatas is so unique.
Have you Indianised the flavour of your coffee for local palates?
We are working closely with Tata to find the highest quality of Arabica. Our people did a bunch of different sample roastings, then we did consumer testing of that to see what they had to say and looked at where it stood in terms of overall quality. We feel we have hit out of the park in terms of hitting the quality standard and the flavour profile the Indian consumer wants. But, each individual’s preference is different, we personalise it for you.
Do you see Starbucks emerging as the third place (between work and home) for consumers as it has in other markets?
If you walk into our stores during the day you will see how customers are using the stores, sitting there, whether with family or friends, with coffee or food and enjoying the environment. We offer free wi-fi, we engage the customers in a way they want to be engaged, and allow them to use the stores the way they want to use them. We build stores close to where they work, where they live and where they go to have fun. You see a variety of footprints in our stores.
How are your stores in India different from what you have elsewhere?
We have really highlighted local artists and craftsmen. In Delhi, we have worked with local craftsmen and what they wove has been placed on the ceiling of the stores. There are pictures of the artists and craftsmen themselves on the walls which tell their story and the story about the coffee. We want to elevate the local community.
And, when do I see Starbucks in Chennai, where I live?
(Laughs heartily) We are looking at prospective areas and cities to grow in, we are going to be aggressive but will also do it in a thoughtful way.
Do all your seven stores source from Tata Coffee’s new roastery? Do you intend to take the beans overseas?
All espresso coffee comes out of this facility. Not now, but over time, we have plans to export coffee to other markets around the world.
How do you view the growth of brands such as Cafe Coffee Day and how do you see them as competition?
Coming into India we are incredibly respectful of the existing coffee culture and we are committed to developing this market further. We believe the Indian market is growing multi-fold and the marketplace has room for many coffeehouses that meet different customers’ needs. We are just getting started and I am confident India will be a large growth market for Starbucks over the long-term.
We’ve read about how Howard Schultz came back to Starbucks when it was on a decline. What put the spark back in Starbucks?
First and foremost, Howard brought back a level of intensity and focus and discipline to the business. He really focused on re-establishing Starbucks as the leader of all things coffee, and on our expertise. So, for instance, to energise our partners, he closed all stores for a day and retrained all the baristas on how to hand-craft the perfect coffee. That struck a chord with the people, about our commitment to how we were going to elevate the customer experience. He drove meaningful innovation into the business. Digital is another area over the last four years we have focused on. We are now the largest mobile payment application in the world, and so is our My Starbucks Rewards cards. We have 60 million customers and what we’ve seen over the last five years is that we could earn their trust and their business, engage with them through our stores with the quality of coffee we serve.
Have you increased your store count? You had scaled back in 2008.
We scaled back in 2008 and when Howard came back, over the last three years, we have accelerated, particularly in the international space – we have 18,000 stores across 62 countries. Probably two years ago, we were in less than 50 countries. So, we’ve expanded the breadth of countries we are in and also focused on deepening our international presence. China is a great example; by 2015 we will double in size, we will have 1,500 stores. It will become our largest market outside the US. In India we are just getting started. We see it getting to be in the top five largest markets in the world over time. It’s through the partnership with Tata we see a tremendous opportunity.
How do you manage these vast numbers of stores? Do you follow a decentralised model of leadership?
Last year we reorganised the company into individual regions, before we had the US and international markets as two divisions. We transitioned into a regional market, where we have the China region and Asia Pacific, we have the Americas and then we have Europe, Middle East and Africa. The China and Asia Pacific region represents the largest and most immediate growth opportunity for the company. We have been in this part of the world 16 years and there is a huge potential to grow.
In India, in our first seven stores, we are seeing there is a huge pent-up demand for Starbucks in the market. The environment, the quality of coffee, the personalisation of beverages we able to create, the consistency, it doesn’t exist in the market and we are able to bring that. Through our partnership with Tata, we are optimistic about the future of our business.
Do you have own roasteries in other parts of the world and similar relationships as with the Tata group?
Stephen Lovejoy: We do own a few roasting plants. We have four in the US, one in Amsterdam and we have a small circle of strategic partners. Roasting is one of the three critical areas that distinguishes us. This plant was set up under the same roasting systems and standards as around the world. This operation is part of that.
You are moving coffee beans all over, all the time, across the world?
Culver: We buy from 30 different countries around the world. Customers expect quality and we introduce them to different kinds of coffee. We source from Africa, Latin America and Asia. Through our network with our relationships with farmers around the world, we are able to bring our customers high-quality coffee – we buy the top 3 per cent of Arabica grown around the world.