The entry of the iconic coffee retailer Starbucks in India through an agreement with Tata Coffee?initially for sourcing beans and later for exploring opening stores?is both an opportunity and a threat to dozens of home-grown brands like Cafe Coffee Day and Barista. Although India is a big market, and there will always be space for many players and many niches to survive in, it?s important to understand the emerging nuances of service and experiential businesses like coffee chains. The usual refrain that many Indian brands, much like Thums Up, have not just survived but managed to lick global biggies in the domestic market is misleading in this context. In a liberalised and open market, there are only globally competitive businesses, not local or global brands. Yes, Thums Up is a local brand, but supported by a global company with its world-beating scale and operational efficiencies.
Ramesh Chauhan realised that the aerated drinks game had turned global after the entry of Pepsi and Coca-Cola in the early 1990s, and didn?t have the stomach for a fight and therefore sold out. That a whole generation of Indians continued to prefer Thums Up over a Coke or a Pepsi, a fact initially lost on its acquirer, only shows that Chauhan was bang on the product strategy, nothing more. Even a management trainee knows sustainable brand strategy is all about profitability and scale, and that?s where Chauhan read it right and exited at a huge profit. It is not our case to pick winners here, but the writing on the wall is clear. Starbucks, with over four decades of coffee retailing and 17,000 stores worldwide, will bring its superlative experience of product, brand and retail experience to an Indian market that has often lacked on many fronts. Moreover, Starbucks has not been shy of roping in a globally competent partner wherever it felt inadequate?whether its Pepsi for bottled Frappuccino and now Tata Coffee for developing the product for India. The game in all hot & cold non-alcoholic beverages is now two-pronged, global and partnership-led. Globally, Coke has a joint-venture with Nestle for tea drinks and Pepsi has one with Unilever to hawk ice-tea. In the last decade, Tata Coffee?s parent, Tata Tea, has gone global with a vengeance, sewn a partnership with Pepsi in India to jointly sell health & wellness drinks, and operates out of London and calls itself Tata Global Beverages now.
Barista, the pioneer of coffee caf? culture in India, was started by an Indian, nurtured by Tata Coffee, before being sold by its last local owner, S Sivasankaran, to Italy?s Luigi Lavazza. Local coffee retailers will always survive if they exist in a specialised product/price/geographical niche. For others, Starbucks?s entry is a clarion call for taking their game global, or else!