The places we are thinking about launching in are quite widely dispersed. It’s not like we are focussing on areas just outside Mumbai or Kolkata; we are going to parts of the country that are definitely considered tier II, and these are spread across the country
Tata Starbucks is on a mission to make each store profitable as opposed to growing indiscriminately. Driving this strategy is the company’s recently appointed CEO Navin Gurnaney who, in conversation with Devina Joshi, discusses plans to expand the coffee chain in India beyond metros, fighting off domestic café chains and more. Edited excerpts:
Starbucks reportedly posted a net loss of Rs 30.5 crore in FY18 in India. Are things looking on track for breaking even in the next fiscal (FY20), like you have claimed?
Yes. India is among the top five growth markets for us globally. We have had success across various formats, including some of our mall stores and high street stores. We forayed into hospitals too — which has been well received. So there isn’t any particular format where we feel we need to focus on.
We are currently at 140 stores, with the recently launched coffee forward store at Vittal Mallya Road in Bengaluru. We have made a strategic decision to be ‘thoughtfully aggressive’ in India. The thoughtful part is about profitability. This means that we will grow fast, but not indiscriminately; we won’t open stores for the sake of it. We will make sure our stores are profitable.
What about catering to the consumer with disposable incomes in tier II and III markets? In terms of penetration, domestic café brands seem to be ahead…
Yes, true. But everyone who is asking about tier II cities will be very pleased in a year or two to come. The places we are thinking about launching in are quite widely dispersed. It’s not like we are focussing on areas just outside Mumbai or Kolkata; we are going to parts of the country that are definitely considered tier II, and these are spread across the country. The most recent city we entered is Chandigarh.
Some retail experts are critical of how Starbucks doesn’t experiment much with its formats, pricing or menu. Isn’t this a deterrent to expansion?
Some of those formats that are in the US are being worked upon in India. So that criticism will go away. There will be more experimentation, of which we have already done a fair bit.
At Starbucks, we are always innovating on things like beverage, store design and community impact. As part of our entry into the Chandigarh market, we also introduced two new food additions to celebrate the flavours of the city — the Chicken Makhani Croissant Bun and the Chole Masala Tortilla Wrap, with chutney and mango murabba.
Where is your retail footprint most concentrated?
Around 44 stores are in malls, around 64 in high street locations and eight in airports. Then there are non-traditional formats — including office complexes, where we already have around 18 stores. Our store at the Goldman Sachs office in Bengaluru is due to open soon. We are also testing the store-in-store format at Westside in Bengaluru. Furthermore, we have three off-highway locations, including the Mumbai-Pune route.
Are your recent tie-ups with food aggregators like Swiggy a big step?
This is in nascent stages, but a very encouraging start for us. We are also testing with Zomato. What we are trying to do is address the need for convenience. With our Starbucks Delivers programme in partnership with Swiggy, we want to make Starbucks a part of the day-to-day lives of customers. After Mumbai, we are looking to expand the delivery base across Delhi and Bengaluru.
Currently, dine-in is bigger. However, this is changing with more people picking up coffee on their way to work and with Starbucks delivery.
From bakeries, QSRs, fast-food joints and even ‘chai’ lounges, there is quite an overlap in terms of offerings. What is your strategy to stand out?
We will be true to our core. Starbucks customers expect a world-class experience, as also a balance in terms of localisation and specific needs. We have a diverse set of customers — there are those that gravitate towards more localised food and those that prefer food with a European feel. Therefore, we try to offer a balanced menu not just in terms of regions of origin, but also health needs, convenience needs etc.
Going forward, our offering will be food that is aspirational yet has a localised accent to it. There will be different options for people who want different things, like gluten-free, for instance. Foods constitute 23% of our overall sales. There is great potential in India for food to grow disproportionately to drinks.