Starbucks opened its first store in Delhi today. CNBC-TV18's Malvika Jain gets John Culver, president, Starbucks Coffee and Avani Sugalani Davda, CEO, Tata Starbucks Ltd. to throw some light on the company's plan of opening up stores in China and Asia Pacific.
Culver says Indian customers have embraced Starbucks and sees great oppurtunity for the company to expand across the country. "We have been able to bring something that is unique to the market, that doesn't currently exists in terms of the third place that we have created with these beautiful stores as well as the quality of the beverage and the hand crafted personalisation of those beverages for each of the customers, its been tremendous to see the excitement that customers have for Starbucks here in India," he says.
Below is the edited transcript of Culver and Davda's interview to CNBC-TV18.
Q: This is the seventh store in India. You started off and you launched your first store in Mumbai on October 19. What has been the experience so far in India?
Culver: So far what we have seen in all of our stores that, with this store being our seventh here in New Delhi, is that the customer response has just been tremendous. They have embraced Starbucks. We have been able to bring something that is unique to the market, that doesn't currently exists in terms of the third place that we have created with these beautiful stores as well as the quality of the beverage and the hand crafted personalisation of those beverages for each of the customers, its been tremendous to see the excitement that customers have for Starbucks here in India.
Q: The fact of the matter is that you are a late entrant. There are already several players like Barista, Café Coffee Day and so on and so forth who exists in this market. You are still continuing to go slow, why?
Davda: Every category that you pick up, whether it is retail or any other in India, there are local brands that exist. At the same time there is a cache that the brand Starbucks enjoys. In terms of pace of expansion, we are very happy to open the store in Delhi and it is a fitting atmosphere that we have created. We intend to grow aggressively across the country and we are very respectful of competition. At the same time, we do believe that the brand stands for certain values and its deep commitment to growing along with the communities.
Q: Talking about the communities in specific, UK’s Starbucks has threatened to exit the market given the tax regime in the country. What are your thoughts on the tax regime in India and the overall regulatory environment per se?
Culver: What we have seen so far is that in meeting with the government, we have been embraced by the local government. We do business ethically and we abide by the local laws whether it is in the UK or whether its here in India. We are excited about the opportunity to bring Starbucks into the market and create a great experience for our customers and bring the Starbucks experience to life.
Q: When you talk about complying with laws and regulations, the fact is that there are international players who have entered the Indian market and who say that the cost of compliance is too high. So, overall if you look at the cost structure of India as an economy, how do you compare it with other emerging markets?
Culver: What we have seen so far is that there is a tremendous opportunity for Starbucks to grow here in this country. We are committed to India for the long-term. Over the long term, we want to have many stores here. We see India as potentially being one of the top five largest markets that Starbucks operates in over the long-term. It is important that we grow our business in a very respectful way, in a way that earns the customers loyalty, earns their trust and ultimately earns their business. You do that by offering high quality beverages but then also by giving back to the local communities where we do business.
Q: You said you are a long term player. Even during the press conference you said that though you do not have specific number of stores that you are going to be opening up over this year or by say 2015, as far as long term strategy is concerned there must be some timeline that you set for yourself as far as breaking even is concerned?
Davda: Ours is a partnership which has parents like Tata and Starbucks. We have fairly demonstrated that we are roasting and sourcing the coffee locally. We are expanding very respectfully. We are investing in the people and the community. When one looks at brand like Starbucks, it stands for its partners. Those are the people who make the human connection and make this entire third place come alive. In terms of investments, we ofcourse look at an aggressive expansion, but our key is to get the right people and to train them and offer them a fantastic career.
Q: By when do we see you breaking even?
Davda: When one has astute groups like Starbucks and Tata’s, both that are extremely successful over 50 countries, one can be sure that when they come to a market, they have a certain plan in place. So, I am not at the liberty to discuss breakeven or other numbers.
Q: Starbucks was the first company that asked the government to take a decision on the fiscal cliff by putting it across their coffee mugs and cups in the US. Now that the US economy is growing how you do feel?
Culver: We are encouraged by continuing to support the communities where we do business and the countries where we do business. The stores that we are building here in India reflect those local communities. What we have done is, we have worked very closely with the local artist, the local craftsmen to help us create a very special place. All of the fixtures that you see in the store were made here in India and sourced here in India. We want to continue to do that. It’s the right way to do business here and eventually we see an opportunity to take those items and bring those to other stores around the world as well.
Q: What about resolution of the fiscal cliff? What are your thoughts on the fact that the US government has been able to find some sort of a solution and Starbucks was one of the key players who probably indicated to the government that the citizens of the United States of America (USA) wanted a resolution.
Culver: Starbucks has always been viewed as a leader and a company that has a social conscience. What we wanted to do was to encourage law makers to have the conversation to come together to solve the issues that were facing the American people and the American economy. As a company and as a corporate citizen, we pushed that conversation in the right way and helped to encourage that conversation to take place and we are very proud of that.