December 2016 | Sangeeta Menon
'Starbucks would not be in India if it wasn't for Tata'
We meet Sumitro Ghosh at the busy Starbucks outlet in Mumbai's tony Bandra Kurla Complex, and the conversation starts with — no surprises here — coffee! As busy executives from offices in the city’s financial centre discuss deals and deadlines over their favourite beverage, the chief executive of Tata Starbucks, the 50-50 joint venture between Starbucks and Tata Global Beverages (TGBL), sits us down for a coffee-tasting ritual in a small training room hidden away in a corner of the outlet.
Mr Ghosh encourages us to cleanse our palates so we can truly appreciate the India Estates blend, grown and roasted to perfection in the Coorg plantations of Tata Coffee. “This is the only country where Starbucks has locally grown and roasted espresso,” he says as he pours out three little cups of coffee and asks us to first smell the coffee (the aroma adds to the flavour) and then slurp it so it “sprays your whole palate and mouth”.
“We start every meeting with coffee tasting, because it’s all about coffee and educating people about the nuances of enjoying a cup,” says Mr Ghosh, who took over as head of Tata Starbucks in January 2016 after having spent eight years with Starbucks in the United States. Coffee tasting done, he speaks about the world’s most loved coffee chain’s Indian experience so far and how it plans to tackle a tea-drinking nation’s palate.
You’ve spent almost eight years with Starbucks in the United States and 10 months now heading the India joint venture. What has been the experience thus far?
I joined Starbucks because of their culture and the unique way they treat their people, which is unlike anything else I have experienced in the United States. I joined the company shortly after the recession in 2008 and that was probably the worst time in the history of Starbucks, which had us closing some 900 stores in two years. From that point, however, we saw a mass recovery in the business. The stock price recovered from an all-time low of $6 and, from just under 12,000 stores during the recession years, we now have almost 25,000 stores around the world.
Sometime last year, the company presented me with a few new opportunities, the most exciting being a chance to lead the India venture. I came here in January 2016 and I must say it has been a wonderful journey so far. We have such a unique collaboration between Tata and Starbucks. The Starbucks mission statement is to “inspire and nurture the human spirit, one person, one cup, one neighbourhood at a time”. I have worked for companies that have wonderful mission statements and values, but when times are tough you see the values cast aside and the focus shift to making money. I have never known a company like Starbucks that cares as much about the people and the communities they serve and how they treat each other in good times and bad. And everything I am learning and finding out about Tata is so similar to the values that Starbucks stands for.
I am often asked why Starbucks came to India so late. It’s not that Starbucks didn’t think about it earlier but, frankly, they never found a like-minded partner. The biggest decision you make when you go into a marketplace is finding the right partner. With Tata it all made sense. I would say Starbucks would not be in India if it wasn’t for Tata.
The potential for coffeehouses such as Tata Starbucks in India has been pegged high, but this country always poses its share of challenges for businesses making their way in any industry. How are you dealing with the demands of this market?
India loves new things, but there is a clock for being new. The challenge for any brand in India is to convince customers that it is here to stay, that it will remain relevant to them today and in the future. If you look at our three-and-half-year story in India, we are proving that Starbucks and Tata are committed to a long journey here.
We are in six cities today and are looking at the next cities to go to. While we will continue to grow in the cities we are already in — Mumbai and Delhi have the most stores for us — we are also looking at new cities and alternative formats such as smaller stores in business centres. We are trying to be really flexible in how we approach the marketplace to create more opportunities. We see ourselves celebrating big milestones this financial year and in the future.
|Employees at the Starbucks Reserve Roastery|
We are studying the population and looking at cities where we can grow our footprint. We use a lot of science to find out who our target audience is and where they are. But finding the customer is not our challenge in this market; the challenge lies in finding the right infrastructure and the right site. Opening a store in the United States can take six-nine months and we normally find the right place within an average of 1.5 opportunities; in India the same might take 12-18 months and could take four-five opportunities to find the right fit.
People often compare our growth here with that of Starbucks in China and ask us why we don’t have 500 stores here already. What I have to say is that China is a 15-year-old business. India has been the fastest-growing international market in the history of Starbucks. It will be one of our top markets in the world.
The coffeehouse culture ushered in by Tata Starbucks — based as it is on the philosophy of “romance, aspiration and theatre” — has been distinctive. How is this culture being moulded to suit Indian inclinations, particularly of the young and trendy?
When I came here, I saw a marketplace that was growing very fast. In the beginning, the pace we adopted was suited to a launch phase. We have continued to grow while we studied and understood the market. The opportunity I see now is to take the business ahead, making sure that our stores perform at a certain level even as we add more profitable outlets. We would have to continue to innovate as we go forward.
We have learned over time from different marketplaces that we have to understand the local palate and customise our products a bit. If you look at our food menu in this market, we have Indianised quite a bit: you won’t find the Alphonso Frappuccino in the United States or any other Asian market. On the other hand, Starbucks jelly drinks, which are hugely popular in other Asian markets, didn’t work for our Indian customers. Interestingly, the challenge in India is that some customers want the western brand while others want the Indian flavour. We have to please both sets.
What’s unique about Starbucks is that we are very innovative and we try out several offerings; some work and some don’t. This company is built on entrepreneurship and innovation.
In an industry known for high attrition and low employee engagement, Tata Starbucks has announced some compelling benefits for its employees. Why did you feel the need to do this?
We currently employ 1,300-plus employees — we call them partners — in our 84 stores, in addition to support staff. We hire smiling, engaging, positive people who want to connect with customers and then we educate them to make sure they understand the product. We have a committed and enthusiastic bunch of partners who are on par with, if not better than, the best partners in the world. We want to make sure that they love working with us. That’s why we have introduced a five-day work week for our partners without any change in their pay. We have also introduced part-time and flexi-time options to make Tata Starbucks an attractive option for female employees, with the goal of increasing our diversity.
|Tata Starbucks is more than mindful about how it chooses employees, who are called partners|
We create learning opportunities for our employees. Our head of operations in India recently spent five weeks in the United States to understand the nuances of managing operations there. We take batches of 10-11 partners to experience the coffee plantations in Coorg, while another group of partners was sent to Sumatra to understand the coffee culture in a market from where we source a lot of our coffee.
We’ve created a fantastic place to work and our attrition rate is low right now. We value our partners and treat them with respect and dignity. The magic in our stores is mainly down to two factors: one, we have incredible quality coffee, amazing beverages and food that you won’t find anywhere else; two — and this is really the magic — our partners build special relationships with our customers. That’s why we want to make sure our people love working with us.
Tata Starbucks is partnering Tata Strive, the Tata group’s skills development programme. What does this involve?
It’s a fantastic initiative and we are proud to be part of it. Tata Strive brings together several priorities for both Tata and Starbucks. As a participant in the initiative, we are leveraging our strengths to help build a ‘quick-service restaurant’ training programme. We have set up mock stores at the Tata Strive training centres in Mumbai and Hyderabad and hope to train about 3,000 youth over five years. And we hope to hire many of them ourselves.
It’s one thing to invest in a programme or partner NGOs, but this is different. We are investing in finding youth, training them and helping them get jobs. I don’t know how many programmes have this kind of a complete cycle covered as does Tata Strive.
A coffee from Tata Global Beverages’ Indian plantations has reached Seattle. Can you explain the significance?
We are indeed excited that the single-origin coffee from TGBL’s Nullore estate will soon be available at the prestigious Starbucks Reserve Roastery in Seattle. Only rare coffees are sold at the Starbucks Reserve Roastery, which is a 15,000-sq ft store in Seattle where Starbucks roasts its reserve coffees from around the world. It’s like the Willy Wonka of the world’s best coffees and it’s amazing that we now have an Indian coffee being served there.
Tata Starbucks will be launching the Teavana specialty tea brand in India. How will the coffee-tea squaring off pan out?
Yes, we are bringing the Teavana brand to India (in January 2017). The brand has done really well in the United States, where it has integrated nicely into the Starbucks stores with a range of pure and high-quality teas with interesting infusions. In India, Teavana will afford us the opportunity to create a new proposition for tea aficionados. In fact, we will be creating a signature tea along with Tata Global Beverages that will be served in our Tata Starbucks stores. With our premium tea and the experience we will create around it, we can do for tea what we have done with coffee.