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Starbucks: Adapting to a Global Market

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Christina Schmitz

Starbucks, a growing international brand, has generally been welcomed as a popular coffee shop around the world.  Launched in 1971, Starbucks began its international expansion. In 1997 its first stores opened in the Philippines.  From 1997 Starbucks has spread throughout the world in places such as England, Malaysia, New Zealand, Thailand, Taiwan, Chile, Peru and 53 other countries.  Even Austria, the coffee house capitol of the world, welcomed the American coffee chain. Their growing global success has made them one of the most popular and profitable coffee providers around the world. In 2012 their attempts to blanket their brand over the globe continued.  Starbucks opened their first store in one of their last untapped markets: India.

Howard Schultz, Starbucks Chief Executive, said a few weeks before opening the first store in India, that India would be one of the largest growth markets for the company.  After being in business for a few months it was clear that India was not as receptive to the Starbucks brand as was initially predicted. It seemed as if the Indian citizens were not as familiar with the US based company and chose to stick with the familiar coffee and snacks provided to them by the nationally known coffee shop, Café Coffee Day.

Although Starbucks was not expecting the hardships they faced in India, some market and product research may have led them to predict that Starbucks’ coffee menu may not have been a hit with the heavy tea drinkers in the Indian population. “While India is a big exporter of coffee, it is still dominated by tea drinkers” (Machado). Compared to the US, where an average American consumes 4 kilograms (8.8 pounds) of coffee per year, an average Indian only consumes about 82 grams  (.18 pounds) of coffee per year (Machado).  With these statistics in mind it is not shocking that Starbucks was not as successful in the Indian market.

A quick glance at the Café Coffee Days menu shows the carefully crafted balance of coffee, tea and fruit drinks. This coffee shop does not rely primarily on coffee drinkers, but allows consumers a large variety of flavors that are based around the Indian tastes, for both young and old consumers.  According to Café Coffee Days online menu they provide 21 different types of coffee/espresso-based drinks, and 29 varieties of teas, iced teas, lemonades, chocolate drinks and frappe’s. Starbucks has a few adjustments to make to their menu in India to compete with the already popular Café Coffee Day. After realizing the cultural constraint on their brand, Starbucks has taken action in the development of a new marketing mix strategy geared toward tea drinking countries.

In 2012, shortly after the disappointing development in India, Schultz acquired the popular tea company, Teavana for $620 million. His goal in this purchase was to appeal to the $40 billion global tea market, further expanding the reach of the Starbucks stores, as well as “doing to tea what we did to coffee”(Merced). Although Starbucks is already known for selling the tea brand Tazo in their stores, many are saying Teavana will take over the prevalence of the Tazo brand. Currently Tazo is the lower-end, prepackaged tea that is being sold and used as a guinea pig for further development of the Teavana brand. As of now there has not been too much information on the Tazo brand being harmed in this acquisition. Starbucks primarily goal is to use the more high-end Teavana brand to create a global impact.

With the expansion of the Teavana brand Schultz estimates the tea industry will grow rapidly with the addition of tea bars, as well as the repackaging of their teas to expand retail sales. With these developments Starbucks aims to become more popular in dominantly tea drinking countries, while expanding the breadth of their brand and securing their long-term profitability.

The global environment proves to be somewhat unpredictable and surprising, even for successful global brands such as Starbucks. Instead of simply leaving the Indian market after their struggle and relying on their other successful stores, Starbucks used its resources to adapt to the unexpected experience in the Indian market. Being able to acquire Teavana allowed them to bounce back from this experience with a stronger goal for their future. It is important for businesses to realize what makes them successful in many parts of the world, may not make them successful in the next market. Size, brand and product popularity cannot guarantee success in the large, dynamic, and constantly evolving global marketplace.

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Cohn, Emily. “Starbucks Buys Teavana Holdings For $620 Million.” The Huffington Post. TheHuffingtonPost.com, 15 Nov. 2012. Web. 20 Feb. 2014. <http://www.huffingtonpost.com/2012/11/15/starbucks-buys-teavana-holdings_n_2136048.html&gt;.

Marder, Andrew. “Why the Future of Starbucks Is in Tea.” USA Today. Gannett, 24 Oct. 2013. Web. 20 Feb. 2014. <http://www.usatoday.com/story/money/business/2013/10/24/starbucks-future-in-tea/3178947/&gt;.

Machado, Kenan. “India’s Coffee King Unshaken by Starbucks.” Wall Street Journal. N.p., 24 Jan. 2012. Web. 20 Feb. 2014. <http://blogs.wsj.com/indiarealtime/2014/01/23/indias-coffee-king-unshaken-by-starbucks/?KEYWORDS=starbucks&gt;.

Merced, Michael, and Stephanie Strom. “Starbucks to Buy Teavana for $620 Million.” The New York Times. N.p., 14 Nov. 2012. Web. 01 Mar. 2014. <http://dealbook.nytimes.com/2012/11/14/starbucks-to-buy-teavana-for-620-million/?_php=true&_type=blogs&_php=true&_type=blogs&_php=true&_type=blogs&_r=2&gt;.

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