Professional Documents
Culture Documents
Submission II
Coffee industry in India is growing rapidly in the past few years, mainly due to the entry
of big chains like Café Coffee Day, Tata Starbucks, Costa Coffee, Coffee by Di Bella, etc. The
coffee retail market was valued at INR 70 billion in 2015 and is expected to double by 2020. India
has primarily been a tea drinking nation, although coffee has been a predominant drink in the south.
Many factors are involved in huge rise of this industry: the rise of middle class, increasing
westernization, the rise of experience economy and heavy marketing of coffee places as a place to
hang out with friends. This report will mainly use Tata Starbucks as focal points for analysis of
Exhibit 1:
Source: https://www.grandviewresearch.com/industry-analysis/india-coffee-retail-chains-market
BUSINESS ANALYSIS OF COFFEE RETAIL IN INDIA 2
To understand the basic business model of the company the 3C model is being used, i.e.
Customer
Affordability plays a major role in the choice of target customers. For these chains, the target
customers can be broadly differentiated into the following segments based on their demographics.
College Students: These are the young demographic, open to experiences and not particularly
cost conscious. To target this audience, cafes are usually located near colleges and malls. Their
Young Professionals: People who have just started working and need caffeine to continue focus
on their projects and work long hours. Many industrial parks have cafes inside their campus.
Artists: The cafes usually have a policy to let their customers sit for a long stretch of time. This
helps the groups to bond with each other over coffee and ample time and space for the artist
Tourists: The major chains usually have a standardized offering over regions. This aids the tourists
in the way that they get the same taste of coffee everywhere and hence they prefer to go to their
Competitor
In the Indian market, the major players in coffee retail are: Starbucks, Costa Coffee, Barista, Café
Coffee Day, Coffee by Di Bella, Aroma’s Coffee, Theobroma. Also, since majority of the
population in India prefers to drink tea over coffee, the emergence of the tea lounges also poses a
Corporation
A. Operations
1. Standard retail model: there is a headquarter and various branches in different regions
2. Franchisee model: the main company licenses out the retail outlets in a certain region
3. Joint Venture: An alliance between two corporations to jointly own and operate in a
Starbucks operates in India under the umbrella of Tata Beverages in a Joint Venture and sharing
50-50 of the profits. India as a whole comes under the CAP (China Asia Pacific) operations for
B. Logistics
For efficient operations in Starbucks, India is divided into three major sections, North (which
handles operations in North and East, East through a semi dependant remote warehouse), West and
South region. Each of these regions are operated independently using a hub and spoke model. Each
BUSINESS ANALYSIS OF COFFEE RETAIL IN INDIA 4
of these regions have a single warehouse, and materials are transported from here to other cities,
and from one city to the other. Interconnections within the channel have been maintained in a way
to ease out transport material, not just from warehouse but also from one city to another in case of
stores from one city facing stockout. One major logistics team specific to India oversees the inter-
Mainly two types of coffee beans are widely consumed: Arabica and Robusta. Arabica has a milder
and smoother taste whereas Robusta is used for making more bitter coffee. Coffee retails claim to
use the better-quality Arabica beans. Raw unroasted coffee beans from Asia, Africa and Latin
America are washed at the origin and sourced to a central distribution centre where they are custom
roasted and then sourced all over the world to regional distribution centres, via sea or land, and
Starbucks, at the time of entering Indian markets used to ship roasted coffee to India, shipping time
of which ranged from 65 to 80 days decreasing the already limited shelf life of coffee, that is
around 8 months. Starbucks generally sources coffee from Sumatra, Kenya and Italy. They have
also added Indian variants of coffee to their product mix. In 2012, Starbucks and Tata Beverages
This eases out the operation as the green coffee beans are much easier to transport, and the extra
time gives the coffee bean to develop more complexity in their flavour.
BUSINESS ANALYSIS OF COFFEE RETAIL IN INDIA 5
Products and packaging material are imported from their headquarters. Tata Beverages also owns
a syrup factory in Bangalore which allows the company to locally source beverage and some other
food products. As of now, around only 30% of their products are imported and the rest 70% are
locally sourced.
D. Location Planning
Traffic volume and convenience play a major factor in deciding of location for retail outlets. The
same is seen in many of the cafes. For this purpose, competing cafes usually tend to locate its
stores next to each other for higher traffic volume, high visibility and greater convenience for
E. Inventory Management
A business involved in dealing with the finished goods inventory like Coffee can be perishable in
nature. Economic Order Quantity system and P-system are used by the Starbucks for managing
inventory at the store level. Waste and obsolete inventory can be reduced by substantial amount
Starbucks operates in varied ways for its ordering of the inventory and subsequent shipping of it:
1. The first way deals with the usage of Economic Order Quantity (EOQ) for maintaining the
2. The second way deals with management of retail aspects of the store using P-system.
Roasting plants or warehouses of the Starbucks use two systems namely P-system and Q-system
One of the important responsibilities of Operations is Inventory management which can affect the
goods delivery to the customers and has huge capital requirement. Management of Inventory can
have a substantial effect on business activities like operations, accounting and finance. Inventory
management decisions improvement can be done by the usage of basic tools like Ratio-frequency
Starbucks uses analytics to forecast demand of inventory one year in advance. They use moving
averages of the past six years to create one-year plan for inventory management. At every
individual store, there is System Application Process in place for handling the inventory, in which
the number of inventory is entered at the time of stocking. All activities are recorded, be it stock
being consumed, transported to a sister outlet or being disposed. At the end of day, a manual count
F. Quality Control
The quality control is handled directly by the headquarters in USA. All the staff is sent for training
to the headquarters before being absorbed into the organisation. Starbucks uses standard quality
guidelines called QASA (Quality Assurance Safety Audit). Under the guideline, there are 2200
points to be checked within the store. For example, the food kept in the store is to be maintained
at 5.2 0C. The store manager does a weekly check of quality using a random sample of inventory
and checks for compliance of all the points under the guidelines.
BUSINESS ANALYSIS OF COFFEE RETAIL IN INDIA 7
A customer expects a quality service of their beverage and has an expectation to get it delivered in
under 5 minutes. According to the information given by Minitab, process capability analysis was
performed by a team and Gamma distribution model was used for evaluating the wait time. Data
analysis implied that 127,306 people out of every 1 million customers having a sip at Starbucks
will get their beverage delivered only after 5 minutes which implies that more than a quarter of
customers have to wait for longer duration than scheduled to get the beverage served.
Mean beverage time for all the scenarios that were analyzed was less than five minutes but the
probability is still high for waiting more than five minutes. This is indeed a challenge that needs
Findings based on the analysis of “popular times” graph of Starbucks Juhu Tara road (refer Exhibit
2):
1) People typically spend 30 minutes to 1.5 hours at Juhu Tara road outlet of Starbucks. This
spending of time is greatly influenced by the location of the outlet. As Juhu Tara outlet is located
in the prime area of the city surrounded by Universities and colleges, students flock the outlet. This
indicates that location aspect is a key indicator in deciding upon the amount of inventory to be held
2) The store experiences maximum rush on Saturdays and Sundays and minimum on Mondays.
On an average, between 4 P.M. to 7 P.M., it experiences maximum rush on a daily basis. So, there
BUSINESS ANALYSIS OF COFFEE RETAIL IN INDIA 8
should be a dedicated group of staff for preparation, serving and cleaning activities in order to have
a prompt delivery within five minutes of ordering which is the mean delivery time expected by a
customer.
Sundays
Monday
Tuesday
Wednesday
Thursday
BUSINESS ANALYSIS OF COFFEE RETAIL IN INDIA 9
Friday
Saturday
BUSINESS ANALYSIS OF COFFEE RETAIL IN INDIA 10
References:
1) http://www.minitab.com/en-us/News/Students-Look-at-Starbucks-Wait-Times-and-Process-
Capability/
2) From bean to cup: How Starbucks transformed its supply chain, James A Cooke, Supply Chain
Quarterly
3) Behind the Scenes at Starbucks Supply Chain Operations It’s Plan, Source, Make & Deliver,
4) How Starbucks changed Management Supply Chain from Coffee Bean to Cup, Rick Leblanc,
6) Starbucks in India: Creating Sourcing, Quality and Pricing Synergies, THE OPERATIONS &