COLLABORATION IS THE NUMBER ONE STRATEGY FOR REACHING BOTTOM OF
THE PYRAMID CUSTOMER SEGMENTS
( .
place alongside China as one of our twolargest markets outside
North America. Butwe know getting there won't be easy.'-
While the vast majority of Indian consum-ers today may be
relatively poor and repre-sent what Professor C.K. Prahalad
termedthe 'Bottom of the Pyramid' (BOP),'they also represent a
highly valuable cus-tomer segment for Starbucks. These
sameconsumers are living in a society that isgrowing faster than at
any other time inits history and with real incomes set todouble in
the next six years, Starbucks hasits sights on them.
Of course, Starbucks is not the first tohave logged this trend.
India has witnesseda lot of efforts from global brand ownersto roll
out products that are affordable forlow-income consumers. In some
cases,for example, prices have been lowered byreducing the
performance of products.However, many companies have foundthat
failing to create a product that spe-cifically meets the needs and
requirementsof the BOP customer segment or creat-ing one that has
been adapted in someway to save money will simply result incustomer
rejection. For example, in 1994Kellogg's entered the breakfast food
mar-ket on the assumption that its Corn Flakesbrand would do as
well in India as it hadin Europe and the USA. The problemwith this
assumption was that Kellogg'sexpected Indian consumers to enjoy
theproduct by pouring cold, fresh milk overit. However, because of
sterilisation andfood hygiene concerns at that time,
Indianconsumers tended to boil their milk!Kellogg's had to go back
to the drawingboard, diversifying into other breakfastfoods, but
failed to capture any significantshare of the breakfast food
market.
Instead, enhghtened global brand own-ers now seek to leverage
the power of theirbrands in emerging consumer markets.
such as India, by providing products andservices at an
acceptable level of qualityand performance and at affordable
pricesthrough real innovation of either theproduct or the business
system deployed.Starbucks provides an excellent exampleof this and
the reason why it is set to growits market share in India over the
next sixyears and beyond, namely collaboration.Schultz
enthuses:
'Key to our success has been our partnershipwith the Tata
Group.*" We announced ourjoint venture with Tata in January
2012.Ten months later, the Indian governmentloosened restrictions
on foreign investmentin the retail industry. From a legal
standpoint,we could have tried to set up shop in Indiaon our own.
But I can't imagine bringingStarbucks to India without the
assistancewe've received from Tata.
They helped us find great locationsfor our stores. They helped
with storedesign and in getting the food menuright, from tandoori
paneer rolls andcardamom-flavored croissants! Theyhelped us
overcome the many logisticaland infrastructure obstacles to make
sureeverything on our India menu is fresh.They also helped with
recruiting, which iscrucial for us because no matter how bigwe get,
the essence of Starbucks is to makethat human connection: serving
coffee oneperson, one cup, one neighborhood at atime.'^
The other unique aspect of Starbucks col-laboration with Tata in
India is the abil-ity to source and roast coffee beans
locally.Schultz adds:
'India is the only major market in the worldwhere we can do
that, and it's only becauseof our relationship with Tata, which is
thelargest coffee-estate owner in Asia. Theynot only own farm but
also operate theirown roasting facilities. We were able towork with
them to develop an India-only
HENRY STEWART PUBLICATIONS 2045-855X JOURNAL OF BRAND STRATEGY
VOL. 3. NO. 1. 18-20 SUMMER 2014 19
KOLAH
Table I Transition from pre-liberalisation poor to
post-liberalisation poor
From (pre-liberalisation poor) To (post-liberalisation poor)
Settle for lessReluctance, avoidanceAbstemiousness ('not for
us')Destiny-driven, resigned to fateSimple needs
Stretch for more (jugaad innovation)Seeking experienceAffordable
indulgenceStruggling and aspiring for a better lifeState-of-the-art
needs
espresso roast, designed specifically forIndia, that's every bit
as good as the espressowe serve all over the world.'^
What Starbucks understands perhaps bet-ter than many of its
global peers is thetransition that BOP consumers will startto make
from being 'pre-liberalisationpoor' to 'post-liberalisation poor'
in theemerging Indian economy that is set tobecome the third
biggest in the world by2050 (see Table 1).
These BOP consumers are now a gen-eration that can be more
confident aboutthe future and aspire for a better life, wherelife
is not a condition to be endured but tobe experienced and enjoyed.
Starbucks hastaken such a philosophy to heart and hasdeveloped a
product that required it to dothings differently by creating a
unique cof-fee blend that is not roasted by its team something it
had never done before in anymarket. Schultz observes:
'It was a real test of our trust in our newpartner because it
required us to share withTata some of the roasting secrets
we'veperfected over four decades and guardedvery closely. But the
result has been wellworth it. In the process, we learned that
noteverything needs to be invented in Seattleand that with the
right partner, we cancollaborate and co-author, as long as thereis
a foundation of trust.'^
As the Starbucks experience demonstrates,brands must redefine
what they under-stand by being global. Out of every 100
people in the world of the future, at least75 per cent will be
in Asia and most ofthem in India and China. One-third willbe
illiterate; perhaps one-fifth will have acollege education and
about one-quarterwill be developed-market consumers fromEurope and
the USA.
Between now and 2025, about 95 percent of the increase in global
populationwill be in emerging markets and theirincrease in
consumption will be greaterthan that of the traditional
developedmarkets such as the USA and Europe."*
The inescapable conclusion is thatthe centre of gravity of what
constitutes'global' has been turned on its head andbrand owners
must now pursue newsolutions that are based on collaborationrather
than simply transplant strategiesfrom other markets in order to
reach BOPcustomer segments.
References(1 ) Standard Chartered (undated) 'The super-cycle
lives: EM growth is key', available at:
https://www.se.com/en/resources/global-en/pdf/Research/Super-cy
cle_infographic_FINAL.pdf(accessed 20th March, 2014).
(2) McKinsey and Co. (eds) (2013) 'ReimaginingIndia: Unblocking
the Potential of Asia's NextSuperpower', Simon and Schuster, New
York.
(3) Prahalad, C. K. and Hart, S. L. (2002) Thefortune at the
bottom of the pyramid', availableat:
http://www.cs.berkeley.edu/~brewer/ict4b/Fortune-BoP.pdf (accessed
20th March, 2014).
(4) Dobbs, R., Smit, S., Remes,J. et al. (2011)'Urban world:
Mapping the economic power ofcities', available at:
http://www.mckinsey.com/insights/urbaruzation/urban_\vorld
(accessed20th March, 2014).
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