- Starbucks appointed Indian-born businessman Laxman Narasimhan as CEO last week
- Interest in India’s specialty coffee sector has sky-rocketed over the last three years
- Some believe Narasimhan could help the Seattle-based coffee giant step up its presence in the country
FOR MANY, it seemed like Howard Schultz was destined to be Starbucks CEO forever. Having served in the position three times since 1986, he seemed to be an immovable force, credited with not only transforming the coffee chain into the global power it is today, but fundamentally changing coffee cultures around the world.
However, his departure last week, albeit earlier than expected, didn’t come as much of a surprise to anyone. Schultz had been brought out of retirement to serve only as interim CEO last year after Kevin Johnson gave up the position. The understanding was always that it would only be until Starbucks had found someone to replace him permanently.
That person is Laxman Narasimhan, an Indian-born businessman who served as an executive at PepsiCo, and, more recently, as CEO of Reckitt, a multinational consumer health, hygiene and nutrition company, prior to joining Starbucks in 2022.
Schultz called Narasimhan’s appointment “a new era” for the coffee chain, which will involve immediately facing up to a range of challenges. He will need to placate the rising power of union organisers, oversee Starbucks’ expansion in China, and ensure the successful rollout of its new Oleato range. Narasimhan also said he would work half a day each month as a barista at one of the company’s stores to ensure the brand remained “modernised” and “relevant”.
The new CEO’s global perspective is likely to be seen as a boon to Starbucks, which has rarely hesitated when it comes to entering and expanding into foreign markets. Narasimhan reportedly speaks up to six languages and has worked in positions around the world. And some believe his Indian background may also carry significant weight.
‘An important market for Starbucks’
The development of India’s coffee industry has been watched with intrigue over the last decade. A tea-drinking nation with a population size close to China’s, it is seen as having immense potential for the future of coffee consumption.
This is largely driven by its economic development. Nearly a third of Indians are now considered “middle class”, with projections expecting it to rise to 63% by 2047. This has fuelled a growing coffee culture, as younger, wealthier Indians increasingly choose to spend their hard-earned money on drinking specialty coffee out-of-home.
Indeed, Matt Chitharanjan, the co-founder and CEO of specialty coffee roasters Blue Tokai, recently told Coffee Intelligence that a wave of investments and sky-rocketing demand for specialty coffee was “due to increasing disposable incomes” and that the trend was “no longer restricted to the metro cities”. “Now, even tier-two cities have multiple options for getting specialty coffee,” he said.
Although the growth of India’s coffee sector doesn’t quite share the breakneck speed of China’s, it is clearly undergoing a shift that is expected to inject massive cash flows into companies that stand out. Last year alone, specialty coffee startups in India raised a total of $41 million in 2022, up from $11.4 million in 2021.
To various industry observers, Starbucks’ appointment of someone with intimate knowledge of the Indian market has come at an opportune time. Narasimhan was born in the western Indian state of Maharashtra, and worked for several years in New Delhi.
Starbucks entered the Indian market in Mumbai in 2012 after partnering with Tata Consumer Products. The joint venture has overseen the chain’s expansion into 55 cities with more than 270 stores.
It could therefore spell a “new era” for the country as well as the coffee giant, with Narasimhan helping to step up its presence at a key time for the domestic industry.
“It’s important for India’s coffee industry,” says Mark Alzawahra, a market entry consultant based in Bengaluru. “Starbucks did the right thing by setting this up as a joint venture with Tata (or a reputable conglomerate) with a good reputation and reach in the country. That allowed for a lot of red tape to be managed efficiently.
“Tata also has the EOS in India to handle an expanding brand like Starbucks. Hiring a well-known Indian CEO shows how important of a market India is for Starbucks or any other international brand from outside of India.”