Starbucks Paves Way for First Stores in India

(Dow Jones) - Tata Global Beverages said Monday that it finalized an alliance with Starbucks, paving the way for the international chain's much-awaited entry into India.

Tata Global Beverages and Starbucks have formed an equal joint venture, Tata Starbucks, for setting up the Starbucks cafes in India, the company informed local stock exchanges.

Starbucks signed an initial agreement with Tata Coffee, a unit of Tata Global Beverages, in January 2011 to source and roast premium coffee beans from India. The two companies had, at that time, said they would explore the possibility of opening Starbucks retail stores in India.

India is one of the big untapped markets for Seattle-based Starbucks, and its entry will come at a time of growing popularity of coffee outlets in the country.

Drinkers of tea traditionally, Indians have lately been taking to ordering espressos and cappuccino at quick-service cafes as a growing middle class increasingly adapts to Western tastes. Domestic consumption of coffee rose to an estimated 108,000 tonnes (119,000 tons) in 2010, up 80 percent in the past decade, according to the latest available government figures.

Starbucks is likely to face competition from Cafe Coffee Day -- a unit of Amalgamated Bean Coffee Trading -- which runs the largest chain of coffee retail stores in India. Other players such as the Luigi Lavazza-run Barista Lavazza chain of espresso bars and Whitbread-operated Costa Coffee stores have a head-start over Starbucks as well.

But Starbucks is optimistic about the Indian market, with Chairman Howard Schultz saying in January 2011 that the country could one day rival China, where the company plans to more than triple its number of outlets to around 1,500 in five years.

Saloni Nangia, senior vice president of consulting firm Technopak Advisors, said Starbucks will have a "strong local partner" in the Tata group, given the Indian conglomerate's knowledge of the coffee business as well as its presence in hospitality.

The salt-to-steel Tata group runs hotels through Indian Hotels Co., which owns and manages the Taj Hotels Resorts and Palaces brand. The group's retail operations are through Trent and the privately owned Infiniti Retail.

Meanwhile, Tata Coffee said it has signed a separate formal agreement to supply roasted coffee produced with Starbucks technology to the outlets set up by the joint venture in India and the US company's overseas operations.

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