Starbucks India: Coffee Chain To Open First India Outpost With Tata Global Beverages
MUMBAI, India — Starbucks aims to open 50 outlets in India by year's end, through a 50-50 joint venture with Tata Global Beverages, the companies said Monday.
Tata Starbucks Ltd., as their venture is known, hopes to capitalize on the rising aspirations – and fattening wallets – of many Indians, who are eager to partake of the global latte life.
"What we are seeing is an evolution in lifestyles," said R.K. Krishnakumar, vice chairman of Tata Global Beverages. "In some ways the distinctions between the developed world and the developing world are blurring."
He said the partners would initially invest 4 billion rupees ($80 million), with the first outlet to open in Mumbai or New Delhi by September.
Long known as a nation of tea drinkers – despite a rich tradition of coffee in the south – India has embraced coffee house culture with a vengeance.
Last year, India had 1,600 cafes, up from just 700 in 2007, according to Technopak Advisors, which expects India's $170 million cafe market to grow 30 percent a year, adding up to 2,700 more outlets over the next five years.
"We're going to move as fast as possible in opening as many stores as we can so long as we are successful and so long as we are embraced by the Indian consumers," said John Culver, president of Starbucks China and Asia Pacific.
Unusually, the stores will be cobranded "Starbucks Coffee: A Tata Alliance."
The companies will also develop a tea for the Indian market under the Tata Tazo brand.
Last January, Starbucks signed an agreement with Tata Coffee, a unit of Tata Global Beverages, to source and roast coffee beans in India.
The alliance with Tata could help ease one of the main burdens for retailers in India: the high cost of real estate.
Krishnakumar said the joint venture would open outlets at properties owned by group companies, for example at the Taj chain of luxury hotels.
Culver said the company would also look at opening outlets in shopping malls, office parks, universities, airports and train stations.
The alliance will also help Tata Global Beverages expand its international footprint. All coffee beans for the cafes in India will be sourced from Tata Coffee, which also hopes to ramp up exports to regional Starbucks outlets, Krishnakumar said. He said other Tata Beverage brands, like Himalayan water, should also find their way into Starbucks outlets globally.
Culver said Starbucks did not consider trying to go it alone in India, despite the government's recent decision to allow foreign companies to operate single-brand retail outlets without a local partner. A storm of populist fury forced New Delhi to pull back a parallel proposal that would have allowed multi-brand retailers, like Wal-Mart, to open retail outlets with local partners.
"We never considered 51 percent," Culver said. "When we looked at the opportunity to enter India, understanding the complexities of the market and the uniqueness that is India, we wanted to find a local business partner."
Starbucks currently operates over 17,000 stores in 57 countries.
Its India venture will face competition from existing players like Cafe Coffee Day, which dominates the market.
Technopak founder Arvind Singhal said India's flourishing cafe culture has less to do with coffee than a social need for clean, safe gathering places for young and old alike, who often live in cramped quarters.
"India doesn't have too many places for people of any age to just go out," he said. "It's not about a coffee culture. It's a gathering place where people can sit and meet."
He added that Starbucks' entry, however much delayed, is likely to fan competition and speed the proliferation of coffee shops. It could also help boost flagging investor confidence in India. "It's almost like an endorsement that India's still a good story," he said.
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ERIKA KINETZ 01/30/12 11:09 AM ET