World’s largest coffee chain Starbucks Corp on Thursday signed a pact with Tata Coffee Ltd, part of India’s Tata group conglomerate, and Asia’s largest publicly traded coffee grower, to source beans and explore opening retail stores in India.
The first Starbucks outlet in India will likely open in about seven months, according to R K Krishna Kumar, chairman of Tata Coffee.
In a statement, Starbucks chief executive Howard Schultz said the agreement is the first in the company’s entry to India.
“We believe India can be an important source for coffee in the domestic market, as well as across the many regions globally where Starbucks has operations,” he said.
Starbucks and Tata Coffee will consider jointly investing in additional facilities and roasting green coffee for export to other markets as part of the pact.
The companies will look to develop Starbucks stores in retail outlets and hotels.
Starbucks, which operates about 16,800 stores in more than 50 countries with about 20 percent of its sales coming from non-US operations, plans to open 400 stores of the 500 new outlets planned for the current year that began in October, Bloomberg reported.
The Seattle-based coffee-shop operator, which opened its first store in China in 1999 with more than 400 stores across mainland China, now aims to replicate the success of its stores in China that are more profitable than those in the US.
India, which is the world's fifth biggest coffee producer, exports 70 to 80 percent of its coffee output. Coffee exports from India, Asia’s third-biggest producer, rose 56 percent last year on an increased crop and as demand recovered in the leading importing countries, Bloomberg reported quoting the Indian Coffee Board.
The country’s total domestic consumption accounts for about $667 million of which the consumption in organized coffee market through cafes accounts for about $140 million. Consumption of coffee in India has more than doubled to 100,000 metric tons from a decade ago and Starbucks is aiming to tap this market.
Café Coffee Day, India’s biggest coffee-shop operator , and Barista Coffee Co, a unit of Italy’s Lavazza SpA have opened more than 1,200 shops during the same period buoyed by changing tastes and preferences among the populace.
The Indian coffee brewer also operates retail shops under the brands Mr. Bean Coffee Junction and Tata’s Coorg Filter Coffee in south Indian states.
Tata Coffee and its domestic rivals shipped 292,550 metric tons, compared with 187,326 tons a year earlier, the report said. Exports rose 58 percent to $644.9 million.
The company acquired New Providence, New Jersey-based coffee retailer Eight O’Clock Coffee Co. to enter the U.S in 2006.
In 2001, Tata Coffee bought a 34 percent stake in Indian cafe chain Barista and sold its holding to the Sterling Group in 2004. Sterling sold the chain to Lavazza, Italy's largest coffee company, in 2007.
A number of US companies have entered the Indian market in recent years to tap the burgeoning middle class segment of the population. Several chains, including Domino's Pizza, McDonald's and YUM Brands with its KFC, Pizza Hut and Taco Bell units, have entered the Indian market and adapted their menus to suit the Indian palate.
Shares of Tata Coffee closed 20 percent higher at 555.70 rupees on Friday on the Bombay Stock Exchange, while shares of Starbucks closed 65 cents higher at $32.41 on Thursday on Nasdaq.