Starbucks Will Enter India in Joint Venture With Tata

Coffee Chain Sees Vast Potential in Tea-Drinking Nation, Expects to Have 50 Outlets in First Year

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Starbucks Corp. and venture partner Tata Global Beverages will open their first store in India by August to tap rising coffee consumption in the world's second-fastest-growing major economy, after China.

The equal venture will open outlets in Mumbai and New Delhi this year and have 50 locations within the first 12 months, Tata Global Vice Chairman R.K. Krishna Kumar said at a press conference in Mumbai yesterday.

Starbucks will compete in India with Barista Coffee Co., a unit of Italy's Lavazza, and Cafe Coffee Day, run by Amalgamated Bean Coffee Trading Co. Consumption of the drink almost doubled in the country in the decade through 2010, to 108,000 metric tons.

"We are going to bring the Starbucks experience that is known around the world to India," John Culver, Starbucks president-China and Asia Pacific, said in an interview with Bloomberg News. "All the coffee we serve here will be locally sourced."

The Seattle-based coffee chain has an agreement to get its beans from Bangalore-based Tata Coffee Ltd), a unit of Tata Global.

Starbucks plans to accelerate growth in Asia Pacific, where revenue rose 38% in the quarter ended Jan. 1, 2012, Chief Financial Officer Troy Alstead said on a Jan. 26 conference call.

On Jan. 10, India's government raised the ownership limit to 100% for foreign retailers selling a single brand, a decision benefiting companies like Starbucks. The new rules require overseas companies to procure at least 30 of their products or materials from small Indian operations if they own more than 51% in the venture.

The Indian economy will grow an estimated 6.5% this year, the fastest of developing Asian economies, excluding China, according to January estimates from the World Bank.

Starbucks is also expanding in markets outside the U.S., whose sales contribution has fallen in the past decade, to less than 70% in the last fiscal year, according to data compiled by Bloomberg.

The company plans to open its first store in Costa Rica in May and will add other locations in Central America, including El Salvador and Guatemala.

In a separate story, the Financial Times reported that "the Indian venture is also likely to see Starbucks products sold through other parts of the wider Tata Group, one of India's most recognizable conglomerates, including Taj Hotels and TajSATS, an airline catering business."

--Bloomberg News--

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