MUMBAI — After years of studying the Indian market, Starbucks Coffee said Monday that it would open its first store here by September through a 50-50 joint venture with Tata Global Beverages, a unit of the largest business group in India. The announcement comes a year after Starbucks said it was going to enter this market and nearly two months after the Indian government fumbled an effort to attract more foreign investment in its retailing industry.
The companies would not provide details on their investment and how many stores they want to set up, but a senior Tata executive said at a press conference that there could be 50 stores by the end of the year and speculated that it could eventually have 3,000 locations.
India, long a country of tea drinkers, has seen an explosion in cafes and restaurants over the past decade thanks to its growing middle class and a large youth population.
John Culver, the president of Starbucks in Asia, said it was the growth of that market that convinced the company to finally commit to India after considering it for nearly a decade.
“We are going to move as fast as we possibly can to take advantage of the opportunity that exists in India,” he said during an interview. “It’s an economy that is moving very quickly and the consumer is evolving very quickly.”
Mr. Culver suggested that Starbucks would not compete directly with Indian coffee chains because it would sell “premium” coffee, tea and food in its Indian stores. He declined to say how its prices in India would compare with other Indian chains and with its U.S. and European outlets. Most Indian coffee chains sell beverages at far lower prices than their counterparts in the West. A small cappuccino typically costs 53 rupees, or $1, at Café Coffee Day, the country’s largest cafe chain.
While several foreign coffee players, like Lavazza of Italy and the California-based chain Coffee Bean & Tea Leaf, have set up outlets in India, the national market is dominated by Café Coffee Day, which is owned by a coffee-growing and trading firm based in Bangalore.
With more than 1,200 stores, Café Coffee Day has a ubiquitous presence in Indian cities and is especially popular with the country’s youth, many of whom appear to prefer its large selection of cold, sweet milkshakes, teas and other beverages, rather than traditional coffee. An executive with the company said it planned to have 2,000 stores by the end of 2014.
“We will hopefully learn a few things from them,” the executive, K.Ramakrishnan, president of marketing for Café Coffee Day, said about Starbucks. “That apart, it’s business as usual for us. We continue our expansion story.”
For Tata, the venture with Starbucks serves as a second chance at creating a national cafe chain. It earlier had a minority stake in Barista, a chain that is now controlled by Lavazza. R.K. Krishnakumar, the vice chairman of Tata Global Beverages, said the company quit that venture when two of its partners started fighting with each other.
Mr. Krishnakumar said that while Starbucks was “cautious and careful” in setting and announcing goals, it could easily have 3,000 stores in India.
Starbucks will arrive in India just as policy makers are struggling to bolster growth and interest by foreign investors. The Indian economy is set to slow to 7 percent growth in the current fiscal year, which ends in March, from 8.5 percent the year before. Many economists and corporate executives are increasingly frustrated by the slow pace of decision-making in New Delhi.
At the end of last year, many foreign investors were dismayed that the government quickly put on hold its decision to allow foreign retailers like Wal-Mart Stores to take a 51 percent stake in Indian retailing stores because of protests by opposition political parties and small retailers and wholesalers. It is unlikely that the government will reconsider that proposal before elections in five states conclude in March.
This month, policy makers implemented a related decision to allow retailers like Starbucks that sell only one brand of products to set up wholly owned stores in the country. But some foreign chains like Ikea have said that a condition that requires retailers to buy 30 percent of their products from artisans and small Indian companies would make it difficult for them to take advantage of the decision.
The country’s finance minister, Pranab Mukherjee, spent the past two days in Chicago trying to reassure investors and companies that India was committed to opening up its economy to outsiders. “India presents opportunity at this moment that cannot be ignored,” Mr. Mukherjee said at the Chicago Council of Global Affairs on Sunday. “I urge you to seize this moment and contribute to our collective prosperity in the times to come.”
The companies would not provide details on their investment and how many stores they want to set up, but a senior Tata executive said at a press conference that there could be 50 stores by the end of the year and speculated that it could eventually have 3,000 locations.
India, long a country of tea drinkers, has seen an explosion in cafes and restaurants over the past decade thanks to its growing middle class and a large youth population.
John Culver, the president of Starbucks in Asia, said it was the growth of that market that convinced the company to finally commit to India after considering it for nearly a decade.
“We are going to move as fast as we possibly can to take advantage of the opportunity that exists in India,” he said during an interview. “It’s an economy that is moving very quickly and the consumer is evolving very quickly.”
Mr. Culver suggested that Starbucks would not compete directly with Indian coffee chains because it would sell “premium” coffee, tea and food in its Indian stores. He declined to say how its prices in India would compare with other Indian chains and with its U.S. and European outlets. Most Indian coffee chains sell beverages at far lower prices than their counterparts in the West. A small cappuccino typically costs 53 rupees, or $1, at Café Coffee Day, the country’s largest cafe chain.
While several foreign coffee players, like Lavazza of Italy and the California-based chain Coffee Bean & Tea Leaf, have set up outlets in India, the national market is dominated by Café Coffee Day, which is owned by a coffee-growing and trading firm based in Bangalore.
With more than 1,200 stores, Café Coffee Day has a ubiquitous presence in Indian cities and is especially popular with the country’s youth, many of whom appear to prefer its large selection of cold, sweet milkshakes, teas and other beverages, rather than traditional coffee. An executive with the company said it planned to have 2,000 stores by the end of 2014.
“We will hopefully learn a few things from them,” the executive, K.Ramakrishnan, president of marketing for Café Coffee Day, said about Starbucks. “That apart, it’s business as usual for us. We continue our expansion story.”
For Tata, the venture with Starbucks serves as a second chance at creating a national cafe chain. It earlier had a minority stake in Barista, a chain that is now controlled by Lavazza. R.K. Krishnakumar, the vice chairman of Tata Global Beverages, said the company quit that venture when two of its partners started fighting with each other.
Mr. Krishnakumar said that while Starbucks was “cautious and careful” in setting and announcing goals, it could easily have 3,000 stores in India.
Starbucks will arrive in India just as policy makers are struggling to bolster growth and interest by foreign investors. The Indian economy is set to slow to 7 percent growth in the current fiscal year, which ends in March, from 8.5 percent the year before. Many economists and corporate executives are increasingly frustrated by the slow pace of decision-making in New Delhi.
At the end of last year, many foreign investors were dismayed that the government quickly put on hold its decision to allow foreign retailers like Wal-Mart Stores to take a 51 percent stake in Indian retailing stores because of protests by opposition political parties and small retailers and wholesalers. It is unlikely that the government will reconsider that proposal before elections in five states conclude in March.
This month, policy makers implemented a related decision to allow retailers like Starbucks that sell only one brand of products to set up wholly owned stores in the country. But some foreign chains like Ikea have said that a condition that requires retailers to buy 30 percent of their products from artisans and small Indian companies would make it difficult for them to take advantage of the decision.
The country’s finance minister, Pranab Mukherjee, spent the past two days in Chicago trying to reassure investors and companies that India was committed to opening up its economy to outsiders. “India presents opportunity at this moment that cannot be ignored,” Mr. Mukherjee said at the Chicago Council of Global Affairs on Sunday. “I urge you to seize this moment and contribute to our collective prosperity in the times to come.”
By VIKAS BAJAJ
Source:http://www.nytimes.com/2012/01/31/business/global/starbucks-to-open-first-indian-store-this-autumn.html?_r=1
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