Starbucks, America's iconic coffee brand, has teamed up with India's Tata Global Beverages to open 50 Starbucks cafés across India in 2012, starting in Delhi and Mumbai.
The company also plans outlets at select properties within the Taj group of hotels, which is under the Tata Group. The stores will be cobranded "Starbucks Coffee: A Tata Alliance."
Talks began between the two companies began nearly a year ago, as Starbucks sought to build a joint-venture in one of the world's fastest growing economies.
Starbucks has had success in other tea-drinking markets, most notably China, which is on track to become the company's largest international market.
The partnership with the Tata's, India's largest coffee producer and exporter, will help Starbucks source their coffee beans locally, as importing coffee beans from abroad is highly taxed. India is the world's fifth-largest coffee producer.
Meanwhile, India's foreign investment reform legislation passed late last year to allow foreign ownership of single-brand retailers also calls for domestic sourcing as part of the requirements.
The number of cafes in India have reportedly grown to about 1,600 in 2011 from the 700 in 2007, with the coffee-drinking market growing by 25 percent each year.
India's leading coffee chain Café Coffee Day will provide Starbucks with strong competition in India with more than about 1,200 retail outlets across India in 175 cities.
However, Café Coffee Day recently said that its strategies are guided by consumers and not by competition, even in the case of pricing. It has remained committed to growing to 2,000 cafes by the end of 2014, and expects growth for the industry with Starbucks entering the Indian market.
Starbucks seeks to grow in the Indian market by tapping multiple channels such as hotels, restaurants, Malls, colleges and universities, etc, primarily targeting the young Indians.
However, pricing may be the main issue for Starbucks' premium experience in the price-sensitive Indian market where the café culture is not fully evolved.
Starbucks may look to copy Café Coffee Day's successful forumal of luring customers with their popular food and beverages, with coffee being just incidental for a start.
It may also localize the menu to meet Indian tastes, a la McDonalds with their McSpicy Paneer.
The Indian cafe market has a few other minor international player such as Italy's Barista Lavazza, USA's Coffee Bean and Tea Leaf, Canada's Gloria Jean's, and UK's Costa Coffee as well as India's own Indian Coffee House run by the Indian Coffee Board, and Mocha.
This is Tata Group's second bite at the coffee-chain market after it made a 34 percent investment in Barista about ten years ago, but exited the business in 2004.
by RTT Staff Writer
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