Tatas tie up with Starbucks

The worlds most popular brand of coffee will soon be available in India. Making its long-awaited entry,the $10.7-billion Starbucks Coffee Company has teamed up with Tata Coffee,part of the $72-billion Tata Group,to source and roast high-quality green coffee beans at the latters Coorg facility.

The worlds most popular brand of coffee will soon be available in India. Making its long-awaited entry,the $10.7-billion Starbucks Coffee Company has teamed up with Tata Coffee,part of the $72-billion Tata Group,to source and roast high-quality green coffee beans at the latters Coorg facility.

In about six months,they are likely to strengthen the alliance to roll out Starbucks outlets,RK Krishna kumar,chairman,Tata Coffee,said on Thursday after the Nasdaq-listed firm signed a non-binding MoU with Tata Coffee. Currently,it is just an alliance; but once Starbucks takes a call on its retail plans in India,it could turn into a 50:50 JV, he observed,adding that the JV would look at stores as also explore the franchisee route,as the Tata Group has done with other retail formats.

Globally,Starbucks policy is to use their brand alone and we will have to respect that, the chairman said,adding the business could be a fairly profitable one given that the brand commanded a premium.

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Since Starbucks is a single-brand operation,there would be no regulatory hurdles. For the time being,the US-based firm will assign a technical team to support the Bangalore-headquartered Tata Coffee,which reported revenues of Rs 1,286 crore in the year to March 2010 and is among the regions leading providers of premium arabica coffee beans. While the company will not set up additional production facilities immediately,it may do so later with its new partner also contributing to the investment. In the meanwhile,it would leverage the technical support of Starbucks for both sourcing and roasting coffee,and the two would together export to markets in south East Asia and China in addition to supplying Starbucks.

Starbucks,which commands a market capitalisation of $24 billion and earned a profit of $946 million in the year to September 2010,already has 400 outlets in China and has been keen to enter the Indian market for some time now. According to a recent report by JPMorgan,Starbucks single cup brewing strategy would be announced soon and moreover,the company plans to have 1500-plus stores by 2015 in mainland China,implying around 220 unit openings per year. In 2006,Tata Coffee,Asias largest coffee plantation company and the third largest exporter of instant coffee in the country,acquired Eight ‘O Clock Coffee,a segment leader in the US coffee retail market for $ 220 million.