Tata-Starbucks JV: 50 stores at Rs 4.0 bn investment this year

Mumbai, Jan 31 (PTI) World's largest coffee chain Starbucks and India's Tata Group has announced an equal joint venture to open 50 cafes in the country in the first year of operations entailing an investment of Rupees 4.0 billion (USD 80 million). "The initial investment will be Rs 400 crore between the two partners, and as business expands we will keep moving it up,.. we are looking at opening 50 stores this year," Tata Global Beverages Vice-Chairman R K Krishnakumar told reporters at a joint press conference in Mumbai on Monday Tata Global Beverages signed a joint venture agreement with the US-based coffee giant, which sets forth the vision of developing the business here. Each party will hold 50 per cent in the JV. The cafes will be branded as Starbucks Coffee - A Tata Alliance. "We will open the first store around August-September or even earlier. We are looking at Delhi and Mumbai as the initial focus points," Krishnakumar said. The JV follows after the two firms forged an alliance last year to source and roast coffee for the US chain. Starbucks China and Asia Pacific President John Culver said, "We look at this JV as a long-term partnership that is a win-win for both of us. The Tatas present a unique opportunity for us to have an enduring partnership. "We will not only look at the hotel properties that the Tatas have but we will also look at office spaces, shopping malls, airports, railway stations, colleges and universities to open our stores." The JV announcement comes at a time when the country has just opened its doors for 100 per cent FDI in single brand retail but Starbucks maintains it always looked at having an equal partnership with the Tatas. On January 10, the Government allowed 100 per cent foreign direct investment in single brand retail. To repeated media queries as to why they chose an alliance route and not enter India on their own, Culver parried a direct reply but said, "We have been in discussions with the Tatas even before the FDI door was opened." Describing the partnership as unique, Culver said the JV will launch some co-branded products. For instance, he said, "Starbucks will offer its premium tea brand Tazo under Tata Tazo brand." Krishnakumar said going forward, the JV will expand and Starbucks stores will offer other Tata Global Beverages products like its packaged water Himalayan in the country and globally. Sounding bullish about prospects of the alliance, Krishnakumar said, "The opportunities for rapid expansion are huge. I wouldn't be surprised if in five years India itself will be equal, if not larger than, China's 3,000 stores." Starbucks already has a deal with the Tata Coffee to source coffee for its global operations and this is separate from the new JV, Culver said, adding this firm will be up and running soon in the South. Tata Coffee has separate agreements with Starbucks Coffee International and Tata Starbucks for supplying coffees to Starbucks outlets in India and global markets. Under the agreements, the company will use Starbucks' know-how, technology and packaging for roasting coffee produced in the company's estates. The coffee will then be sold and distributed to cafes to be set up by Tata Starbucks here and Starbucks business operations overseas. "Tata Coffee is very much a part of the bigger partnership. A separate roasting facility is being set to produce high quality coffee," Krishnakumar said. India is the world's fifth largest coffee producer and exports 70-80 per cent of production, but its global share in the world output is only 4.5 per cent. The country's annual coffee sales are worth about USD 667 million. The iconic Starbucks has over 17,000 coffee houses in over 57 countries, of which 5,500 are outside side the US. Even with the Tata support, Starbucks will find the going tough as there are many coffee chains in the market now. These include Cafe Coffee Day, the largest player with nearly 1,200 outlets, Barista, (with which the Tatas had minority interest initially) with over 200 cafes besides Britain's Costa Coffee, which has about 75 stores. PTI Caption for pic: Starbuck President for China and Asia Pacific, John Culver and Tata Global Beverages Vice Chairman R K Krishnakumar (L) raise toast during a press conference announcing the joint venture between the companies in Mumbai on Monday. PTI Photo