The Homa Files

TakeAway: Starbucks unveiled an alliance Thursday with India’s flagship conglomerate, Tata Group, a wide-ranging company that owns everything from Jaguar cars to steel mills and tea plantations.  This move is designed to pave the way for retail locations and to sell more Indian coffee world-wide.  The alliance is with India’s Tata Coffee Ltd. unit, which owns the Eight O’Clock Coffee Co. in the U.S. and is a big coffee producer in India. 

Starbucks’s success will depend on its adaptability to local tastes, but plans to stick to its strategy of being a “third place” for young Indians. 

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Excerpted from WSJ, “Starbucks Brews Plan to Enter India” By Paul Beckett and Vibhuti Agarwal and Julie Jargon, January 14, 2011

India remains one of the big untapped markets for Starbucks.  Chairman Howard Schultz said India could one day rival China, where the company recently announced plans to more than triple the number of outlets to about 1,500 in five years.

Although known as a land of tea, India is also a major coffee exporter—the fifth-largest in the world, according to the USDA.  Indians have been flocking to coffee themselves as well. Overall domestic consumption rose to an estimated 94,400 metric tons in 2008, up almost 90% since 1998, according to Indian government figures. Much of that has been driven by quick-service, comfortable cafes that are Starbucks’s specialty.

Mr. Schultz said one of the reasons for the alliance is to raise the profile and use of Indian premium Arabica beans in Starbucks stores elsewhere. The first phase of the alliance involves sourcing and roasting beans.

The companies also are considering the opening of Starbucks outlets in Tata retail locations and hotels, Mr. Schultz said. Tata’s Taj hotels are among the most upscale in India and include the landmark Taj Mahal Palace & Tower besieged in the 2008 Mumbai terror attacks.

In recent years, many brands have been expanding as greater exposure to western culture has boosted their appeal among young people and a growing middle class. Starbucks had been looking for a partner in India since about 2007.

Some Indian consumers in New Delhi welcomed the prospect of Starbucks’s arrival, while others see it as a status symbol for the elite.

Edit by AMW

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Full Article:
http://online.wsj.com/article/SB10001424052748703583404576079593558838756.html?mod=dist_smartbrief
 

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