Starbucks Corp., the world’s largest coffee-shop operator, may open restaurants in India, aiming to replicate the success of stores in China that are now far more profitable compared to those in the U.S.
Starbucks signed a deal with Tata Coffee Ltd., Asia’s biggest publicly operated coffee grower, to source beans and explore opening stores, the organizations said in a statement yesterday. The first Starbucks store in India will open in about seven months, Tata Coffee Chairman Krishna Kumar said in an interview.
The agreement “is the first part of our admission to India,” Starbucks CEO Howard Schultz said in the statement. “We believe India could be an essential resource for coffee in the local marketplace, as well as across the many areas internationally where Starbucks has operations.”
Schultz plans to open 400 outlets, of the 500 new stores planned for the fiscal year that began in October, outside the U.S. The Seattle-based organization operates about 16,800 stores in more than 50 countries, with about one-fifth of its sales coming from non-U.S. locations.
Tata Coffee, majority-owned by Tata Global Beverages Ltd., can be a unit of India’s 2nd largest industrial group and it has supplied coffee beans to Starbucks, the organizations said. About 86 % of Tata Coffee’s profit last year originated from outside of India, mainly in the United States, data has shown.
Shares Jump
Tata Coffee gained as significantly as 17 percent, the largest intraday leap since Aug. 21, 2009, to 544.50 rupees in Mumbai trading. The stock traded at 490.55 rupees at 10:35 a.m. Starbucks rose 0.7 percent to $32.41 in Nasdaq Stock Market trading yesterday.
In addition to working together to source beans for Tata’s Indian facilities, the organizations will appear to build up Starbucks stores in stores and hotels. Trina Smith spokeswoman for Starbucks, said in an e-mail that it’s “too early” to provide a timetable about opening outlets in India.
Starbucks is aiming to tap a marketplace where consumption of coffee has more than doubled to 100,000 metric tons from a decade ago. Barista Coffee Co., one of Italy’s Lavazza SpA, CCD (Cafe Coffee Day), India’s greatest coffee-shop, and rivals have opened more than 1,200 shops in the past ten years as people in the world’s largest tea-growing nation build a taste for cappuccinos, according to G.V. Krishna Rau, ex- chairman of the state-run Coffee Board.
Retail Shops
Tata Coffee also operates retail shops under the brands Tata’s Coorg Filter Coffee and Mr. Bean Coffee Junction in south Indian states, based on the company’s website.
Coffee exports from India, Asia’s 3rd biggest producer, gained 56 percent past year with an increased crop and as demand recovered in the leading importing countries, the Coffee Board said earlier this year.
Tata Coffee and its local competitors shipped 292,550 metric tons, compared with 187,326 tons last year, Deputy Director N.V. Nagarajaiah said on Jan 3. Exports fetched $644.9 million, up 58 percent, he explained. In year 2006, Tata Coffee acquired New Providence, Eight O’clock Coffee Co. (New Jersey based coffee retailer) to enter in the United States.
Starbucks’ Schultz can also be adding stores in China, which will likely be the company’s main growth market in 2 years, he said in November. The coffee chain’s income per store is 22 percent in China, higher than the U.S., the company said last month. Starbucks aims to boost the number of outlets within the world’s most populous nation to 1,500 from about 400, by 2015.
Starbucks generated 22 percent of their revenue away from U.S. last year, up from 17 percent in 2007. Profit nearly doubled past quarter, helped by raised sales of via instant coffee and foot visitors in stores. Sales climbed about 10 % within the year ended Oct. 3, topping $10 billion.
