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Starbucks to begin its Indian journey from Mumbai

Starbucks, the world’s biggest coffee chain, said on Friday it will open its first outlet in India next month as it seeks to tap the beverage’s growing popularity in a country famed for its love of tea.

Seattle-based Starbucks, which has eyed the Indian market for years, has chosen to launch operations in financial and entertainment hub Mumbai.

The firm is entering India in a joint venture with the nation’s beverage-to-steel Tata conglomerate, making an initial $78 million investment.

“The store will open October-end,” Starbucks’ Asia-Pacific and China president John Culver said in a statement, without disclosing a specific date.

Starbucks had aimed for 50 outlets in India by the end of 2012, when it announced the venture in January, but made no mention of that target in its statement on Friday.

Analysts said Starbucks was unlikely to rush into launching its cafes.

“Their first store is like a laboratory, there will be tests, checking and re-checking” before they move forward, said Sonam Udasi, research head at Mumbai’s IDBI Capital. “Expansions take time,” he said. The Tata-Starbucks venture’s chief executive will be Avani Saglani Davda, who has held other senior posts with the Tata group.

“We are excited about the great opportunities the Indian market presents,” Davda said in the statement.

Tata Global Beverages shares jumped 8.30 per cent to close at Rs142.8.

Globally Starbucks is focusing intently on Asia, particularly China — which is expected to become its largest market outside the United States by 2014 — as it seeks to offset weaker demand in some European markets.

India is the company’s next big bet.

“Given the size of the Indian economy, the growth of cafe culture and the rising spending power, India will be a very large market (for Starbucks) over the long term,” Culver said in an interview last month.

“Coffee has changed from being a traditional beverage, consumed mainly in South India, to a mainstream beverage with a national presence,” he said.

India is primarily a tea-drinking nation, but in recent years lifestyle changes and rising incomes have spawned a booming market for cafes. Still, India’s annual per capita coffee consumption is just 82 grams (three ounces) — far below that of 6.79kg in Germany and 5.87kg in Brazil, according to data from the International Coffee Organisation.

Starbucks said the espresso coffee served in India will be sourced and roasted locally from Tata Coffee, one of the world’s largest coffee plantation firms.

“This is an important part of delivering a locally relevant experience to our customers,” Culver said.

Baked goods will be tailored to suit local tastes.

Appetite for coffee is growing as the nation sees an explosion of trendy Western-style cafes catering to an increasing number of young professionals.

The new outlet will appear in south Mumbai’s Horniman Circle — a park-like commercial area near banks, residential neighbourhoods and luxury hotels.

The US giant will be competing against Indian-owned Cafe Coffee Day, which dominates the market, and foreign chains such as Britain’s Costa Coffee and US rival Coffee Bean & Tea Leaf that are well established in big Indian cities.