Starbucks is stepping up lobbying efforts with United States government officials as it eyes a breakthrough into the rapidly expanding Indian market.
The American coffee giant has tried to find a foothold in India for many years, but efforts until now have proven fruitless. Earlier this year, the Seattle-based company began lobbying with US policymakers to help boost its chances. The group has been lobbying with the government on a range of topics since 2004, though this year saw the first mention of market openings in India in its quarterly disclosure reports.
Discussions have been held with the Senate, House of Representatives and State Department, with the coffee company spending an estimated $500,000 in its attempts to win government support.
In recent years, Starbucks has also been involved in talks with Indian lawmakers, but it was never able to secure a local partner to finalize any potential deals. Indian law would allow the US company to hold a 51% stake in a new venture inside its borders, but the remaining stake would have to be Indian-owned.
On Monday, the Times of India reported that Starbucks is narrowing in on a deal with Tata Group’s coffee arm to satisfy the Indian government’s requirements.
The two companies have reportedly been discussing plans for collaboration on importing coffee beans and building roasting facilities for some time. Now it seems the two are negotiating a broader partnership, which could pave the way for the opening of new retail outlets, according to the newspaper.
The rapidly expanding middle class along with its ever-increasing spending power is the main driving force behind the boom in the Indian coffee trade. Starbucks has made clear its intentions to set up shop there sooner rather than later, identifying the market as one of its main targets for expansion.
Some international companies, such as Lavazza and Costa Coffee, have made it onto the Indian coffee scene but the segment remains largely dominated by local companies like Cafe Coffee Day and Cafe Mocha.
Reports of the link between the two players sent Starbucks shares up 3.7% to $40.70 in New York with stocks in Tata Coffee jumping 9.8% to 881.75 rupees ($18.06) on the Bombay Stock Exchange.
Key Statistics – Coffee Market in India
- The growing Indian market is currently the sixth-largest producer of coffee worldwide. (source: eProbe market intelligence)
- About 4.5% of global coffee production comes from India. (source: eProbe market intelligence)
- Nestle is the main player in the Indian coffee market. (source: Datamonitor)