Starbucks is forming a joint venture with Tata Global Beverages, a Tata Group company, to open cafes in India, starting in September 2012 in Delhi and Mumbai.
The joint venture, known as Tata Starbucks Ltd., will be responsible for the operation of Indian Starbucks Cafes, and the cafes will be co-branded “Starbucks Coffee: A Tata Alliance.”
Both Starbucks and Tata Global Beverage hold 50% of the new venture, with Starbucks having invested $80 million to date in the new joint company.
Annually, coffee purchases in India account for $667 million in sales, including $140 million from cafes. Starbucks will be competing against coffee key chains such as: Cafe Coffee Day, Barista and Costa Coffee.
Global Market Expansion
The new Indian venture is part of Starbucks' plan to increase global sales. Currently, the company has 11,000 locations in the US and Canada. An additional 6,000 stores are located in 50 countries and account for 20% of revenue.
Last fall, Starbucks changed its operational structure with the goal of raising 50% of revenue from international sales. The stores in India will fall under the China and Asia Pacific division.
President of the division John Culver told BBC News: "We're going to move as fast as possible in opening as many stores as we can so long as we are successful and so long as we are embraced by Indian consumers."
In addition to the cafes in India, Starbucks also plans to open stores in Vietnam, China and Brazil.
Tata Group is a good partner for Starbucks as nearly two-thirds of its revenue comes from abroad. Its companies export to 85 countries and bring in $83.3 billion in revenue.
Established in 1868, the group is comprised of 100 operating companies in a variety of sectors. The group has grown dramatically in the past two decades through a number of mergers and acquisitions. One such acquisition is the American company Eight O' Clock Coffee Company, now known as Tata Global Beverages.
Globally, Tata Group employs 425,000 individuals.
Key Statistics - Global Hot Drinks Market
- Between 2004 – 2009, the Indian coffee market increased at a compound annual growth rate of close to 8%. (source: Datamonitor)
- In 2014, the hot drinks market is predicted to have a volume of 6.6 million kg globally. This represents an increase of 12% from 2009. (source: MarketLine)
- The largest portion of the global hot drinks market is coffee, which accounts for 54% of the market's value. (source: MarketLine)
- The leading player in the global hot drinks market is Kraft Foods, which generates nearly 10% of market share. (source: MarketLine)
- In India, Nestle S.A. is the leading player in coffee. (source: MarketLine)