Starbucks Corp. (SBUX) has taken its first step in India with Tata Coffee Ltd., Asia’s largest publicly traded coffee grower. Starbucks will buy coffee beans from India and explore the possibility of opening outlets in the country.
Per the agreement the company will initially engage in sourcing and roasting of beans. Later, the coffee retailer giant desires to open outlets in Tata retail locations and hotels. The first Starbucks store in India is expected to become operational in about seven months from date.
The Seattle-based company plans to open 400 outlets outside the U.S. in 2011, in addition to many new stores already opened in China. The retail giant already operates 16,800 stores in more than 50 countries. A major portion of the revenue comes from non U.S. locations.
The alliance in India nurtures an ambition to replicate the success achieved last year in China, which turned out to be the company’s major growth market. Starbucks profit per store in China is reportedly higher than that in the U.S. Sources revealed that the company plans to increase the number of stores to 1500 from the existing 400 by 2015.
Starbucks wants to tap the Indian market at an opportune time with soaring demand of cappuccinos. The demand for coffee beans has more than doubled within a gap of ten years. New coffee chains are emerging with attractive outlets and they are mainly targeting the elite youth.
Café Coffee Day, a local chain dominates the Indian market. Barista outlets, owned by Italian company Lavazza have also sgrown notably to capture the coffee market in India. Coffee exports by India have shot up by 56% last year.
Tata Coffee, owned by Tata Global Beverages Ltd., retails coffee under the brand Tata’s Coorg Filter Coffee at its outlet, Mr. Bean Coffee Junction in the south Indian states. Tata Coffee generated $644.9 million of revenue in 2011, up 58% from the previous year.
Starbucks shares rose 0.7% to $32.41 in trading yesterday. Tata Coffee shares went up by 17% yesterday on the Bombay Stock Exchange, the highest intraday jump since Aug. 21, 2009.
Currently, we maintain a Neutral rating on the stock. Further, Starbucks holds a Zacks #3 Rank, which translates into a short-term Hold rating.
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