After its conquest of China, global coffee giant Starbucks is set to roll out its first store in India this year. The Seattle-based Starbucks and the Tatas are close to inking a pact on the coffee giant's India retail foray.
“The agreement will be with the Tata Group companies. We are on the verge of signing the agreement, which will be finalised before the end of this month,” said Mr Hamid Huq, Managing Director, Tata Coffee. Tata Coffee would be setting up the supply chain and roasting facilities for Starbucks.
First store by year end?
“Hopefully we will see the first (Starbucks) store by the end of this year,” Mr Huq added, without disclosing which all Tata Group firms would be involved in the alliance. He was speaking to reporters on the sidelines of the India International Coffee Festival, 2012.
When asked whether the Government's recent approval for 100 per cent foreign direct investment (FDI) in single-brand retail would have any impact on the alliance, Mr Huq said “We started before this. It does not affect us.”
Last year, Starbucks had signed a pact with Tata Coffee to source beans from the Indian vendor and also explore options to roll out its coffee stores in the country. Starbucks has been waiting for some time now to enter the rapidly growing Indian market, where changing lifestyles aided by rising disposable incomes have fuelled the growth of café culture in recent years.
The Italian coffee roasters Lavazza and Illy café, besides the UK-based Costa Coffee have already entered the Indian market in recent years, whereas Dunkin' Donuts and the Australian chain Di Bella Coffee have announced their entry plans. India has close to 2,000 coffee cafes and the market can absorb another 3,000 retail outlets.
Expansion
Tata Coffee, Mr Huq said, is in the advanced stages of scaling up its instant coffee facility at Theni in Tamil Nadu, with an investment of Rs 50 crore. The total installed capacity at both Theni and Toopran units would increase to 8,000 tonnes by this year end, up from the present 6,600 tonnes. Besides increasing volume, the expansion would also improve the quality profile of the company, Mr Huq said.
Shares of Tata Coffee touched an intra-day high of Rs 876 on the BSE before ending at Rs 867.70, a marginal gain over previous close. For the December quarter, Tata Coffee consolidated net profits halved over the corresponding quarter last year, hurt by the weak performance of its US-subsidiary Eight O'Clock Coffee. The earnings of Eight O'Clock were down because of high prices of green coffee.
Tata Coffee reported a consolidated net profit of Rs 24.03 crore on revenues of Rs 415.89 crore as against a net of Rs 49.72 crore on revenues of Rs 350.2 crore in the corresponding period last year. The standalone net profits also saw a 24 per cent decline on higher expenses. Standalone net profit for the December quarter was Rs 18.99 crore on revenue of Rs 124.11 crore as against a net of Rs 24.91 crore on income of Rs 100.75 crore.