January 31, 2012

STARBUCKS TO OPEN FIRST INDIAN STORE THIS AUTUMN

Posted by The Himalayan Voice:

[* The announcement comes a year after Starbucks said it was going to enter this market and nearly two months after the Indian government fumbled an effort to attract more foreign investment in its retailing industry.* India, long a country of tea drinkers, has seen an explosion in cafes and restaurants over the past decade thanks to its growing middle class and a large youth population.]

By Vikas Bajaj
Danish Siddiqui/Reuters
R.K. Krishna Kumar of Tata Global Beverages, left, and 
John Culver of Starbucks announced the joint venture 
in Mumbai on Monday.
MUMBAI — After years of studying the Indian market, Starbucks Coffee said Monday that it would open its first store here by September through a 50-50 joint venture with Tata Global Beverages, a unit of the largest business group in India.
The announcement comes a year after Starbucks said it was going to enter this market and nearly two months after the Indian government fumbled an effort to attract more foreign investment in its retailing industry.
The companies would not provide details on their investment and how many stores they want to set up, but a senior Tata executive said at a press conference that there could be 50 stores by the end of the year and speculated that it could eventually have 3,000 locations.
India, long a country of tea drinkers, has seen an explosion in cafes and restaurants over the past decade thanks to its growing middle class and a large youth population.
John Culver, the president of Starbucks in Asia, said it was the growth of that market that convinced the company to finally commit to India after considering it for nearly a decade.
“We are going to move as fast as we possibly can to take advantage of the opportunity that exists in India,” he said during an interview. “It’s an economy that is moving very quickly and the consumer is evolving very quickly.”
Mr. Culver suggested that Starbucks would not compete directly with Indian coffee chains because it would sell “premium” coffee, tea and food in its Indian stores. He declined to say how its prices in India would compare with other Indian chains and with its U.S. and European outlets. Most Indian coffee chains sell beverages at far lower prices than their counterparts in the West. A small cappuccino typically costs 53 rupees, or $1, at Café Coffee Day, the country’s largest cafe chain.
While several foreign coffee players, like Lavazza of Italy and the California-based chain Coffee Bean & Tea Leaf, have set up outlets in India, the national market is dominated by Café Coffee Day, which is owned by a coffee-growing and trading firm based in Bangalore.
With more than 1,200 stores, Café Coffee Day has a ubiquitous presence in Indian cities and is especially popular with the country’s youth, many of whom appear to prefer its large selection of cold, sweet milkshakes, teas and other beverages, rather than traditional coffee. An executive with the company said it planned to have 2,000 stores by the end of 2014.
“We will hopefully learn a few things from them,” the executive, K.Ramakrishnan, president of marketing for Café Coffee Day, said about Starbucks. “That apart, it’s business as usual for us. We continue our expansion story.”
For Tata, the venture with Starbucks serves as a second chance at creating a national cafe chain. It earlier had a minority stake in Barista, a chain that is now controlled by Lavazza. R.K. Krishnakumar, the vice chairman of Tata Global Beverages, said the company quit that venture when two of its partners started fighting with each other.
Mr. Krishnakumar said that while Starbucks was “cautious and careful” in setting and announcing goals, it could easily have 3,000 stores in India.
Starbucks will arrive in India just as policy makers are struggling to bolster growth and interest by foreign investors. The Indian economy is set to slow to 7 percent growth in the current fiscal year, which ends in March, from 8.5 percent the year before. Many economists and corporate executives are increasingly frustrated by the slow pace of decision-making in New Delhi.
At the end of last year, many foreign investors were dismayed that the government quickly put on hold its decision to allow foreign retailers like Wal-Mart Stores to take a 51 percent stake in Indian retailing stores because of protests by opposition political parties and small retailers and wholesalers. It is unlikely that the government will reconsider that proposal before elections in five states conclude in March.
This month, policy makers implemented a related decision to allow retailers like Starbucks that sell only one brand of products to set up wholly owned stores in the country. But some foreign chains like Ikea have said that a condition that requires retailers to buy 30 percent of their products from artisans and small Indian companies would make it difficult for them to take advantage of the decision.
The country’s finance minister, Pranab Mukherjee, spent the past two days in Chicago trying to reassure investors and companies that India was committed to opening up its economy to outsiders. “India presents opportunity at this moment that cannot be ignored,” Mr. Mukherjee said at the Chicago Council of Global Affairs on Sunday. “I urge you to seize this moment and contribute to our collective prosperity in the times to come.”

INDIA’S CHAI DRINKERS EMBRACE COFFEE

[Sarika Desai, 31, is a fashion designer and entrepreneur who frequently conducts her business meetings at the Coffee Bean and Tea Leaf. “I normally drink the Moroccan mint tea since I don’t really enjoy the coffee,” said Desai, who spends approximately 2,000 rupees, or about $40, each week at cafés. “I come here for the comfortable environment, wireless connectivity, central location and the quality of food.”] 
By Neha Thirani
Uriel Sinai/Getty Images
Patrons at a coffee shop in Bangalore.
For coffee-shop regulars across India, Starbuck’s plans to enter the Indian market will be hailed as a pleasant development.
In a culture formerly accustomed to having the day punctuated at regular intervals by steaming cups of “chai,” urban Indians took to the coffee shop culture with great gusto. Since the late ‘90s when Indian coffee shop chains first began to open in every city neighborhood, the coffee shop has worked its way into the Indian way of life.
Though some might still prefer drinking tea while at home, the plush sofas, casual setting, pop music and free Internet have attracted many.
Sarika Desai, 31, is a fashion designer and entrepreneur who frequently conducts her business meetings at the Coffee Bean and Tea Leaf. “I normally drink the Moroccan mint tea since I don’t really enjoy the coffee,” said Desai, who spends approximately 2,000 rupees, or about $40, each week at cafés. “I come here for the comfortable environment, wireless connectivity, central location and the quality of food.”
“Earlier, people in the city met for paan or ice-cream post-dinner,” Desai said. “Now people say – ‘let’s meet for coffee’– it’s part of the new parlance. My 19-year old brother drinks tea at home, but frequently meets his friends at Café Coffee Day.”
Growing up, watching re-runs of “Friends” on television, young urban Indians congregate naturally at cafés – where the coffee served has little to do with the appeal. The most popular drinks at chains like Café Coffee Day are often not traditional coffee, but things like the iced chocolate mocha and flavored lemonade that cater to the Indian penchant for sweets.
While coffee shops such as Barista and Cafe Coffee Day serve only a small percentage of the population because of their high prices, traditional Indian coffee shops in cities like Dellhi and Kolkata are still serving up hot cups of coffee for Rs 10. Filled with an older generation mulling over the days news over coffee, these coffee houses are now struggling to attract a younger audience who prefer their newer, snazzy counterparts – and are willing to pay the premium.
“I like going to cafés for the ambience, nice seating, you can watch football matches there with friends,” said Umang Khagram, a 20-year-old engineering student who spends $3 each week at coffee shops. “It’s a place to chill outside of the house.”
India has seen an explosion in cafes and restaurants over the last decade thanks to its growing middle class and a large youth population – about half of Indians are 25 or younger. John Culver, the president of Starbucks business in Asia, said it was the growth of that market that convinced the company to finally commit to India after considering it for nearly a decade.
Though Barista, (now Barista Lavazza) was considered the most popular coffee chain when they first opened stores all across India in 1997, they were overtaken by Cafe Coffee Day which, with its lower price point and large variety of frappes and sweet drinks, caters to Indian preferences. Today Cafe Coffee Day is by far the most ubiquitous coffee chain across Indian metros.
Dikshita Shukla, a professional working in the advertising industry, finds that most working people go to the nearby Café Coffee Day just for a change from the office environment. “Coffee is just an excuse. You’ll often see a table with four people, with maybe one dessert and one drink ordered. It offers a less-expensive venue to meet than a proper restaurant.”
“The Indian coffee market has yet to come of age – as off now, coffee is all sugar and milk and Nescafe,” says Aniruddha Barua, 25, a real estate analyst based in Mumbai, whose preferred drink is a double espresso. “Coffee shops probably make a very small part of their revenue from selling actual coffee.”
However, urban high school students have grown accustomed to gathering in coffee shops as part of their social life. “We come here every day after school, for at least a few hours,” says Kanak Somani, a student at Mumbai’s Jamnabai Narsee School, referring to a Costa Coffee in her school’s neighborhood.
“Almost everyone orders a cappuccino. We drink so much coffee, it doesn’t really help us stay awake anymore,” says Somani, 18, who spends about $10 each week at cafés.  “I would be super-excited about a Starbucks in town – I love their Frappuccinos.”