core sector communique

Starbucks suffers delay in India rollout

Starbucks is suffering delays in plans to roll out dozens of stores in India, in a blow to the coffee retailer’s drive to reduce reliance on its American base through aggressive expansion in emerging markets.

In January the Seattle-based company announced an $80m joint venture with India’s Tata conglomerate, with a senior executive at the Indian group suggesting the duo could launch as many as 50 stores by the end of 2012, with the first to open in September.

Starbucks this year said it would accelerate openings in Asia following disappointing sales in economically depressed European markets, with plans for a net increase of 400 new stores this year, half of which would be in China.

However the group said on Friday it could confirm only that a single store would open in Mumbai by the end of October, while plans to open in New Delhi had been delayed until early 2013.

“It’s not so much about the number of stores that we open”, said John Culver, president of Starbucks in China and the Asia-Pacific region, speaking in Mumbai. “With the population of over 1bn here, and with the emergence of a coffee house culture, we see this as a very big market over the long term.”

Despite the delay Mr Culver said Starbucks remained on course in the nascent $200m coffee market in Asia’s third-largest economy, which he said was growing at 25 per cent a year and would, in time, become one of the largest in which his group operated.

The coffee chain’s delay follow a range of troubles suffered by international brands attempting to enter India’s vast but fragmented retail market, despite the government’s decision this month to push forward with plans to allow foreign companies to establish wholly owned subsidiaries in the country.Starbucks offered no explanation for the delays, but analysts have questioned whether the group can repeat its aggressive Chinese rollout – where it has opened more than 600 stores since opening in 1999 – given India’s complex and bureaucratic property market.

On Friday the group said its first store would open in a location in south Mumbai, in a heritage building already owned by the Tata group. It also said the 50/50 Tata Starbucks joint venture would be led by Avani Davda, who has worked for various parts of the $83bn Tata conglomerate over the last decade

Ms Davda confirmed that the partnership, which for the first time would feature both companies names on Starbucks’ well-known green and white signage, will include a food menu adapted to the spicier tastes of Indian consumers.

“It is blending a lot of local flavours, and some of the items you see will really surprise the local consumers,” she said. “It is an elaborate menu, with one unique dish in each local area.”

- Umesh Shanmugam