Starbucks May Open First Store in India in Second Half

Starbucks Corp. (SBUX), the world’s biggest coffee shop operator, may open its first store in India in the second half of this year as it seeks expansion in the fastest growing major economy after China.

Starbucks will open the stores after forming an alliance with India’s Tata Group by the end of this month, Hameed Huq, managing director of Tata Coffee Ltd. (TCO), said in New Delhi today. The Seattle-based company signed an agreement in January 2011 to source beans from Tata Coffee.

Starbucks faces competition from Barista Coffee Co., a unit of Italy’s Lavazza SpA (LAVA), and Café Coffee Day, run by the Amalgamated Bean Coffee Trading Company Ltd. in India, where consumption doubled to more than 100,000 metric tons between 2001 and 2010, the Coffee Board of India estimates.

An agreement that may lead to opening the first store in the second half of this year will be completed this month, Huq said. He didn’t comment on terms of the expected accord.

An e-mail sent to Starbucks’s public-relations team in Seattle outside business hours wasn’t immediately answered.

Tata Coffee’s shares rose 1 percent to 865.95 rupees at the close of trading in Mumbai, while the benchmark Sensitive Index (SENSEX) gained 1.2 percent.

India’s government on Jan. 10 removed the 51 percent limit on foreign ownership of stores selling a single brand, a decision that will benefit companies including Starbucks and Ikea. The new rules require the overseas companies to procure at least 30 percent of their products or inputs from small Indian companies if they own more than 51 percent in the venture.

Starbucks is “moving forward with MOU discussions and planning” in India, John Culver, president of the coffee chain’s international business, said in an e-mailed statement last week.

To contact the reporters on this story: Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net; Malavika Sharma in New Delhi at msharma52@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net