STARBUCKS , the worlds largest retailer of coffee, has revived its plans for India and begun talks with the Shyam and Hari-Bhartia controlled Jubilant Group for a possible alliance, two persons familiar with the development said. Jubilant Foodworks, part of the Delhi-based Jubilant group, is the Indian franchisee for Dominos, the pizza chain. The groups flagship company is Jubilant Organosys, a leading contract manufacturer of pharmaceutical products.

A spokesperson for Jubilant Foodworks declined comment. However, a person close to the group said the company regularly spoke to foreign majors seeking to enter India’s food and beverages sector and Starbucks was among them.

FI
B stalled Starbucks entry earlier

JUBILANT is regularly in discussions with several companies, including Starbucks. This person said talks with the US-based coffee retailer were at an early stage. Starbucks didn’t respond to an email query at the time this article was being written.

Starbucks, famous for making coffee-drinking fashionable in the US, had tried to enter India by striking an alliance with Kishore Biyanis Future group three years ago but these plans were rejected by the Foreign Investment romotion Board or FI B, the government body which regulates inflow of foreign money into India’s factories, shops and mines. Organised coffee retailing is a niche but growing segment in India. Industry officials said the size of the segment, which is dominated by unlisted companies, is around Rs 500 to Rs 600 crore.

The major players in India include two franchisees of overseas coffee retailers. These are Italian chain Lavazza-owned Barista which bought a controlling stake in the coffee retailer from C Sivasankaran, the Chennai-based entrepreneur, and UK-based Costa Coffee for which RJ Corp owned by
epsi bottler Ravi Jaipuria is the exclusive licensee.

India allows foreign investors to own 51% in single-brand retail which would encompass coffee chains such as Barista. Lavazzas exact equity holding in Barista is not in the public domain. Cafe Coffee Day owned by entrepreneur VG Siddhartha, which has E firms among its shareholders, is another major player in this segment. These chains have been thriving on rising demand from India’s increasing upwardly mobile middle class and youth for whom hanging around in a coffee shop is still aspirational. Starbucks attempts to enter India have been stymied because of what many say is a lack of transparency in roles governing foreign direct investment in retail. About four years ago, the coffee retailers application to the FI
B was rejected due to lack of clarity on the foreign shareholding structure of the proposed Indian venture.

New Horizons, a 51:49 JV between Starbucks Indonesian franchisee V Sharma and Future Group CEO Kishore Biyani, was to be the licensee for Starbucks operations in India. New Horizons was to set up operate and manage Starbucks stores in India. But the alliance never saw the light of the day after the Indian government asked Starbucks to amend its application twice.

Seemingly irked by this, Starbucks withdrew its proposal and decided against coming to India, at least for some time.

For the year 2010, Starbucks financial and operational targets include mid-single digit revenue growth and about 300 new stores, it has announced on its website. It plans to set up 100 new stores in the US and approximately 200 new stores in international markets.

Source: http://www.indiacoffee.org/newsview.php?newsid=56

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