Bloomberg News

Tata Coffee Gains After Saying May Announce Starbucks Deal

October 10, 2011

(Updates with Starbucks executive’s comment in eighth paragraph.)

Oct. 10 (Bloomberg) -- Tata Coffee Ltd., which is in talks with Starbucks Corp. to open cafes in India, climbed the most in a month in Mumbai trading after Managing Director Hameed Huq said the company may announce an agreement in two weeks.

Tata Coffee rose 11 percent, the most since Sept. 6, to 889 rupees at the close in Mumbai trading. The stock was the third- best performer on the BSE 500 Index. Parent Tata Global Beverages Ltd., which holds a 57.5 percent stake, rose 3.8 percent to 85.65 rupees.

Tata Coffee signed an agreement with Starbucks in January to supply coffee beans and explore opening stores in India, the world’s fastest-growing major economy after China. A deal will help the world’s largest coffee-shop operator tap a market where consumption of the beverage risen 80 percent in a decade, according to data from India’s Coffee Board.

“That is very much on the cards,” Huq said in a phone interview today. “We will come to the media, I think hopefully within a fortnight’s time,” he said, without elaborating.

Starbucks will compete in India with Lavazza SpA’s Barista Coffee Co., Dunkin’ Brands Inc. and closely held Cafe Coffee Day, which runs 1,134 stores, according to its website.

‘Under Penetrated’

“The market is under-penetrated and there is a lot of scope in urban areas to expand the market,” said Mehul Desai, an analyst with K.R. Choksey Shares & Securities Pvt. in Mumbai. “How fast they are able to open stores and capture the market will be the deciding factor. The more the number of cafeterias, the more the acceptance will be by the people.”

Starbucks is finalizing a joint venture agreement with Tata Coffee to open stores, the Times of India newspaper reported today, citing two people it didn’t identify. Indian laws limit foreign investment in single brand retail chains to 51 percent.

“We are excited about the great opportunities that India presents,” John Culver, president, Starbucks Coffee International, said in an e-mail. “Early this year we signed an MoU with Tata Coffee for sourcing and roasting high-quality green coffee beans. We are moving forward with MoU discussions and planning, and hope to make an announcement soon.”

The first Starbucks store in India will open in about seven months, Tata Coffee Chairman R.K. Krishna Kumar said in an interview with Bloomberg UTV in January.

--Editors: Suresh Seshadri, Arijit Ghosh

To contact the reporter on this story: Malavika Sharma in New Delhi at msharma52@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net


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