Bloomberg News

Tata Global Surges After Venture With Starbucks: Mumbai Mover

January 31, 2012

Jan. 31 (Bloomberg) -- Tata Global Beverages Ltd. jumped the most in almost six months in Mumbai trading after announcing a joint venture with Starbucks Corp., the world’s largest coffee-shop chain.

Tata Global advanced as much as 6.2 percent to 104 rupees, the biggest intraday jump since Aug. 10, before trading at 103.35 rupees as of 10:45 a.m. in Mumbai. The stock was the biggest gainer today on the BSE100 Index.

The equal venture Tata Starbucks Ltd. will open outlets in Mumbai and New Delhi this year beginning August and will have 50 stores within the first 12 months, Tata Global Vice Chairman R.K. Krishna Kumar said yesterday. The partners plan to capitalize on the rising coffee consumption in the world’s fastest growing major economy after China.

“The venture will benefit from changing spending patterns here, as Indian consumers are looking to adopt the ways of the developed economies,” said Sreekanth P V S, an analyst at Angel Broking Ltd. in Mumbai.

The Indian stores will build on the world’s largest coffee- shop chain’s expansion outside the U.S., where stores are less profitable than those in the Asia-Pacific region. Starbucks will compete with Barista Coffee Co., a unit of Italy’s Lavazza SpA, and Cafe Coffee Day, run by Amalgamated Bean Coffee Trading Co. in India, where consumption of the drink almost doubled in the decade through 2010 to 108,000 metric tons.

The Starbucks Experience

“We are going to bring the Starbucks experience that is known around the world to India,” John Culver, Starbucks president for China and Asia Pacific, said in an interview. “All the coffee we serve here will be locally sourced.”

The Seattle-based restaurant operator has an agreement to source beans from Bangalore-based Tata Coffee Ltd., a unit of Tata Global.

Starbucks rose 1.3 percent to $48.48 yesterday, boosting its gain so far this month to 5.4 percent. The stock climbed 43 percent in 2011, the third straight year of gains.

Tata Coffee advanced 0.6 percent to 871.70 rupees and has climbed 15 percent this month.

India’s government on Jan. 10 raised the ownership limit to 100 percent for foreign retailers selling a single brand, a decision benefiting companies including Starbucks. 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.

The Indian economy will expand an estimated 6.5 percent this year, the fastest pace among developing Asian economies excluding China, according to January estimates from the World Bank. The Reserve Bank of India projects 7 percent growth for the 12 months ending March.

--Editors: Frank Longid, Suresh Seshadri

To contact the reporters on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.

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


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