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Corporate Jan 31, 2012

Starbucks, please don’t forget the loo

By Anant Rangaswami

Get ready for battle, Caf Coffee Day, Lavazza, Costa Coffee, Coffee Bean & Tea Leaf and Gloria Jean's; big brother is here.

Starbucks has entered India through a 50:50 joint venture with Tata Global Beverages (TGB), a business partnership that will facilitate speedy roll-out - an ambition made clear when they announced plans to launch 50 cafes by end 2012.

Business aside, Starbucks and the Tatas find common ground in their commitment to the community, with Starbucks stated and practiced policies on ethical sourcing and environmental causes dovetailing with Tata's history of philanthropy and investing back in the community.

The alliance is made in heaven, giving Starbucks access to all of the Tata's hotel properties, reducing the headache of a real-estate hunt considerably as far as cafs are concerned. In addition, Starbucks will be able to ride on the distribution strength of Tata Global Beverages, which markets brands such as Tata Tea, Tetley Tea, Tata Coffee and Himalayan Water.

Tata Coffee will roast coffee to supply Tata Starbucks, and to export to Starbucks Coffee Company.Reuters

Starbucks, a Seattle-based company that began in 1971, today has more than 15,000 stores in 50 countries. The company had recently announced plans to serve wine, beer and premium food offerings at a handful of locations in Atlanta and Southern California by the end of this year. The 23 January announcement came on the back of customer feedback which sought more options to relax in its stores in the evenings.

In a separate sourcing and roasting agreement between Starbucks Coffee Company and Tata Coffee, Tata Coffee will roast coffee to supply Tata Starbucks, and to export to Starbucks Coffee Company.

As Tata Global Beverages CEO RK Krishnakumar said, the JV leverages "the global in-home expertise of Tata Global Beverages and the global out-of-home expertise of Starbucks."

The JV starts off with the advantages of access to prime retails space in the form of the properties of the Taj Hotels, access to airline customers through TajSATS Air Catering Ltd., a joint venture of the Indian Hotels Company, and SATS (Singapore Airport Terminal Services). TajSATS provides in-flight catering at Mumbai, Delhi, Chennai, Kolkata, Amritsar, Goa and Bangalore and manages the Lufthansa lounge (Star Alliance) and Emirates lounge in Mumbai International Airport.

While the space that the Tata's hotel properties have is a big advantage, few of the hotels have easy high street access -a clear preference in this business. While the JV makes no announcement of access to other Tata businesses, it's likely that Trent will be leveraged as well, with Starbucks outlets at Landmark and Westside stores.

The biggest, unstated asset that Starbucks will be looking at is the availability of restrooms at all the hotels and at Trent stores. In the USA, Starbucks has started closing bathrooms at all outlets with less than 20 seats (the law makes them mandatory at larger outlets), much to the dismay of coffee drinkers.

Immediate access to space, existing, well-oiled distribution infrastructure, two established brands working together, an alignment of philosophies - what more could one want in a recipe for future success?

Restrooms. Ask any coffee drinker and he or she will tell you that the loos are a unique selling proposition.

Watch the report below:

by Anant Rangaswami

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