StarBucks Coffee for India

  BANGALORE (MarketWatch) -- India's Tata Coffee Ltd. and Starbucks Corp. could this month unveil an alliance marking the popular U.S. coffee retail chain's foray into Asia's third-largest economy, a person familiar with the matter said Monday.

 India remains one of the big untapped markets for the Seattle-based coffee-and-food company. Chairman Howard Schultz had said in January that India could one day rival China, where the company plans to more than triple the number of outlets to around 1,500 in five years.

Starbucks had signed an initial agreement with Tata Coffee in January to source and roast premium coffee beans in India. At that time, the two companies said they will also jointly explore the opening of Starbucks retail stores in the country.

Seattle-based Starbucks had held talks with other potential partners in India including fast food chain operator Jubilant Foodworks before settling down with Tata Coffee, the newspaper said, citing sources with direct knowledge.

Tata Coffee's managing director, Hameed Huq, could not be reached by Reuters at his office in Bangalore, and Starbucks did not immediately respond to a mail seeking comment on the report.

Starbucks had signed a pact with Tata Coffee, part of the Tata industrial conglomerate, in January to buy coffee from India and explore opening retail stores in the country, the companies had said in a statement.

The Times of India said the Starbucks joint venture deal with Tata Coffee would also be backed by other bigger firms within the salt-to-software Tata group.

India's foreign direct investment regulations will allow Starbucks to hold up to 51 percent in the joint venture and Tata shares may be routed through more than one group entity, including Tata Coffee, the newspaper said.

The alliance is with India's Tata Group, a wide-ranging company that owns everything from Jaguar cars to steel mills and tea plantations. Its Tata Coffee Ltd. unit owns the Eight O'Clock Coffee Co. in the U.S. and is a big coffee producer in India.

The country, though known as a land of tea, is also a major coffee exporter—the fifth-largest in the world, according to the U.S. Department of Agriculture.

In earlier interviews Starbucks Chairman, Mr. Schultz said one of the reasons for the alliance is to raise the profile and use of Indian premium Arabica beans in Starbucks stores elsewhere. The first phase of the alliance involves sourcing and roasting beans.

Indians have been flocking to coffee. Overall domestic consumption rose to an estimated 94,400 metric tons in 2008, up almost 90% since 1998, according to Indian government figures. Much of that has been driven by quick-service, comfortable cafes that are Starbucks's specialty. For instance, Coffee Day Resorts, in which U.S. private-equity firm Kohlberg Kravis Roberts & Co. holds a stake, runs a large chain of Café Coffee Day stores across India. Lavazza of Italy owns a chain of espresso bars, Barista.