Starbucks Will Open Cafes in India

Document 1 of 1 Starbucks Will Open Cafes in India; Coffee Retailer Forms Joint Venture With Tata Group; Pair Plans to Open 50 Stores by Year-End Author: Bahree, Megha Publication info: Wall Street Journal (Online) [New York, N.Y] 31 Jan 2012: n/a. ProQuest document link

Abstract: While several cafes will be stand-alone stores, some might also be set up at the Tata Group-owned Taj Hotels. […] India has remained one of the last untapped markets for the Seattle-based coffee retailer, which has operations in 57 countries. Links: Find it @ FIU Full Text: MUMBAI–Starbucks Corp. is setting up shop across India in a move that may give the government a much-needed pick-me-up in the process.

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The coffee retailer said on Monday it is entering India in a joint venture with the Tata Group, India’s flagship conglomerate. The agreement paves the way for the companies to set up cafes around the country and sell Indian coffee globally. Starbucks has set up a joint venture with Tata Global Beverages Ltd., which owns Eight O’Clock Coffee in the U.S. The two companies will start in India with an investment of $80 million and plan to add funds as the business expands. The venture expects to open its first cafe as early as August in either Delhi or Mumbai, India’s two largest cities. It plans to simultaneously roll out cafes across those two cities before it ventures into other parts of the country. It aims to open 50 cafes by year end. While several cafes will be stand-alone stores, some might also be set up at the Tata Group-owned Taj Hotels. Until now India has remained one of the last untapped markets for the Seattle-based coffee retailer, which has operations in 57 countries. While India is a nation best known for its tea drinkers, sipping coffee and socializing at coffee shops is becoming increasingly popular. Domestic consumption of coffee rose to an estimated 108,000 metric tons in 2010, up 80% in the past decade, according to the latest available government figures. It is a big win for Starbucks, which is counting on emerging markets for additional growth. In the U.S., the company closed hundreds of outlets amid the recession, and while the majority of its profits are still derived domestically, the company is competing against other multinationals such as McDonald’s Corp. that have already established a bigger overseas presence. Rival Dunkin’ Brands Inc., last year entered into a pact with an India-based company to open up to 30 Dunkin’ Donuts outlets over the next three years. Starbucks also recently changed its financial reporting structure to reflect the geographic regions from which its sales and profits are derived. Its Chinese and Asian-Pacific region in the latest quarter reported the biggest bump in same- store sales, or sales at stores open at least a year. The move was flagged last January when Starbucks signed an initial agreement with Tata Coffee Ltd., a unit of Tata Global Beverages, to source and roast premium coffee beans from India. It is setting up a facility for this in the south of India, the coffee hub of the country. The two companies had, at that time, said they would explore the possibility of opening Starbucks retail stores in India. At the time, Starbucks Chairman Howard Schultz said during an interview that India could one day rival China, where the company had announced plans to more than triple the number of outlets to about 1,500 in five years. Starbucks’s announcement is likely to give a shot in the arm to the Indian government, too. For more than a year, the government has been besieged by a string of corruption scandals. Its critics have accused the government of having passed few major new initiatives since being elected to a second term in office in 2009. It also ran afoul of many foreign companies and investors in recent months after reversing a decision to allow 51% foreign direct investment in supermarkets and department stores. The reversal blocked entry into India for big-box stores including Wal-Mart Stores Inc. The government did allow 100% foreign investment in single- brand retail. Until now, single-brand foreign retailers such as Nike Inc. could hold only 51% of an Indian joint

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venture. Starbucks is classified as a hospitality business rather than a retailer and was allowed to have 100% ownership in India prior to the new policy for single-brand retail. Analysts said Starbucks arrival will be viewed positively by other foreign brands that may have become skeptical about India’s prospects. “A brand of the stature of Starbucks sends a very strong signal to retail and food-services companies world-wide,” says Saloni Nangia, senior vice president at Technopak, an Indian research firm. “This is an opportune moment for the country as it sends out a very positive signal,” she said. Starbucks had been looking for a partner in India since about 2007.John Culver, president of Starbucks China and Asia Pacific, said in an interview that he didn’t believe the company had missed out on India’s economic boom years. A few years ago, India’s Gross Domestic Product was seeing almost double-digit growth. The government expects GDP for the year ending March 31 to come in at around 7% and few economists think it’ll do much better in the coming year. “I don’t think we’re late to the game,” said Mr. Culver. “We are very optimistic and very bullish on the opportunity that exists in India.” R.K. Krishna Kumar, director at Tata Sons Ltd., the holding company for most of the Tata investments, added: “This joint venture sends a very strong signal that business is as usual in India. I hope this will reverse the negative impression.” Starbucks says it will offer its core products of espresso-based drinks and food items as well as add some Indian variations. “We will offer a premium product and experience and it will be priced to what the market can bear,” said Mr. Culver. Tata Starbucks plans to open cafes in malls, airports, and near where its customers work and live, the company said. Foreign food brands have had a turbulent history on the subcontinent. Coca-Cola Co. was banned here for 16 years until the mid-1990s for refusing to divulge its secret recipe. Kentucky Fried Chicken about 15 years ago became the focal point for protests by some Indian farmers and politicians to protest what they viewed as a threat to India’s rich culinary culture. But in recent years many brands, including McDonald’s Corp. and Yum Brands Inc.’s KFC and Taco Bell, have been expanding their presence across the country, thanks to the more international tastes of India’s young people and its growing middle class who have increased exposure to Western culture and are driving up demand. Julie Jargon contributed to this article. Credit: By Megha Bahree Subject: Coffeehouses; Retail stores; Coffee Company/organization: Tata Group; 551112 Publication title: Wall Street Journal (Online) Pages: n/a Publication year: 2012 Publication date: Jan 31, 2012 Year: 2012 Section: Business Publisher: Dow Jones&Company Inc Place of publication: New York, N.Y. Country of publication: United States Journal subject: Business And Economics Source type: Newspapers Language of publication: English Document type: News ProQuest document ID: 918712740

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Document URL: http://ezproxy.fiu.edu/login?url=http://search.proquest.com/docview/918712740?accountid=10901 Copyright: (c) 2012 Dow Jones&Company, Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission. Last updated: 2012-02-21 Database: ABI/INFORM Complete

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·         Starbucks Will Open Cafes in India; Coffee Retailer Forms Joint Venture With Tata Group; Pair Plans to Open 50 Stores by Year-End1. Which company is the focus of this article?

a. Specific US company:

b. In which specific country/region of the world is this company’s business the topic of the article?

c. Search for information about the company (from their website and from news articles). Provide some basic BACKGROUND INFORMATION about the company and its focus based on your research. (2 paragraph summary):

d. Search key publications (WSJ, NY Times, Fortune, Forbes) to find any updates on this topic since this particular news article was published. Include any/all updates.

Publication:

Information Updates:

2. What is the main idea of this news article?

a. Provide a brief summary of highlights.

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4. Please describe in detail the marketing challenge(s) faced by this US company in the international business situation that is the topic of the news article.

a. Description of marketing challenges:

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c. Describe in detail what marketing should do/ is doing as stated in the article and in your opinion:

5. Based on your learning thus far in this course, are there any insights/recommendations that you would offer the marketing team of this company with regard to the particular situation/issues described in the article?

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7. Which marketing concepts or terminology, that you have learned thus far in this course, were you able to apply to this assignment/marketing situation? (Think about your answer, and provide a minimum of FIVE marketing concepts)

a. Please specify which specific marketing concepts, and how each of these concepts applies to the situation described in the news article.

8. What is your key learning from this news article?

9. What is you key learning from this assignment? In your opinion, do you think the learning experience from this assignment adds value to your overall experience in this course? Please explain.

10. How has your overall learning experience been in this course thus far? In your opinion, what is the most interesting topic that was covered thus far in thiscourse? What was the most useful or relevant to you personally? Was there a least interesting topic? Please Explain.

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