Tata Starbucks open 1st store, but expansion may be tough

Nachiket Kelkar
moneycontrol.com

Starbucks finally opened its first store in India on Friday at Horniman Circle in South Mumbai. But the key question is whether it will meet its initial expansion targets?

Tata Starbucks joint venture had planned to open 50 stores in India by Dec-end, but that looks unlikely now given that the first store itself has been little behind schedule and officials refuse to give any specific number of planned stores now. And expensive and limited quality real estate supply could be a key reason.

"This (partnership) is about expanding market here. We may have taken a view of 50 stores a year ago. But finding, identifying real estate is not easy. We expect once the store is open, we can rollout many more," RK Krishnakumar, chairman, Tata Global Beverages said.

Starbucks, though, is very positive about the opportunities in India and feels it could be one of the largest markets for Starbucks in the world one day.

"This is a very large opportunity...With Tata's help and the size and scale of this market, we believe this is a market we will grow significantly in over next few years," said Howard Schultz, chairman, president and CEO of Starbucks Coffee.

Following the first store opening today, Tata Starbucks will open the second outlet at the Tajmahal Palace hotel also in South Mumbai, next week. Another outlet will open at Oberoi mall in Mumbai's western suburb of Goregaon, also next week.

It plans to enter Delhi in 2013.

Company officials say that they will build stores throughout India, but in the near-term the focus will be on major cities.

The company will be competiting with other international coffee chains like Costa Coffee and Lavaza. But its biggest competitor will be home grown Cafe Coffee Day, which already has 1300 outlets across the country.

Starbucks is a premium brand around the world. Here it is sourcing most of its coffee locally from Tata Coffee estates and thus also seems to have kept prices in line with other coffee chains operating here like Costa.

For instance, its hot coffees led by the espresso starts at Rs 90, while the cold frappuccinos are priced in Rs 120-200 range.

Lot of food items also have been tweaked for India. So there will be stuff like chicken tandoori kebab sandwich and paratha wrap. Don't expect beef or bacon sandwiches here.

nachiket.kelkar@network18onlne.com