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Starbucks Eyes India

The coffee giant has big plans for the subcontinent.

1:45 PM, Jan 24, 2011 • By VICTORINO MATUS
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In the spirit of, well, spirits, Starbucks plans to take advantage of Asia's emerging markets, with an eye towards the Indian subcontinent. As the Wall Street Journal recently reported:

Starbucks Corp. unveiled an alliance Thursday [January 13] with India's flagship conglomerate—a move designed to pave the way for retail locations here and to sell more Indian coffee world-wide.... Chairman Howard Schultz said in an interview from Mumbai that India could one day rival China, where the company recently announced plans to more than triple the number of outlets to about 1,500 in five years.... 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.

Yes, the land of Darjeeling is also the fifth-largest exporter of coffee in the world, just behind Brazil, Vietnam, Colombia, and Indonesia. India has also seen its own coffee consumption go through the roof. All of which could translate into enormous revenue for Starbucks, though doing business in India will require jumping through a few hoops, as the Journal explains:

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 some Indian farmers and politicians to protest what they viewed as a threat to India's rich culinary culture.... Foreign brands that do best "are those that have adapted their products to Indian tastes in addition to what they have done globally," said Ramesh Srinivas, the executive director of consulting firm KPMG in Bangalore.

Take Domino's Pizza Inc.'s "Peppy Paneer" pizza, which includes paneer, the bland Indian cheese, and spicy red peppers. McDonald's serves no beef because of the cow's sacred status in Hinduism, but it churns out Chicken Maharaja Macs. Mr. Srinivas said Starbucks might consider savory vegetable puff pastries, an Indian breakfast treat, next to the muffins as well as chicken tikka sandwiches for lunch.

It will be interesting to see how Starbucks adapts. Meanwhile, the booze business continues to boom—with both Westerners and Indians reaping the benefits. As one reader recently reminded me, India-based United Spirits Limited (a subdivision of the UBGroup, headed by Vijay Mallya) has already acquired such renown distilleries as Dalmore and Jura.

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