Tata Global Beverages, a listed company, announced on Monday its entry into a 50:50 joint venture with the world’s largest coffee-chain, Starbucks. The venture, named Tata Starbucks, will own and operate cafes branded as ‘Starbucks Coffee - A Tata Alliance’.

The venture is in line with Tata Global’s strategy of growth, focusing on alliances, in addition to organic growth, according to RK Krishnakumar, the company’s vice-chairman. The initial investment will be Rs 400 crore. There will be three directors from each side. The CEO is still in the process of being hired; a chief financial officer for the joint venture has been identified.

This marks the re-entry of the $83.3 billion Tata group in this business. In 2004 the group sold its stake in the country’s first café chain, Barista, to the Sivasankaran promoted Sterling group.

“Tatas have an equity with coffee and Starbucks is the world’s largest coffee chain. This marriage will be successful,” said Harish Bijoor, CEO of Harish Bijoor Consults. According to him, organised retail chains have in all 2,045 cafes in India.

Starbucks had signed an initial agreement with Tata Coffee, a unit of Tata Global, a year ago to source and roast premium coffee beans from India.

At the time the two companies said they would explore the possibility of opening Starbucks cafes in India. The Seattle, US-based Starbucks Coffee Company is probably the first foreign beverage retailer to enter India after the government allowed 100 per cent foreign holding in single- brand retail.

“The market will expand and it is good for everyone, till now Cafe Coffee Day has set the benchmark. Starbucks may set a new benchmark in terms of performance, delivery, people and sourcing. But we do not expect any competition, as there is enough room for every player,” said K Ramakrishnan, marketing president of Café Coffee Day. Shailesh Pardeshi, regional business head of Fresh & Honest Cafe, Lavazza company, said, “Tata-Starbucks will only cater to the premium end of the market. In India we still have to educate people on fancy coffee.”

The first Starbucks café is expected to open by August or September. The joint venture hopes to have a network of 50 stores in metros by the year-end. “The company will first focus on launching outlets in Mumbai and Delhi and then expand fast to other cities. The stores will be opened in Tata-operated locations like Taj Hotels as well as other locations such as schools, universities, malls, stations and airports,” said Krishnakumar.

“When we entered the market we were very cautious as the market was not mature. Although we are still far away from being a mature market, the response from consumers in the past two years has increased significantly,” said Santosh Unni, CEO of Costa Coffee India. The UK’s largest coffee chain, Costa Coffee, entered India in September 2005 through an exclusive master franchisee tie-up with Devyani International, a Ravi Jaipuria company. It has 95 outlets in cities such as Delhi, Mumbai, Bangalore and Pune. The company plans to add another 60 outlets and enter new cities this year.

“We look forward to bringing the Starbucks experience to customers in India by offering high quality arabica coffee, locally relevant food, and legendary service,” said John Culver, president of Starbucks China and Asia Pacific. The joint venture will also launch a premium tea product, Tata Tazo. Starbucks currently has 17,000 cafes in 57 countries.

Tata Coffee has set up a separate exclusive roasting facility to supply Starbucks in India. The joint venture will source food from TajSATS, a joint venture JV between Indian Hotels Company and Singapore Airport Terminal Services.

Tata Global’s subsidiary, Eight O’Clock Coffee, and Starbucks compete with each other in the US.

(With inputs from Sangeetha G from Chennai)