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Starbucks, Jubilant still in talks

Raghavendra Kamath & Viveat Susan Pinto  |  Mumbai 

Starbucks, the world’s largest coffee chain, is still in talks with New Delhi-based Jubilant FoodWorks and some of the top real estate and retail chains to set up standalone stores in the country, said a person with direct knowledge of the development.

On Thursday, Starbucks signed a binding memorandum of understanding (MoU) with Tata Coffee to set up stores in Tata Group’s associated retail outlets and hotels besides sourcing and roasting coffee beans in Tata Coffee’s Kodagu facility in Karnataka.

In an interview with an international newspaper, Starbucks Corp chairman Howard Schultz said the company would select an Indian partner with which it will develop standalone stores in India, without offering a time frame.

Though Seattle-based Starbucks held talks with many Indian companies, including Jubilant, Reliance Industries, DLF Retail and DB Realty among others in the past, nothing fructified.

“As far as Jubilant goes, the talks are still on,’’ said the person, adding the scale with which Jubilant operates may tilt matters in its favour.

Jubilant FoodWorks Limited, a Jubilant Bhartia Group Company, holds the master franchisee rights for Domino’s Pizza in India, Nepal, Sri Lanka and Bangladesh. Among pizza chain operators, Jubiliant is the largest player with around 340 outlets. In the second quarter of the current financial year, it added 18 stores with net sales going up 67 per cent during the quarter.

Hari S Bhartia, one of the promoters of the company, and Ajay Kaul, chief executive of Jubilant Foodworks, did not comment on the subject when contacted. E-mail to Starbucks did not elicit any response. Reliance Retail, however, denied holding talks with Starbucks.

In an interview with Business Standard, R K Krishna Kumar, chairman, Tata Coffee, said the Tatas do not want to merely be a franchise partner despite a non-exclusive agreement with the US-based chain.

“It is up to Starbucks to decide what kind of a sustainable partner they are looking at, what will be the shared values, etc,’’ Kumar said. He added that since Starbucks in the US has a shop-in-shop model, both the could explore joint opportunities. “Like Starbucks kiosks, for example. The front-end stores will have Starbucks name,’’ he said.

But the tie-up with the Tatas does not hamper Starbucks’ plans to partner with other Indian corporates, said the person quoted earlier.

“They (Starbucks) can always have different franchisees for different regions. Besides, they can always have different concept stores with different partners,’’ he said citing the example of quick service restaurant chain McDonalds, which has different franchisees for the north and east of India and the west and south of India.

In June 2007, Starbucks said it would file a revised application for its entry into India after its earlier proposal for franchise operations was put on hold by the Department of Industrial Policy and Promotion. The department was of the view that the plan did not conform to FDI rules.

Starbucks had proposed to enter the Indian market through a franchise agreement with 51 per cent owned by its Indonesian franchisee V P Sharma with the rest owned by Future group chief Kishore Biyani. That agreement was not acceptable to DIPP, a official from the government told this newspaper earlier.

“Starbucks follows multiple strategies across the world. In some places it runs franchise stores. In some, it has its own stores and in others it runs a mix of stores. India is a too big a market for Starbucks to rely on only one partner,’’ said a retail consultant who did not want to be named. “Apart from real estate, what a partner brings to the table matters during the negotiations.’’

Tata Coffee stock gained 20 per cent today to close at Rs 555 while Jubilant closed at Rs 562, nearly 5.66 per cent lower than Thursday’s close.

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First Published: Sat, January 15 2011. 00:48 IST