Noel Tata as Café Revolutionary

The rumour that Ratan Tata’s half brother Noel might head Tata Starbucks’ cafe venture has a truly compelling appeal

The aroma is too heady to resist. Is Noel Tata, once considered Ratan Tata’s shoo-in successor as chief of the Tata Group, about to take charge of the just-unveiled 50:50 joint venture between Tata Global Beverages Ltd (TGB) and Starbucks Coffee Co? That’s the market rumour. What’s known is that Tata Starbucks Ltd plans to open a chain of cafés across India, starting August. Whiffs of such an alliance have been in the air ever since January 2011, when Starbucks struck a deal with Tata Coffee, which owns some of India’s best coffee plantations, for the supply of roasted beans.

Seattle-based Starbucks boasts of $11.7 billion in revenues and some 17,000 outlets in 56 countries, and now that India is open to 100 per cent FDI in single-brand retail projects, does not legally need a local partner here. But for a company named after a character in Moby Dick whose thinking is anything but run-of-the-mill, it would’ve been odd if it took the obvious route into the market.

Apart from plantations, Tata Coffee has experience in part-operating cafés that serve as a ‘third place’ (away from home and office), where you are welcome to sit around for hours on end. In 2001, Tata bought one-third of Barista, an Indian chain started by Turner Morrison with expansive plans. But barely three years later, it was offloaded by both in what looked like a distress sale. They sold it to C Sivasankaran’s Sterling Group, which passed it on to Turin-based LavAzza in 2007 at many times its acquisition cost. Today, Barista has only about 230 outlets, and is far behind its old challenger for market leadership, Café Coffee Day, which has 1,230. Recent entrant Costa Coffee has about 70. And Mocha has its own niche.

Starbucks, of course, is the ‘real thing’ among coffee chains. It can’t afford to stumble. By and large, India is a tea market with low coffee ‘cross-elasticity’, and one that is yet to see a coffee revolution a la Europe-of-an-earlier- era. All in all, it calls for a local partner with a psychographic fix on the consumer. And Tata, it appears, hasn’t given up its coffee house passion.

But would Noel Tata deign to head Tata Starbucks Ltd? Maybe ‘deign’ is the wrong word. The financial size of an enterprise, after all, is not always relevant to its true worth. The café sector plays to Tata’s own blend of strengths, and offers a challenge of the rare kind that business legends are made of. The alliance could well be worth the time and energy of the former future Tata Chief.

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Aresh Shirali