Starbucks’ Indian Beach-head

What does Starbucks' entry mean for the roughly half-a-million Indian farmers who grow coffee and 600,000 others involved in roasting, trading and other corollary industries?

For the last 10 years or more, Café Coffee Day, a chain run by a vertically integrated company that grows, roasts and retails its own beans, has worked hard to surge ahead of its rival Barista in the Indian cafe market. In the effort, it has set up over 1,000 full-service outlets across the country and almost as many mini-kiosks, thus expanding India's cafe culture vastly. But last fortnight, the Seattle-based Starbucks finally got a beach-head in India, its largest untapped market.

In preparation for its own outlets in India, Starbucks signed on Tata Coffee for local supplies. So what will this mean for the roughly half-a-million farmers who grow coffee and 600,000 others involved in roasting, trading and other corollary industries? "I think it's good," says VR Gudde Gowda, officer on special duty of the Indian Coffee Board. "Starbucks is a branded company, and it will promote the product. It will help Indian coffee growers, especially small growers." He estimates that the entry of the coffee chain will push prices up "maybe 5 to 10 per cent."

He also sees another benefit in the deal, by which India's largest plantation owner Tata will not just supply beans but also help Starbucks get its Indian retail act together: "It will have an impact and will give [Indian growers] more access" to other Asian markets like China, apart from West and East Asia, where Starbucks already has a presence.

While the deal will likely please growers and roasters, Gowda, who handles coffee  promotion in northern India, would also like to see a rise in domestic coffee consumption. He says consumers in the north, traditionally a tea-drinking region, are still price sensitive.  "If it is Rs 30-40 [per cup], they will be more suc­cessful," he says of cafe chains. "They will actually [be able to boost] coffee. At Rs 30-40, they will have a better market."

Current cafes are overpriced. "That is the feeling of the consumer," he says. Café Coffee Day charges about Rs 50 per cup. Barista has been costlier still. "Customers are comfortable paying in [a lower] range."