Tata Coffee to close ranks with Starbucks

Tata Coffee, the Bangalore-based publicly-held coffee bean supplier, is set to storm into the closely-knit roasteries group of Starbucks. The latter has just six roasteries (five in the US, one in Amsterdam) that supply to 17,000 Starbucks cafes across the world, and the roastery set up by Tata Coffee, at Coorg in the pristine Western Ghats in Karnataka, would be the next in line.

"The technology used in the roasteries for Starbucks is closely guarded and our roastery has been set up directly under Starbucks' technical overview. The 375-tonne roastery was set up with an investment of Rs 4 crore (Rs 40 million), and will supply to the Starbucks cafes in India. Next on the agenda is to gradually start supplying to the cafes in South Asia, and eventually various other global cafes for Starbucks," a senior management official of Tata Coffee told Business Standard.

This is in line with the stated agenda that the Indian Espresso Roast will be the hallmark feature of all Starbucks stores in the market. As part of the agreement, Starbucks and Tata Coffee will work towards developing and improving the profile of Indian-grown Arabica coffees round the world by elevating the stature of Indian coffee.

"However, it will be a while before Tata Coffee gets its place in mature global markets where Starbucks is present, as the processes are being fine-tuned to match the exacting standards," the official added.

According to information available, Starbucks decided on the roastery with Tata Coffee after a series of rigorous checks on the various parameters at the Kushalnagar plant in Coorg.

An indication on the kind of ground work Starbucks does is visible in this fact when it scouted for its first roastery outside of the United States in Europe.

"In the late 90s, when Starbucks considered its ambitious expansion plans for Europe, the Middle East and Africa, the company spent close to three years looking at various sites across Europe before they chose Amsterdam in the Netherlands for their first roastery outside the United States," a Netherlands government statement highlighted.

Ever since, Starbucks and Tata Coffee announced the pact during late January 2012, the stock of Tata Coffee has so far gained 23 per cent on the hope that there will be substantial uptake in volumes from Starbucks.

The global major in coffee retailing bought over 428 million pounds of coffee in fiscal 2011 and it paid an average price of $2.38 per pound for premium green (unroasted) coffee in 2011 - up from $1.56 per pound in 2010.

Tata Coffee, a subsidiary of Tata Global Beverages, has been betting big on instant and specialty coffee to differentiate in the marketplace and is also the third largest exporter of instant coffee from India.

Tata Coffee produces more than 10,000 metric tonnes of shade grown Arabica and Robusta coffees at its 19 estates in South India and its two instant coffee manufacturing facilities have a combined installed capacity of 6,000 metric tonnes. It exports green coffee to countries in Europe, Asia, Middle East and North America.

Tata Coffee for the second quarter of FY13 has reported a healthy 109 per cent growth in its second quarter net profit to Rs 36.8 crore (Rs 368 million) as compared to corresponding previous quarter riding on good growth in its instant coffee division and a sharp turnaround in its global subsidiary Eight O' Clock Coffee. Total income at Rs 477 crore (4.77 billion) for the quarter was up 15 per cent.