India's a notoriously populous country with a growing middle class, and many American companies covet store space there. Starbucks (Nasdaq: SBUX) is rolling out a new set of plans to get a better foothold in the subcontinent.
The Wall Street Journal reported that Starbucks has struck a deal with Tata Group. The Indian conglomerate peddles all kinds of consumer goods, and owns the Eight O'Clock Coffee brand found on U.S. grocery-store shelves. The deal will include Starbucks opening in Tata's locations, including retail outlets and upscale hotels.
For years, Starbucks has tentatively aimed at raising its presence in India. In 2007, it distributed its wares in Indian movie theaters, and in 2009, the coffee giant reiterated plans to get business going in India. A recent logo change led some to speculate that ditching the English word "Starbucks" signaled the company's plans for rising international expansion.
Starbucks would certainly be a natural fit for an Indian market that craves a cup of java. Coffee consumption in the country has risen by 90% since 1998.
American companies have made numerous attempts of varying effectiveness to set up shop in densely populated countries like India and China. Yum! Brands (NYSE: YUM) has been a particular success in China, and it's trying to duplicate that win in India. The restaurateur has more than 100 KFC locations there already, and plans to have 1,000 total Pizza Hut, KFC, and Taco Bell outlets in India within the next five years.
McDonald's (NYSE: MCD), which has made a real impression on investors with its coffee initiatives here in the U.S., also recently announced plans to step up Indian expansion, aiming to increase its store count from 208 to 248 this year. The burger chain has radically adjusted its menu to fit in, focusing on chicken sandwiches and veggieburgers. (Hamburgers don't go over well in a country in which the vast majority of the population doesn't consume beef.)
American companies definitely covet a presence in India and China, but that doesn't mean they can easily adjust to cultural differences. However, if Starbucks can take off in India, the java giant could enjoy supercaffeinated returns. Even if sluggish U.S. consumer spending and increasing rivalry from companies like Green Mountain Coffee Roasters (Nasdaq: GMCR) and Peet's (Nasdaq: PEET) complicate its domestic sales, strong results abroad could keep Starbucks growing.
The coffee giant needs to hurry, though; other food chains and rivals are stepping up their efforts, and Starbucks shareholders won't want to be left behind.
