Packaged Starbucks coffee likely to hit stores after Nestle deal

Starbucks, the world’s largest coffee chain, and Nestlé, the world’s largest food company, on Monday said they were getting into a global deal to sell Starbucks coffee products outside its cafes — in shops and supermarkets.

While the deal is likely to be concluded by the end of this year, analysts Business Standard spoke to say the possibility of Starbucks-branded coffee at Indian shops existed.

“I don’t rule that out,” Abneesh Roy, senior vice-president, research, institutional equities, Edelweiss, said. “While timelines have not been indicated for an India launch, the deal actually paves the way for Starbucks-branded coffee to be visible in Indian stores. Look at it this way: Starbucks is popular in India and will love that extra distribution push that the deal will give it and Nestlé gets one more big brand in its portfolio,” he said.

Nestlé and Hindustan Unilever (HUL) fight a pitched battle for leadership in the instant coffee market in India, estimated at Rs 15 billion. Their brands include Nescafé and Bru, respectively. A third player, Tata Global Beverages (TGB), emerged when Tata Coffee Grand was introduced in November 2015. While Nestlé will get another big product in its portfolio through the new deal, some experts said it could cannibalize sales of Nescafé. “That is something that Nestlé will have to account for, if it does indeed begin to sell Starbucks-branded coffee in retail outlets here,” Arvind Singhal, chairman, Technopak, said. The bigger question is: Where does the new deal leave Starbucks’s joint venture with TGB in India? Six years ago, TGB and Starbucks entered into a sourcing and retail arrangement in the country, which saw the two not only setting up Starbucks stores in India, but the latter also getting roasted coffee beans from TGB subsidiary Tata Coffee. When announcing the launch of its first store in October 2012, former Tata Group chairman Ratan Tata and Starbucks executive chairman Howard Schultz had said the arrangement could be expanded in the future to cover the latter’s consumer products division. In other words, TGB could distribute Starbucks-branded coffee in retail shops and supermarkets here. That, however, will no longer happen, say experts, with Starbucks and Nestlé getting into a new deal. 

A mail sent to Tata Starbucks India went unanswered till the time of going to press. Nestlé India did not indicate anything when contacted. Starbucks has around 115 stores in India, covering cities such as Mumbai, Delhi, Bengaluru, Pune, Chennai, Hyderabad and Kolkata. The coffee chain plans to enter more cities in the current financial year, launching over 24 stores during the period.

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