Coorg: Tata Coffee Ltd and the world’s largest coffee-store chain Starbucks Corp. signed a deal in 2012 for the Tata group firm to supply coffee beans to the latter’s stores in India.
On Friday, the companies inaugurated a plant in Coorg, which has a capacity to roast 375 tonnes of coffee. The plant will also supply coffee for Starbucks’ stores in other countries, said John Culver , president, Starbucks Coffee China and Asia Pacific.
In a joint interview, Culver and Tata Coffee managing director Hammed Huq spoke about the partnership, Starbucks’ expansion in India and the coffee market.
Now that you’ve opened a few stores here, how has the response been and what are the immediate learning?
Culver: The customer feedback has been incredible. Just in terms of the pent-up demand that has been here for Starbucks and the fact that Starbucks is here, customers have the customized beverages, loved the environment. We are very encouraged by that.
When you announced the joint venture last January, you’d set a goal of opening stores 50 stores by the end of the year. That hasn’t happened. What challenges have you faced in opening stores?
Culver: I don’t feel as if we’ve faced challenges in opening stores. We’ve taken a look at the market and have put in place what we think is a sound strategy to grow in the market. We want to make sure that we focus on each of the stores that we open.
What is Starbucks’ expansion strategy in India?
Culver: We are committed to India for the long-term. We see that India, over time, can become one of the top five markets Starbucks operates in. We’re in Mumbai and New Delhi today. We are going to continue to thoughtfully grow into other cities, and then eventually into smaller cities. We have plans to move quickly and aggressively, and do it in a disciplined way.
What is the quality of coffee in India, compared with the other markets?
Culver: We have a 42-year history of ethically sourcing only the top 3% of Arabica and, obviously, once we get the coffee, we focus on the roasting process. Whether it’s coffee from Africa, India or Brazil, we’ve been able to apply our expertise in roasting and sourcing, and we’ve been able to elevate a whole new world of coffee that did not previously exist. There’s a lot of great coffee grown in India. We have a history of sourcing from India and with this partnership with Tata Coffee we’re going to be buying even more coffee from India and serve it to our customers in our stores in India and, ultimately, use it in our markets outside India as well.
When will the plant start supplying to your cafes in other countries?
Culver: It’s very important that we build relationships with the coffee-growing community here and work closely with the coffee farmers and help them elevate the quality of what they are growing here so that it hits the standard that we want. We’ll also work closely with them on growing practices so that they can improve the overall health of their plants and the overall yield.
Some coffee growers have switched from growing Arabica beans to Robusta this year. Have you made a change as well?
Huq: This year has been bad for Arabica production because of long droughts. The volumes have been depressed. Next year, Arabica will bounce back. People going from Arabica to Robusta is a very short-term move. We will maintain an Arabica production base of about 30-35%, which is very viable and catering to the speciality or the high-quality segment.
What’s the outlook on Arabica prices?
Huq: The market has corrected. Earlier, the market was averaging about 270 cents per pound, it had touched $3 at one point. Now it’s hovering around $1.5 a pound. Going forward, it will never go back to ($3 levels), but Arabica will remain profitable for a good quality producer.
When do you expect to reach full capacity at the current plant?
Huq: We’ve just started the plant. It’s more important to get the systems and processes in place and look at the quality. We’re in it for the long haul. We’ve got the plant ready in time to meet the needs of our retail business—that was the first step. The next step is to build on it and scaling up will take place. I don’t want to give a time frame about when we will do it.