Indians may get to have their Starbucks Frappe soon, only Starbucks Corp. may not have much to do with it directly.
To comply with India’s strict foreign investment guidelines in the retail sector, the Seattle-based Starbucks has refiled its application to operate in the country. It will now operate through its Indonesian franchisee V.P. Sharma, who will own a 51% stake in the venture. The remainder will be held by Future Group’s Kishore Biyani. The details of the arrangement between Starbucks and Sharma are not known. Both Sharma and Biyani declined to comment on the issue.
“Starbucks is out of it (the new application),” said a senior official at the ministry of commerce and industry who did not wish to be identified. “Sharma will represent Starbucks now,” according to the “modified application,” he added.
Although Indian laws allow foreign ownership of 51% in single-brand retailing operations in the country, the government had not cleared an earlier application from Starbucks in December 2006. That application stated that Starbucks would hold an 18% stake in the venture (which could be raised to 51%), with New Horizons Retail Pvt. Ltd, a company co-promoted by Sharma and Biyani. However, government officials said that did not conform to the 51% ceiling because Sharma is a non-resident Indian or NRI. Investments by NRIs, they added, is treated as foreign investment. Starbucks’ 18%, and the Jakarta-based Sharma’s holding in New Horizons, they said, added up to more than 51%. The exact amount of that aggregate holding isn’t known.
Starbucks had previously said that it was reworking the application to conform to Indian laws regarding foreign investment in retail, a contentious issue because several political parties, trade organizations and activist groups are opposed to it on the grounds that it will hurt small retailers in the country. In the December application, Starbucks and New Horizons had said that they would open a Starbucks coffee chain and retail outlets and sell branded coffee.
The official at the ministry of commerce and industry did not give any details as to when the new application would be cleared.