Tata Coffee jumps on buzz of JV with Starbucks; stock up 9%

NEW DELHI: Shares of Tata Coffee Ltd gained nearly 10% in early trade on Monday to touch their day’s high of Rs 881.75 on reports that Starbucks Corp is close to finalising an equity joint venture with the company for opening coffee shops in India.

Seattle-based Starbucks had held talks with other potential partners in India, including fast food chain operator Jubilant Foodworks, before settling down with Tata Coffee for its ubiquitous cafe business in India, where there is a growing affinity for cappuccinos and lattes, reports suggest.

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India's foreign direct investment ( FDI) regulations will allow Starbucks to hold up to 51% in the joint venture and Tata shares may be routed through more than one group entity, including Tata Coffee, said the report.

India's coffee shop sector is dominated by local players like Cafe Coffee Day and Barista Bean Company, which was acquired by Italy’s Lavazza. Several international brands like Costa, Coffee Bean, Segafredo Zanetti and Nescafe have embarked on building cafe chains in the country. More recently, Dunkin Donuts announced a tie-up with Jubilant.

Starbucks, like most international chains, has turned its attention to emerging markets, including India, to drive growth. The Western-style cafe culture has helped boost coffee consumption in India by 6% in the last five years. Coffee consumption stood at 1 lakh tonne in 2010.

The stock opened at Rs 810 and touched high of Rs 881.75 on the Bombay Stock Exchange. At 11:54 a.m., shares of the company were trading 8.1% higher at Rs 868.