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A tall Frappuccino in Mumbai? Maybe, soon

By Moni Basu, CNN
  • Starbucks enters a deal with an Indian coffee conglomerate
  • It could pave the way for Starbucks retail outlets to open in India
  • India has "tremendous potential," says the Starbucks chairman

(CNN) -- Indians may have come a step closer to sipping venti Frappuccinos after Starbucks signed a deal Thursday with a coffee conglomerate in India, a previously untapped market.

Starbucks Coffee Company signed a memorandum of understanding with Tata Coffee Limited that could pave the way for retail outlets in India and the global sale of Indian arabica beans, roasted at Tata's facility in Coorg, India.

"India is one of the most dynamic markets in the world with a diverse culture and tremendous potential," Howard Schultz, chairman and chief executive officer of Starbucks, said in a statement.

While other American food and beverage giants like McDonald's and Coca-Cola have become household words in India, Starbucks -- love it or hate it -- has yet to take advantage of millions of consumers in the world's second most populous country.

The world's largest coffee company, based in Seattle, operates in more than 16,000 outlets in 50 countries, including China. But even though more and more Indians are taking to the coffeehouse idea, Starbucks has been absent from the streets of the Asian giant.

"We welcome Starbucks' entry into India because of both its unique experience with the store format and for its commitment to society, values that we share," said R.K. Krishnakumar, chairman of Tata Coffee.

By some estimates, the India cafe market is growing by as much as 40 percent a year.

So far that market has been dominated by Café Coffee Day, an Indian chain, and Barista, operated by Italy's Lavazza. Other international companies including the UK's Coffee Republic, Malta's Cafe Jubilee and Australia's Coffee Club Group are scouting for franchises, according to Indian media reports.

And why not? Since 1995, coffee consumption in the traditionally tea-drinking nation has doubled, according to the Coffee Board of India.

About half of India's 1.1 billion people are under 25. With India's recent economic boom, many of them have freshly acquired disposable income to spend in fashionable, Western-style places like malls and restaurants.

"We believe India can be an important source for coffee in the domestic market, as well as across the many regions globally where Starbucks has operations," Schultz said.

A cup of coffee at an upscale cafe, however, can set you back 70 rupees ($1.50). Tea at an outdoor stall only costs 5 cents. So, for the millions of Indians who still live in abject poverty, a Starbucks coffee might just be a bit too grande for the wallet.