Newstrack

Starbucks withdraws request to set up shop

EH Staff - New Delhi

Seattle-based Starbucks finally decided to wake up and smell the coffee. The world's largest coffee chain has withdrawn its application with the department of industrial policy & promotion (DIPP), filed earlier this year. The decision comes after DIPP refused to clear its application for the second time on the grounds that the Starbucks investment proposal was inconsistent with FDI policy on single-brand retail.

"Starbucks is reviewing all our options and evaluating how we will proceed related to our entry into one of the fastest growing economies in the world," May Kulthol, a company spokesperson, said in a statement.

The US$ 7.8-billion Starbucks had proposed to make New Horizons - a company in which Future Group's Kishore Biyani holds 49 per cent while NRI V P Sharma has majority 51 per cent stake - its master franchisee in India. Sharma also heads the master franchisee for Starbucks in Indonesia.

The DIPP maintained that since the government allows 51 per cent FDI in single-brand retail, Starbucks should come in on its own rather than via the circuitous franchise route.

The development comes at a time when the government is holding consultations to plug loopholes, which could be used by foreign retail companies to enter the country. The government is also fine-tuning its policy on single-brand retail and is in the process of developing fresh guidelines for retail service providers.

At present, there are no guidelines for non-financial service providers, except for courier and transport services. Foreign retail service providers have submitted several proposals to the government. For instance, Singapore-based EYLM has applied to enter into a joint venture with an Indian company, which would, in turn, enter into a master franchise agreement with Spanish laundry and dry-cleaning chain Pressto.