Guess who’s moving into India? Howard Schultz and the rest of his Starbucks (NASDAQ:SBUX) team. Reuters reported Oct. 10 that Starbucks is finalizing a joint-venture deal with Tata Coffee Limited to open coffee shops all across India. Starbucks’ largest market in Asia currently is China, with 470 outlets open and plans for 1,500 by 2015. India’s not going to be nearly as easy to conquer.
China is a tea-drinking culture, so coffee-shilling Starbucks had little competition when it first started opening stores there in 1998. India, on the other hand, has an established coffee culture, dominated by Café Coffee Day, whose 1,000 outlets dwarf anything Starbucks will be able to open in the next few years. Nonetheless, the inroads Starbucks is making in emerging markets are exactly what other large companies are hoping to accomplish.
Here are five publicly traded companies that, like Starbucks, are trying to put their stamp on the Indian market.
The world’s largest retailer unsuccessfully tried for years to convince the Indian government to let it open retail stores in the country. Undeterred, it entered a joint-venture partnership with Bharti Enterprises — a company controlled by the powerful Mittal family — to sell goods under the name “Best Price Modern Wholesale” to retailers and other businesses in the country.
Raj Jain, Chief Executive of Bharti Walmart, believes it will have a leading position in India’s wholesale market by the end of 2013, when it’s expected to have at least 12 stores open — each averaging between 50,000 and 100,000 square feet. The Indian government said recently that it might be willing to let foreign retailers open stores directly, eliminating the need to go wholesale. Regardless of what happens, Wal-Mart is likely to keep its wholesale operations open, as the company has done so in other foreign markets, such as Brazil, Mexico, Guatemala and China.
Let’s get something straight. India isn’t China. From January 2011 to September 2011, General Motors (NYSE:GM) sold 1.9 million vehicles in China and Ford (NYSE:F) 386,000. Both companies are spending billions of dollars in China. India spending, on the other hand, is in the hundreds of millions, and the sales volumes show it.
The good news is that Ford and GM had volume increases year over year of 9.5% and 17.4%, respectively, in September. Unfortunately, that’s not likely to last. In late July, General Motors India reduced its 2011 vehicle sales from 160,000 to 140,000 because of continually rising interest rates and fuel costs that are making car ownership prohibitive for many. Ford’s experience surely is no different, and it should see a big slowdown in the final three months of the year. However, despite a slowing market, Ford’s car sales in 2011 should break the 100,000 mark for the year. It might not be China, but India’s large population will continue to be a tempting target both car companies.