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Tata Coffee’s path to global recognition

From the October 2017 issue.

Now five years in, the partnership between Tata Coffee and Starbucks has helped the two coffee giants put India on the map for quality coffee.

Sanjiv Sarin

In early 2011, when Tata Coffee graced the cover of Global Coffee Report’s very first issue, the Indian coffee company was on the brink of something big. At the time, details were limited, but within the following year, parent company Tata Global Beverages finalised a joint venture with Starbucks that would change the business forever.

Beginning with Delhi and Mumbai in 2012, the 50-50 joint venture, named Tata Starbucks Limited, would open stores throughout India under the brand “Starbucks Coffee, A Tata Alliance”. The new stores would be Starbucks’ first foray into the Indian market and, thus, India’s introduction to the Starbucks coffee shop experience. Through a separate, complementary agreement and its ongoing commitment to sustainability and plantation practices, Tata Coffee committed to being the sole coffee supplier for all of the Tata Starbucks stores in India.

In October 2012, the first Tata Starbucks store opened in the Horniman Circle area of Mumbai. The store was also the first Starbucks location in the world to feature espresso sourced and roasted locally from India.

Fast-forward to today and the joint venture now operates nearly 100 stores in six cities across India.

In the past six years, the two like-minded companies have been focused on building and growing the partnership. “Both of the companies are very customer focused and have the same quality and ethical standards. We’re also very strong in sustainability,” says Sanjiv Sarin, Managing Director and CEO for Tata Coffee. “Our hearts and our minds met.”

Small lot, big impact
Although Tata exports more than 98 per cent of its Arabica coffee to roaster customers, it continues to supply all Tata Starbucks stores’ coffee, which is quality managed at Starbucks’ Seattle Roastery.

Tata’s 19 estates cover 8000 hectares in the Coorg, Hassan and Valparai regions of southern India, about 12 degrees north of the equator and well-positioned within the coffee belt.

Tata’s Nullore Estate, in particular, has an elevation of about 900 metres and is one of the largest Arabica plantations in the Coorg region. At about 500 hectares in size, the estate produces more than 500 tonnes of coffee every year. Just last year, Starbucks chose this estate to source its limited-edition Indian Reserve.

“When we saw the emerging trend toward premium, microlot coffee, we went back to our estate to identify a block where this coffee would be grown,” Sarin tells Global Coffee Report. Tata put together a cross-functional team to execute the initiative over the course of an entire year.

Because of its ideal soil conditions, amount of sunlight, and various flora and fauna, Block 19 was selected for the Nullore microlot. There, the coffee is shade grown in a two-tier system that is common in India; then it’s hand-picked and sun-dried.

The Starbucks Reserve India Tata Nullore Estate is Starbucks’ very first single-origin Reserve coffee from India. What’s more, the Nullore Estate is being sourced as a microlot coffee, which is generally defined in the industry as a very small batch produced separately and with a cupping quality of greater than 85.

“Being able to meet the Reserve quality standards really energised the entire organisation,” Sarin says. “Not only did it show us what we’re capable of, but it also raised our position among quality suppliers. This is a very exciting place for us to be in.”

Sarin also sees the Nullore microlot, and any others that may come in the future, as a big step toward making a name for Indian coffee on a global scale. With a coffee like the Nullore Estate Reserve, “we are creating premium varieties of Indian coffee, which has traditionally been a mass consumption product and could not compete with the world. We have gone and broken that myth.”

John Culver, President of Starbucks China and Asia-Pacific, echoed these sentiments in Starbucks’ announcement of the limited-edition release: “This is the first step Starbucks and Tata Coffee are taking toward developing and improving the profile of Indian-grown Arabica coffees around the world by elevating the stature of Indian coffee.”

The limited edition Nullore Estate Reserve was available at the Starbucks Reserve Roastery and Tasting Room in Seattle and select stores throughout the USA since November 2016. As with all Reserve batches, it was only available until supplies ran out.

Nullore Estate

Beyond India’s borders
India’s coffee production is largely driven by Robusta, which makes up more than 70 per cent of the country’s coffee crop, according to the US Department of Agiculture’s Foreign Agricultural Service annual Global Agriculture Information Network (GAIN) Report. India generally produces between 5 million to 6 million 60-kilogram bags of green coffee annually. For the 2017-18 harvest year, the country is estimated to produce about 5.5 million bags, up from 5.2 million due to better rainfall and irrigation water availability than the previous season, as well as it being an on year for coffee. To help insulate the business from vagaries of weather, Tata has built more than 250 rainwater harvesting tanks that serve all its irrigation needs.

Similar to Tata, the country as a whole exports most of its coffee – an estimated 90 per cent. According to the GAIN report, Indian Robusta has a strong reputation on a global scale, with Europe as the top export destination.

Though only about one-quarter of India’s total exports are made up of soluble (instant) coffee, which uses the Robusta variety, Tata has more than 35 per cent of its business in instant coffee.

In its two instant coffee plants in India, Tata produces 8400 tonnes of spray-dried, agglomerated and freeze-dried varieties per year. An additional 5000 tonnes of freeze-dried instant coffee will be produced annually in a plant Tata is opening in Vietnam.

Construction of the state-of-the-art, Leadership in Energy and Environmental Design (LEED) certified plant commenced after a ground-breaking ceremony in August; it is expected to begin operations in fiscal 2019.

“As we looked to expand our business while focusing on differentiation and premiumisation, the natural move was for us to step outside India,” Sarin tells GCR.

“While our products are already exported to over 40 countries across the globe, our instant coffee has only been produced in India thus far. [The Vietnam plant] marks our first foray beyond Indian shores as a manufacturer – and, hence, is a significant milestone in our journey to becoming a global coffee player.”

He says that Tata has been steadily growing its freeze-dried instant coffee business, which makes up about 20 per cent of the company’s instant coffee production. Freeze-dried coffee is a growing, albeit small, segment worldwide and is the most premium of the instant varieties.

“We started looking at Vietnam because it is the number-one producer of Robusta and it has multiple regional trade agreements,” he says. As the largest global producer of Robustas, Vietnam has the capacity to provide a steady, convenient supply of raw material to the new plant.

Starbucks in India

Three-pronged approach
In addition to the differentiation and premiumisation Sarin speaks of, another of Tata’s key focus areas is the customer. Together, these pillars helped drive the Vietnam initiative.

“We’ve been using our coffee plantations to help differentiate ourselves and drive value, but we also need best-in-class extraction capabilities,” he explains.

“We are investing significantly to produce high-quality freeze-dried coffee in Vietnam to cater to discerning customers.”

The Nullore Estate microlot is another move driven by those aforementioned pillars, as are Tata’s single-estate and monsooned coffees. Its monsooned coffee is produced on the Malabar Coast, with harvested beans exposed to the monsoon rain and winds for several months, resulting in a less acidic, unique flavour profile that is especially popular in Western Europe.

Where Tata may have previously operated as a high-volume producer of roast and instant coffee, the company has been increasingly focusing efforts on its placement in the specialty coffee market. Forging the relationship with Starbucks five years ago was one of the first big steps – one that has continued to be fruitful year after year.

Last year Tata and Starbucks announced they would be working together on other initiatives.

Through an exclusive partnership between Tata Global Beverages, Tata Sons (promoter of the major operating Tata Group companies), and Singapore Airlines, all flights on its Vistara full-service airline will serve Starbucks coffee. After seeing success with its Teavana specialty tea throughout the US, Starbucks introduced the brand in its Indian stores in December, collaborating on a signature Indian blend with Tata Global Beverages.

Starbucks also expanded the availability of Himalayan Mineral Water, bottled by Tata Global Beverages, beyond the Indian Starbucks stores to Singapore at the end of last year. The companies hope to further distribute the water brand across China and the Asia-Pacific region.

Outside of coffee, Tata and Starbucks have committed charitable efforts to the Indian community through Tata Group’s STRIVE initiative, which is aimed at empowering youth with skills for employment, entrepreneurship and community enterprise. Through its extensive corporate social responsibility efforts, Tata Coffee also supports the Coorg Foundation, which runs a school for special-needs children, and RIHP, the only public hospital of its scale and specialty in the region.

Tata’s various initiatives and coffee’s domestic reception have come at a time when coffee is increasingly penetrating Indian culture. Where tea was once the dominant beverage, coffee is becoming increasingly popular, especially among younger consumers. According to the GAIN Report, hundreds of western-influenced coffee shops have emerged across India’s major and smaller ‘second-tier’ cities over the past decade. The research points to strengthening disposable incomes and a growing willingness to consume food and beverage outside of the home as the key contributors to both the increasing incidence of coffee shops and the greater consumer interest in coffee. Café Coffee Day is currently the dominant coffee chain in India, and Italy’s Lavazza and Australia’s Gloria Jeans both have a strong presence.

“As the industry has shifted and other global players enter the market, we can only go upwards,” says Sarin, indicating how the company must position itself in the specialty coffee market while never losing sight of its customers. “We have growth ambitions to become an even stronger global player. But more importantly, we want to add value to everyone we touch, and so we remain very customer-focused.” GCR

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