Mumbai - Shares in India's Tata Coffee soared on Friday after the group announced a tie-up with Starbucks that will see the US drinks giant open its first cafes in the growing Indian market.
Shares in Tata Coffee, a coffee grower and supplier of high-quality Arabica beans, leapt as much as 17.5% to a day's high of 544.5 rupees, before easing back on profit-taking to 489.7, still up 5.74%.
Seattle-based Starbucks has for years been eyeing the Indian market, where large US food and drink giants such as McDonald's, Domino's and Pizza Hut have already established a strong presence.
Starbucks, which is aiming to open a store by the middle of the year, will come late to the Indian market where competitors including Costa Coffee, Barista, Cafe Coffee Day or Coffee Bean are established.
Typically tea-drinking Indians are increasingly turning to coffee and upmarket cafes, which are promoted as sophisticated marks of affluence and good taste in the class-conscious nation.
"The deal will enhance sales and brand image for Tata Coffee," Kauspubh Pawaskar, an analyst with Mumbai-based brokerage Sharekhan said on Friday.
Starbucks' entry to India will not threaten existing branded coffee chains in the country, Kauspubh said, expecting Indians to consume more of the beverage.
"Disposable income for India's middle-class is rising, as economic growth improves," the analyst said.
India is forecast to produce 299 000 tonnes coffee in the fiscal year ending March. Nearly 70% of this is exported, with 95 000 tonnes consumed locally.
India's coffee consumption grows by 5% - 6% each year, Pawaskar said.