In a significant step toward market entry in India, U.S.-based Starbucks Coffee Company on Thursday signed a non-binding memorandum of understanding (MoU) with Tata Coffee, one of the region's leading providers of premium Arabica coffee beans.

The MoU will create avenues of collaboration between the two companies for sourcing and roasting high-quality green coffee beans in Tata Coffee's facility in Coorg in south India. In addition, Tata and Starbucks will jointly explore the development of Starbucks retail stores in associated retail outlets and hotels.

The two companies also will explore social projects to positively impact communities in coffee growing regions where Tata operates.

Commenting on the announcement, Tata Coffee Chairman R. K. Krishnakumar said, “We welcome Starbucks entry into India because of its unique experience with the store format and for its commitment to society, values that we share.”

“India is one of the most dynamic markets in the world with a diverse culture and tremendous potential,” said Starbucks Coffee Company Chairman, President and CEO Howard Schultz.

“This MoU is the first step in our entry to India. We are focused on exploring local sourcing and roasting opportunities with the thousands of coffee farmers within the Tata ecosystem. 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.”

Tata Coffee, with its large Arabica coffee production base spread over different growing districts of the South, has supplied premium coffee beans for Starbucks in the past and is now building a structure for a long-term relationship.

In the areas of sourcing and roasting, Tata Coffee and Starbucks will explore procuring green coffee from Tata Coffee estates and roasting in Tata Coffee's existing roasting facilities. At a later phase, both will consider jointly investing in additional facilities and roasting green coffee for export to other markets.

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