Starbucks puts India plan on back burner

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Starbucks Corp, the world's biggest coffee-shop chain, has postponed its plan to enter India, the world's second-most populous nation.

Starbucks has withdrawn its application to operate single-brand retail stores in India, T May Kulthol, a spokeswoman for the Seattle-based company, said in an e-mailed statement. It didn't give a reason for the withdrawal.

The government had asked the coffee chain to file a revised proposal clarifying the investment pattern in the company that plans to open stores in India, Ajay Dua, secretary in the department of industrial policy and promotion, said on June 25.

The government said the proposed unit did not comply with foreign direct investment rules, which allow up to 51 per cent foreign ownership in single-brand retail chains.

India may allow an increase in foreign ownership in single-brand retail companies to 100 per cent, a report said on July 9, citing a strategy paper prepared by the government.

"Starbucks is reviewing all its options and evaluating how it will proceed with regard to entry into one of the fastest growing economies in the world," Kulthol said in the statement.

Starbucks planned to enter India in partnership with Kishore Biyani of the Future Group, and V P Sharma, head of the US company's Indonesian franchise.

In January, the Foreign Investment Promotion Board had questioned Sharma's shareholding in the proposed Indian venture with Biyani.

Starbucks said in August last year that it was looking for a venture partner or a licensee to enter India by the end of 2007.

The government has limited overseas investment in the retail industry to single-brand merchants, preventing global chains from buying stakes in local companies or setting up their own stores.