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| Bitter taste |
New Delhi, July 20: The US-based coffee retail chain Starbucks has withdrawn its application to operate single-brand retail stores in India, delaying its entry in the country. The company had filed the application with the Foreign Investment Promotion Board (FIPB).
The company, through its wholly owned subsidiary, Starbucks Coffee International, informed the commerce and industry ministry and the FIPB today about its decision and formally withdrew the application.
The coffee retailer’s decision comes in the wake of the government asking Starbucks to file a revised proposal clarifying its investment pattern. Officials said the proposed chain didn’t comply with the FDI rules, which stipulated there could be up to 51 per cent foreign ownership in single-brand retail chains.
“We are reviewing all options and evaluating how we will proceed related to our entry in one of the fastest growing economies of the world,” a Starbucks release said.
Starbucks planned to enter the country through franchisee operations in partnership with retail store entrepreneur Kishore Biyani. On the other hand, there were suggestions from some government quarters that it should come through the direct investment route. The coffee chain’s earlier proposal to the FIPB had sought to appoint New Horizons Retail as the master franchisee. New Horizons was floated by V.P. Sharma, an Indonesia-based NRI, and Kishore Biyani, CEO of the Future Group.
Starbucks had first announced its plans to enter the country in 2006 and had sought the FIPB’s approval. The company planned to launch its stores in New Delhi and Mumbai by the end of this year.
The company had filed a revised application on April 13 this year with a restructured equity structure nearly three months after its previous application was rejected apparently because the foreign holding exceeded the 51 per cent cap.
According to officials, one reason for the withdrawal might be the impending review of the FDI rules. There is a possibility of the government hiking the ceiling for investment in single-brand retail chain to 100 per cent.
