Last month, with his back to the wall Kishore Biyani, India’s raja of retail mandated JM Financial with the task of reducing the Future Group’s Rs.8,000 crore debt.

To be sure, with most of Biyani’s businesses still in the investment stage this is no mean task. But then, if you’re Nimesh Kampani, the boss of JM Financial, India’s top industrialists are only a phone call away. So while others at JM were working at ways to reduce Biyani’s debt load Kampani is said to have personally brokered a deal between Kumarmangalam Birla and Biyani.

On 30 April Aditya Birla Nuvo picked up what should eventually translate into a controlling stake in Pantaloons apparel business for Rs.800 crore. The new entity (i.e. Pantaloons apparel business separated from Panatloon Retail) would be listed on the stock exchange and after making an open offer Aditya Birla Nuvo aims to pick up a controlling stake. As part of the deal Biyani would reduce his debt load by Rs1,600 crore. 

With the government shelving, for now, its plans to allow foreign investment in multi-brand retail this is the first step of consolidation in the retail sector that many analysts had forecast. For Kumarmangalam the absence of foreign investment has meant that he’s picked up Pantaloons for a song. On the other hand for Biyani has sold his crown jewel.

Pantaloon Retail and Aditya Birla Nuvo declined to comment as both companies are in their silent period before reporting year-end results.

“In one shot Madura has gained a formidable retail presence,â€� said an analyst who declined to be named. Madura is Aditya Birla’s apparel retail business that has in its portfolio brands like Louis Philippe and Allen Solly. It’s been on a rapid growth clip – last years revenue stood at Rs.2,145 crore – and has been looking to grow its retail presence rapidly. Pantaloon’s with its well established national footprint fits the bill perfectly. One of the reasons Pantaloon’s apparel business was profitable was because over the years it had moved heavily towards stocking private labels. Now, with Madura it gets a ready made stream of marquee brands that would allow it healthy margins. “If they execute this right imagine a Shoppers Stop kind of businesses in brand but with private label margins,â€� he said.

For the time being Biyani maintains control. In an encouraging sign for the markets Rakesh Biyani and Kailash Bhatia will continue to run the business.

Rakesh is known to be an extremely methodical numbers driven executive whose style is often at odds with the gut-driven Kishore. Kailash Bhatia, the man behind brands like Weekender and Colorplus is the merchandising brain behind Pantaloons.

Expect regular reviews and target setting. As one top level executive who was with Pantaloons told me recently, “I worked there for so many years and never had one business review.� Rakesh will have his task cut out, managing the over three months of inventory that has piled on with Pantaloons. The two companies, Pantaloon Retail and Madura will work closely to derive operational synergies.

The news was announced after markets closed but through the day rumours of an impending deal sent the Pantaloons stock soaring 10 percent to Rs188. This was because investors believed a deal would result in investment in Pantaloon Retail. It remains to be seen how investors react once they realize that Pantaloons apparel business would be carved out and leaving them with formats like Food Bazaar, Big Bazaar and Home Town that are not yet profitable.

* For purposes of clarity, Pantaloon refers to Pantaloons apparel businesses, and Pantaloon Retail refers Food Bazaar, Big Bazaar, Home Town and other businesses.

Coca Cola has resorted to the oldest trick in the book. To prise open the market for price-sensitive entry-level consumers it’s cutting prices.

Last week, the company cut prices for Coke 200ml glass bottles in ‘select markets’ reported the Times of India. They now sell for Rs8 instead of Rs10. This comes a couple of months before the onset of summer, which is regarded as the busiest time for the industry. Coca Cola and arch rival Pepsico log as much as half of yearly sales in the four months beginning April.

This leaves us with the obvious question: Why cut prices when memories of 2003 when both companies dropped prices and suffered huge losses are still raw?

On the sidelines of an industry event last week Manu Anand, chairman, Pepsico India brushed aside talk of a price war. According to him the company is more focused on new promotions and campaigns for the summer.

But dig a little deeper and it appears there’s more to Coke’s move than meets the eye.

First, company insiders say Coke has cut prices across the country and not select markets as previously reported. According to them it is waiting to see how the market responds before the next move. Second, the company plans to aggressively stock these in semi urban and rural markets. So don’t expect them to show up at your neighbourhood supermarket. It plans to be equally selective in supplying them to kirana stores in metro areas.

The message from the top is unequivocal: this time we plan to get in new consumers not get existing ones to down trade. With Indians consuming 11 bottles of Coke a year versus 54 in Egypt and 675 in Mexico the company knows it has a long way to go.

Significantly, this time the price cut is to be restricted only to Coke and that too only on the 200ml pack size. There are no plans to extend this to other brands. Over the years the company has been investing in expanding its reach in rural India. It’s now taken a calculated risk to get new consumers in before the onset of summer.

It’s clear that Coca Cola has been planning for a while. On Monday it rolled out a pan India television campaign, in which the company has chosen to soft sell the product to consumers. Noticeably absent is any aggressive communication of the price point. It only shows up in the last frame. And lest there be any confusion on who the target audience is the text in the advertisement appears in Hindi. Rewind to nine years ago when the Rs5 price was aggressively communicated and the contrast is stark.

For now, industry watchers, who declined to be named, believe Coke has the first round advantage. The company has another strong brand Thums Up to fall back on. With 15 percent of beverage sales it is the country’s largest believes it can hold on to a Rs10 price point here. Meanwhile, Pepsi has only one cola brand and as a result has no option but to follow suit and match prices. This has the potential to hurt the company more than it could hurt Coca Cola.

Indeed there are indications that Pepsico has started cutting prices in some markets. Questions sent to the company remained unanswered.

Coca Cola’s fired the first salvo. It’ll be interesting to see how this develops.

Last week, a decade since it first started scouting around the Indian market Starbucks announced plans to launch its first stores in Delhi and Mumbai by August 2012.

The company’s international operations have been firing on all cylinders in the past one year. After initially stumbling in China it has begun to turn the corner.

While it will no doubt look to avoid those mistakes in India and lean on its JV partner for guidance the question remains: what should we expect from the launch of Starbucks in India? Will it be an up market version of Coffee Day or should we expect a distinctive experience i.e. one with premium pricing? Will they Indianize quickly? How fast will they expand? We’re sticking our necks out and making some predictions.

Brand Positioning: This one is easy as we got our answer from the horse’s mouth. Last year Howard Schultz in an interview with Forbes India had made it clear that the last thing they would do is water down the experience. “I think it would be very disappointing for us to come all the way from Seattle to India and water down the experience because we don’t have the courage to create something that is consistent with our heritage.�  So expect the company to go aggressively after real estate in Delhi and Mumbai. Malls, airports, office blocks are prime targets. There should even be a couple of trophy outlets like the one they have at the entrance to the Forbidden City in Beijing. A Starbucks at the Gateway of India perhaps?

Pricing: This one is trickier. As a former CEO of a coffee chain put it, “The deal with the Tata’s is a masterstroke. It allows them to source coffee from India, roasted to their specifications.� But more importantly it allows Starbucks to avoid the 100 percent duty that Coffee Bean, Gloria Jeans Coffee and Costa have to pay. Coffee costs account for 40-45 percent of costs at these chains and what Starbucks has done with the Tata tie-up is that it has reduced its coffee costs to around the same as what say Café Coffee Day would pay. This should give it the pricing heft required for a market likeIndia.

Whether Starbucks passes on these costs to consumers remains to be seen. People in the trade whom Forbes India spoke with said they expected a basic Starbucks coffee to cost an average of Rs125 – higher than the Rs60-75 that Café Coffee Day charges but lower than the Rs150 other international chains inIndiacharge.

In addition to coffee they expect food to be another key driver of footfalls. In India food usually makes up for 25 percent of revenue something Schultz knows only too well. “Just like we have done in China, we will create local relevancy, especially on the food side,� he said in an interview last year.

Given that a coffee shop generates returns of Rs200-250 per square foot — about a fourth  what the typical restaurant does– getting a local food offering that drives footfalls will be key. (Per square foot returns are not an indicator of profitability as the footfalls in a coffee shop are higher). Here again the tie up with the Tata’s comes in. TajSATS, which is well versed with Indian food habits will be roped in to supply food to Starbucks outlets.

Scaling up: Contrary to some reports Starbucks will not find it too hard to get prime real estate. Mall owners should be falling over themselves to welcome the company. The Hindustan Times wrote about the company saying that a Starbucks outlet could increase footfalls in a mall by 40 percent. Once the space is allocated a 1,000 square feet store takes about 15 days to set up. Can the company expand fast? Yes. Will it? No. Instead expect it to use these stores to test its hypotheses on the Indian consumer. Our prediction for the first year: No more than 25 stores. And don’t expect them to get to 3,000 stores anytime soon. Remember after 13 years in China the company is still has only 550 stores in the country.

As we look ahead to the launch, we’d love to hear from you readers about what you’d like to see from Starbucks. Post your thoughts on the comments section.