Starbucks' impact on Tata Global overstated: MStanley

Mon Nov 19, 2012 11:11am IST

A pedestrian walks past the new Starbucks logo on a store in Times Square in New York March 8, 2011. REUTERS/Lucas Jackson/Files

A pedestrian walks past the new Starbucks logo on a store in Times Square in New York March 8, 2011.

Credit: Reuters/Lucas Jackson/Files

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Reuters Market Eye - Shares in Tata Global Beverages (TAGL.NS) fall 2.9 percent after Morgan Stanley downgrades the stock to "underweight" from "equal weight".

Tata Global shares have nearly doubled this year, partly on hopes about its outlook as the joint venture partner of Starbucks(SBUX.O), which has opened three coffee shops in India this year.

However, Morgan Stanley says the contribution from the Starbucks JV will be limited and recommends booking profits on Tata Global.

"The business suffers from poor earnings visibility, weak brand/market positioning, a lack of pricing power, sluggish revenue growth and mediocre return ratios," Morgan Stanley says about Tata Global in a note dated on Monday.

Morgan Stanley also adds: "Structurally this is one of the weakest businesses in our coverage universe."

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