NEW DELHI: US-based coffee chain major Gloria Jean’s is setting up a wholly-owned cash-and-carry subsidiary in India to supply coffee beans, merchandise and equipment to its cafes in the country operated through the franchisee route.

The retailer currently has a master franchisee agreement with Citymax Hospitality (India). Gloria Jean’s has applied to the Foreign Investment Promotion Board (FIPB) for permission. Under the current law, 100% FDI is permitted in the cash-and-carry wholesale business.

The proposed Gloria Jean’s subsidiary would be involved in local procurement of roasted coffee, apart from paper cups, syrups and equipment. It would also import incidental products from China, Australia and other countries. The cash-and-carry subsidiary would sell coffee and other incidental products to Gloria Jean’s master franchisee in India.

This is similar to the model being followed by Wal-Mart, the world’s largest retailer, in India. The retail giant has invested directly in a cash-and-carry subsidiary which will supply to the front-end stores under a franchisee agreement with the Bharti Group.

Taking a different approach, Starbucks, the world’s largest coffee retailer, had last year applied to the FIPB for setting up a 51:49 joint venture with an Indian partner for investing in single-brand retail stores in the country.

However, the application was rejected twice for lack of clarity over the shareholding pattern of the proposed JV. Starbucks withdrew its application last July, without citing any reasons.

Gloria Jean’s entered into the master franchisee agreement with Citymax in December 2007 to set up 500 coffee outlets across the country over the next 10 years. The cafe chain is known for its hot and cold coffee drinks including traditional espresso, blends and whole bean coffees, specialty teas, pastries and coffee accessories.

In India, it is targeting executives in the age group 25-45 years, positioning itself higher than Cafe Coffee Day and Barista and closer to Costa Coffee. Gloria Jean’s also plans to retail roasted coffee under the brand name GJC in India.

Founded in Chicago as a small coffee and gift shop, Gloria Jean’s today has more than 850 stores in over 30 countries. Citymax India is part of the Dubai-based retail major Landmark Group. The organised coffee retail market in India has around 1,200-1,500 stores.