Tata Group retailer Trent has signed a licensing agreement with European coffee chain Caffe Nero to open cafes within its Westside and Zudio stores, according to a report by The Economic Times. The move comes after the retailer's discussions with Tata Starbucks did not result in an agreement.

The earlier talks between Trent and Tata Starbucks broke down over how the cafes would be positioned within the retail stores. Starbucks wanted a prominent, front-facing presence, while Trent was unwilling to accommodate the requirement. The two sides also differed over the extent of Starbucks' control over formats and locations.

Tata Starbucks is a joint venture between Tata Consumer Products and Starbucks Coffee Company. Harish Bhat, a Tata veteran who was associated with the development of Starbucks in India, recently stepped down from Trent's board. He was understood to have done so to avoid a potential conflict of interest.

With those discussions ending, Trent has now turned to Caffe Nero for its in-store cafe plans. The commercial terms of the agreement, rollout schedule and the number of cafes planned are not known. 

The move comes as retailers globally look to add cafes and food offerings to physical stores, using them to encourage visits and increase the time customers spend at their outlets. Such formats can also give physical retailers an additional point of differentiation as consumers increasingly shop online.

Coffee has become particularly relevant to this strategy, with Starbucks building its global business around takeaway-led consumption. In India, cafes also attract officegoers and students who use the spaces to work, meet or socialise.

For retailers, however, the economics of operating cafes remain important, particularly in markets where real estate costs are high. The additional offering needs to generate enough revenue per square foot to justify the space it occupies.

For Trent, the Caffe Nero agreement provides access to an established specialist coffee brand without requiring it to build a cafe business from scratch. Westside and Zudio also give the coffee chain access to an existing network of retail locations.

Founded in London in 1997, Caffe Nero operates across the UK, US, Europe and the Middle East. The agreement with Trent could give the chain a platform to expand its presence in India, although the eventual scale and pace of the rollout remain unclear.