Starbucks plans faster expansion in India with new store formats

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A private security guard checks a customer’s body temperature outside a Starbucks cafe, as a precaution against the spread of the coronavirus, in New Delhi, India, March 17, 2020. REUTERS / Danish Siddiqui / File Photo

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  • New formats include small stores, drive-thru points of sale
  • Tata Starbucks aims to open 40-50 outlets this year
  • Tata Consumer to cut costs to offset the impact of inflation
  • Indian company to add affordable distributors and brands to countryside

NEW DELHI, Oct.25 (Reuters) – Starbucks aims to accelerate expansion in India with smaller stores and drive-thru outlets, the CEO of its local partner said on Monday, signaling the US coffee chain’s bullish plans as the COVID-19 slowdown eases across the country.

Launched in India in 2012, Tata Starbucks – a joint venture between Starbucks (SBUX.O) and Indian company Tata Consumer Products (TACN.NS) – operates 233 outlets in 19 Indian cities.

The two partners “are pushing Tata Starbucks to be much more aggressive in store openings, new formats and entering new cities,” Sunil D’Souza, CEO of Tata Consumer Products, said on Monday.

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“All we have to figure out is how fast we can move forward,” D’Souza said. “We have a window of opportunity because the competition is shrinking.”

India is one of the fastest growing Starbucks markets in the world. The coffee market in the country has surged even though tea remains a more affordable and popular drink.

Despite this, the fascination with coffee brands like Starbucks and Costa Coffee remains high. Most Starbucks outlets in India are large in size and designed with rich paneled decor.

The company is now exploring smaller outlets because they can be opened faster and is experimenting with concepts like drive-thru after opening one in northern India last year, D said ‘Souza.

Tata Starbucks reported 128% revenue growth in the quarter ending September, when it opened 14 new outlets.

“Am I happy with 14? Absolutely not. The goal is much more important,” D’Souza said, adding that the goal was to open 40 to 50 outlets this year.

INFLATION CONCERNS

Tata Consumer Products’ portfolio of consumer goods includes its eponymous brands of salt and tea and other commodities. It also owns the famous Tetley tea brand.

Recent inflationary pressures, driven by soaring crude oil prices, have hit Tata and other competitors such as the local units of global consumer giants Unilever (ULVR.L) and Nestlé (NESN.S) as freight and packaging costs have increased.

Expressing concerns about rising raw material costs and energy prices, D’Souza said Tata Consumer Products will seek to control marketing and other costs to offset the impact.

“At least in the short to medium term… we have to live with it,” he said, adding that the company would look to raise prices slightly to increase margins, while reducing packaging size.

Even with such concerns hanging over, Tata Consumer Products wants to focus more and more on catering to Indians in rural areas, having long focused on urban centers.

The company will increase its distributor network by around 20% in rural areas, where it plans to promote existing affordable brands and launch new ones, D’Souza said.

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Reporting by Aditya Kalra in New Delhi and Abhirup Roy in Mumbai; Editing by Euan Rocha and David Evans

Our standards: Thomson Reuters Trust Principles.


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