Starbucks India to accelerate store expansion after business recalibration

Starbucks has a presence in about 80 cities, which D'Souza considers "a good number" to operate in, with only limited additions to the city count going forward (Photo: Reuters)

Starbucks India is set to resume its aggressive store expansion strategy following nearly two years of recalibrating its business model amid a broader slowdown in discretionary spending, Tata Consumer Products Managing Director and CEO Sunil D'Souza has said.

Starbucks, which operates in India through JV partner Tata Consumer Products Ltd (TCPL), used the last 18-24 months as an "opportunity to recalibrate" its entire business model -- from store size and capital expenditure per outlet to the pricing of beverages, he told PTI.

According to D'Souza, things have "started to fall into place" as Tata Starbucks has now reported four successive quarters of same-store sales growth.

"We had four successive quarters of same-store sales growth now, and we are seeing acceleration coming in. Now, we will again start to expand the number of stores aggressively," he said.

TCPL has a 50:50 JV with US-based Starbucks Corporation -- Tata Starbucks -- which operates around 500 Starbucks cafes in India.

The company had earlier targeted opening around 100 Starbucks stores annually and sustained that pace for a few years, but moderated expansion over the last 18-24 months amid softer demand across the discretionary consumption and quick-service restaurant (QSR) segments.

"But we also took the opportunity to recalibrate our entire business model, because we do think Starbucks has a significantly longer runway in India," D'Souza said.

On the shape of the renewed expansion, he said it would combine both new store additions and greater density in existing markets.

Starbucks has a presence in about 80 cities, which D'Souza considers "a good number" to operate in, with only limited additions to the city count going forward.

"I think 80 is a good number in terms of operating, but I think you will find density of stores in cities also going up significantly," he said, adding that operating more than five stores in a city brings efficiencies of scale.

"The one critical thing you must remember is you get efficiencies when you have more than five stores per city, because then your delivery, your kitchen, etc, starts to run efficiently," he added.

He noted that TCPL Chairman N Chandrasekaran, addressing shareholders at the company's annual general meeting in June, articulated a longer-term ambition for Tata Starbucks to eventually catch up with Starbucks' scale in China, which has around 8,000 stores.

Tata Starbucks reported 11 per cent revenue growth in the June quarter, opening four new stores, including two Reserve outlets in Kolkata and New Delhi that strengthened its premium portfolio. The JV was operating 498 Starbucks stores in India at the end of the June quarter.