Tata Consumer Products Adjusts Starbucks Store Opening Plans

By Praveen Paramasivam
(Reuters) – India's Tata Consumer Products will delay some new Starbucks (NASDAQ:SBUX) store openings due to reduced customer traffic in cafes, according to CEO Sunil D'Souza on Monday.

"We will calibrate for the short term — maybe instead of opening 100, we will open 80 now, and next year we will open 120 instead of 100," D'Souza noted, emphasizing that Tata Starbucks remains committed to its goal of 1,000 stores by 2028.

City residents are cutting back on spending amid high inflation, impacting purchases of coffee and fast food. Tata Starbucks, a collaboration between the U.S. coffee giant Starbucks and the Indian conglomerate, boasts over 450 outlets—making it the largest cafe chain in India. Its store count has more than doubled since four years ago, but D'Souza cited a shortage of quality locations as a significant obstacle.

"In India, good quality real estate with traffic… is a challenge," he said, pointing out the contrast with the rapid mall developments in China, Starbucks' second-largest market.

To address this, Tata Starbucks has enhanced its team to strategically plan store openings, focusing on upcoming real estate developments.

Despite a 12% increase in last fiscal year's sales, reaching 12.18 billion Indian rupees ($143.6 million), the company also faced a widening net loss, from 250 million to 800 million rupees. Revenue growth has been modest in the first half of this year.

According to insights from Tofler, Tata Starbucks' revenue has more than doubled in the past four years. D'Souza believes in the long-term potential of coffee culture in India, noting that cafe density remains low compared to Indonesia, Vietnam, and the Philippines. He anticipates double-digit revenue growth in the second half of the financial year, despite rising raw material costs impacting profits.

Tata Consumer refrained from providing specific revenue figures, but analysts predict an average revenue increase of nearly 16% in the second half. Similarly, Yum Brands franchisee Sapphire Foods India has indicated a cautious approach to Pizza Hut store openings this financial year.