Starbucks eyes faster India expansion with new store formats

Tata Consumer Products

25/10/2021 14:56

* New formats include smaller stores, drive-through outlets
    * Tata Starbucks aims to open some 40-50 outlets this year
    * Tata Consumer to cut costs to offset inflation impact
    * Indian firm to add distributors, affordable brands in
rural push

    By Abhirup Roy and Aditya Kalra
    NEW DELHI, Oct 25 (Reuters) - Starbucks aims to hasten its
India expansion with smaller stores and drive-through outlets,
the CEO of its local partner said on Monday, signalling the
American coffee chain's bullish plans as the COVID-19 slowdown
abates in the country.
    Launched in India in 2012, Tata Starbucks - a joint venture
between Starbucks  SBUX.O  and India's Tata Consumer Products
 TACN.NS  - operates 233 outlets across 19 Indian cities.
    Both the partners "are driving Tata Starbucks to be far more
aggressive in store openings, new formats, and in entering new
cities," Sunil D'Souza, CEO of Tata Consumer Products, said in
an interview on Monday.
    "All we've got to figure out is how quickly we can scale,"
said D'Souza. "We have got a window of opportunity because the
competition is on the back foot." 
    India is one of Starbucks' fastest growing markets globally.
The market for coffee shops in the country has surged even as
tea remains a more affordable and popular beverage.
    Despite this, a fascination for coffee brands like Starbucks
 and Costa Coffee remains high. Most Starbucks outlets in India
are large-format and designed with rich wood-panelled decor. 
    The company is now exploring smaller sized outlets as they
can be opened faster and it is experimenting with concepts like
drive-throughs after opening one in northern India last year,
D'Souza said.
    Tata Starbucks registered 128% revenue growth in the quarter
ending September, during which it opened 14 new outlets. 
    "Am I happy with 14? Absolutely not. The target's much more"
D'Souza said, adding the aim was to open some 40-50 outlets this
year. 
    
    INFLATION WORRIES 
    Tata Consumer Products' consumer goods portfolio includes
its eponymous salt and tea brands and other staples. It also
owns the popular tea brand Tetley.
    Recent inflationary pressure, driven by a surge in crude oil
prices, has hit Tata and other competitors such as the local
units of global consumer giants Unilever  ULVR.L  and Nestle
 NESN.S  as freight and packaging costs have surged.
    Flagging concerns about higher raw-material costs and energy
prices, D'Souza said Tata Consumer Products will look to control
marketing and other costs to offset the impact.
    "At least in the short to medium-term ... we've got to live
with it," he said, adding the company would look to raise prices
slightly to boost margins, while cutting package sizes.
    Even as such concerns weigh, Tata Consumer Products wants to
increasingly focus on catering to Indians in rural areas, after
long focusing on urban centres.
    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.

 (Reporting by Aditya Kalra in New Delhi and Abhirup Roy in
Mumbai; 
Editing by Euan Rocha and David Evans)
 ((aditya.kalra@tr.com; +91-11-49548021; Twitter @adityakalra;))