Starbucks eyes faster India expansion with new store formats

By Abhirup Roy and Aditya Kalra

NEW DELHI (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 and India's Tata Consumer Products - 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 and Nestle 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)