At a time when market leader Cafe Coffee Day's future hangs in the balance following its founder V G Siddhartha's death, its peer Tata Starbucks Pvt Ltd is bullish about the coffee chain industry and its growth prospects. Starbucks is looking to open more new stores than it has in the past couple of years.
Against 25 new stores in FY18 and 30 new stores in FY19, the premium coffee chain was looking to grow "very substantially" in the current financial year, said Tata Starbucks Chief Executive Officer Navin Gurnaney. "The sky has not fallen (on the coffee industry). We will substantially increase the number of store launches over that in the past couple of years."
What's more, given the rate of investment per store at between Rs 1.5 crore and Rs 2 crore, depending on the size and location of the store, the company is likely to invest more than Rs 45-50 crore this year. "We have very well-to-do parent companies in Tata Group and Starbucks. Our growth is not hindered by capital but by availability of quality real estate," said Gurnaney when asked about investment.
In August alone, the company has already taken its tally of total stores in India from 152 to 157 by adding five more as it made inroads in Gujarat.
"We spend anywhere between Rs 1.5 crore and Rs 2 crore to build a store. We would not be being aggressive with our store growth if we didn't see potential. We think the market is very strong. Excellence is always well received and we believe we have excellent experience, partners and products. We are extremely bullish on India. India is one of the top five growing markets for Starbucks internationally," Gurnaney told Business Standard.
Tata Starbucks is banking on its weekly 270,000-odd, that is close to 40000 daily, customers that it serves for the growth, since coffee forms 90 per cent of the beverages ordered by them.
"People don't come to us just to buy a sandwich. It is always an accompaniment with a beverage. Coffee category has been growing with all groups of people and the millennials are certainly gravitating towards coffee. But not just millennials, it is also the 30 years something upwardly mobile, better travelled and better educated people which are growing in India," he added.
The Tata Starbucks' CEO disagrees on any slowdown in consumption at its stores, quoting a compounded annual growth rate (CAGR) of 32-33 per cent in the last couple of years in revenue. Having clocked revenues of Rs 442 crore in FY'19, Tata Starbucks posted a 23 per cent growth in the quarter that ended on June 30 of the current financial year.
Tata Starbucks has been witnessing several top performing stores spread out across Mumbai, Bengaluru, Hyderabad and Delhi. The company currently operates seven different formats of stores including 71 stores in high streets, 53 in malls, 20 in office complexes, 8 at airports, 3 on highways and one each in hospital and store-in-store format.