New Delhi: Tata Consumer Products Ltd, the operator of Starbucks in India, will accelerate the expansion of the coffee chain following a period of “tempered” store additions.
The company opened six Starbucks outlets in India in the June quarter, bringing the total tally to 485. The store expansion was slightly “tempered,” the management said.
“You would probably see a similar number or maybe slightly more this quarter. I would probably wait for one more quarter before pressing the accelerator on outlets,” Sunil D’Souza, managing director and CEO of Tata Consumer Products, said in an interview with Mint on Thursday.
Store openings for Starbucks moderated in the past two quarters, with the company adding six stores per quarter. This was lower than the double-digit expansion in previous quarters. Total store additions in FY25 were 58, down from a record 95 opened in FY24.
Starbucks’ revenue grew 6% year-on-year during the June quarter, while same-store sales growth was positive, except in May, when regional geopolitical tensions flared up and impacted store operating hours in some areas.
“We started seeing traffic increase as well as same-store sales growth starting to pick up into the positive territory after four to five quarters of pressure, except for the month of May when we had store closures and reduced timings with Operation Sindoor, especially in north and northwestern India. Other than that, we can see that trajectory starting to shift and growth starting to come back. I’m cautiously optimistic,” he said.
The coffee chain started operating in India in 2012 through a 50:50 joint venture between Starbucks Coffee Company and Tata Consumer Products. In early 2024, Tata Starbucks Pvt Ltd stated its ambition of operating 1,000 stores in India by 2028, effectively opening one store every three days.
Discretionary spending stress
Store openings in the coming quarters could more than double from levels in the June quarter, D’Souza said. The chain had added 16 stores in the December quarter, with expansion dialed up in east India. In the September quarter, 19 stores were added and in the June quarter of FY25, it opened 17 outlets.
High food inflation has tempered consumer demand across the board, leading many companies to report sluggish sales. D’Souza acknowledged that this “stress on discretionary spends” had impacted the quick service restaurant (QSR) space, including Starbucks.
However, recent initiatives like new menu items are showing results, he said.
A December report by Motilal Oswal highlighted significant demand challenges, weak unit economics, and increased competition impacting QSR financial performance in the September quarter, leading to contracted margins across major brands.
The chain is “exploring” more Starbucks Reserve stores following the 2022 opening of the first such outlet in Mumbai’s Fort area. Reserve stores are premium outlets that offer small-lot, single-origin coffees from around the world.
“We are exploring ‘Reserve’ in one or two cities nationally, but it depends. We’ve still not pressed the trigger on anything. We opened Starbucks Reserve after converting the existing Starbucks store in Mumbai to a Reserve store, and that is doing very well for us. So, we’ve been thinking about expanding,” D’Souza said.
Shares of Tata Consumer Products rose 1.06% on the BSE at 1:12 PM on Thursday, a day after the company’s earnings announcement.
