Starbucks plans new shop formats for India to fast-track expansion

Global coffee chain aims to open 40-50 outlets this year, with focus on smaller shops and drive-throughs

A Starbucks shop in Mumbai. Subhash Sharma for The National

Starbucks aims to hasten its India expansion with smaller shops and drive-through outlets, the chief executive 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, chief executive of Tata Consumer Products, said.

"All we've got to figure out is how quickly we can scale. We have got a window of opportunity because the competition is on the back foot."

India is one of Starbucks' fastest growing markets. The market for coffee shops in the country has surged even though tea remains a cheaper and popular beverage.

Despite this, a fascination for coffee brands like Starbucks and Costa Coffee remains high. Most Starbucks outlets in India are large 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, Mr D'Souza said.

Tata Starbucks registered 128 per cent revenue growth in the quarter ending in September, during which it opened 14 new outlets.

"Am I happy with 14? Absolutely not. The target's much more," Mr D'Souza said. The aim was to open 40-50 outlets this year, he said.

Tata Consumer Products' portfolio includes its eponymous salt and tea brands. It 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, Mr D'Souza said Tata Consumer Products would look to control marketing and other costs to offset the effects.

"At least in the short to medium-term ... we've got to live with it," he said. The company would look to raise prices slightly to boost margins, while cutting package sizes, he said.

Despite these concerns, Tata Consumer Products wants to focus increasingly on catering to Indians in rural areas after long focusing on urban centres.

The company will increase its distributor network by about 20 per cent in rural areas, where it plans to promote existing brands and launch new ones, Mr D'Souza said.