Starbucks gets off to a spirited start in India

Sagar Malviya, The Economic Times

Mumbai, September 27, 2013

starbucks mumbai The world’s most popular coffee brand Starbucks sold coffee, snacks and merchandise worth Rs 14.6 crore in the first financial year of its operations in India ending March, averaging almost Rs 1.5 crore per outlet from its 11 doors in just five months since opening its first outlet in Mumbai last October.

The homegrown Cafe Coffee Day, with around 1,200 stores (at the end of FY13) makes Rs 38-40 lakh from each of its outlets yearly, according to a person who has studied the model of the company. Costa Coffee does business of a crore a year from its best selling outlets, but, on an average, it nets Rs 60 lakh from its 100-odd outlets. Coffee Bean and Tea Leaf, a niche premium chain sells coffee and food items worth Rs 3.5 crore annually in each of its 32 outlets.

The company, Tata Starbucks, a joint venture between US Chain Starbucks with Tata Global Beverages, closed its year end with total six stores in Mumbai and five stores in Delhi, which generated the total revenue of Rs 14.61 crore during the financial year ended March, according to its latest annual filings. It opened its first store in late October last year.

Experts, however, feel that while initial sales of Starbucks is substantially high by industry standards, its per store sales might drop going forward.

"Other than the initial rush of consumers due to the launch ‘novelty’, another factor contributing to high sales of current Starbucks outlets is that they are all in high-footfall marquee locations, and are all much larger than competing cafe brands," Devangshu Dutta, chief executive of retail consultancy Third Eyesight, said.

"Sustaining high sales per square foot over the years is the challenge to meet as the chain expands into other locations, possibly with smaller outlets," he added.

A Tata Starbucks spokesperson said its business in India continues to exceed expectations though establishing a successful business takes time. "Our measure of success is in the number of customers who come back to our stores. We are focused on a long-term, disciplined and thoughtful growth in this dynamic market, and committed to working towards exceeding expectations of our customers and building a strong presence in the market," the spokesperson said.

Starbucks currently operates 20 stores in the country. It plans to open around 100 Starbucks cafes in the country by next year to match up to established rivals and is building a war chest for expansion by more than trebling its authorised capital to Rs 220 crore.