Starbucks outshines coffee chain rivals in first full year in India


November 7, 2014

Sagar Malviya, The Economic Times

Mumbai, 7 November 2014

Starbucks, the world’s largest coffee retailer, posted nearly three times more per-store sales than established rivals in India in its first full year of operations in the country.

Tata Starbucks, a joint venture between Starbucks and Tata Global Beverages, generated total revenues of Rs 95.42 crore in the year ended March 2014, according to its annual report filed with the Registrar of Companies (RoC) on Thursday.

With 43 stores until March, a back-of-the-envelope calculation shows that each Starbucks shop sold coffee, snacks and merchandise worth over Rs 2.2 crore last fiscal, significantly higher than the per-store sales of other coffee chains.

Amalgamated Coffee Bean, which runs the country’s top coffeehouse chain Cafe Coffee Day, hasn’t disclosed its latest financials yet. For 2012-13 it had revenues of 1,126 crore including income from its plantations business and sales through 1,400-odd cafes. That translates into not more than 80 lakh annual sales per store.

Starbucks’ per-store sales is, however, a tad lower than Jubilant Foodworks that runs over 752 Domino’s Pizza outlets and Dunkin Donuts and clocked sales of Rs 1,732 crore last fiscal, which means Rs 2.3 crore per outlet on an average.

While the company didn’t comment on financial details, a Tata Starbucks spokesperson said it is humbled by how Indian customers have embraced the Starbucks experience in the two years they have been in the India market. "We believe that over the long-term, India will be among the top 5 markets for Starbucks," said the spokesperson.

Starbucks currently operates 59 stores in the country and plans to close the financial year with 90 doors. Over last year, the coffee chain has more than trebled its authorised capital to 220 crore.

The company may not be able to keep up its high per-store sales as it opens stores in suburbs and towns where most consumers may find Starbucks pricey. Hence, it plans to open many stores that will nearly be three times smaller than its first few stores or half the size of average existing cafes.

"As they move from high traffic and high spends location, revenues or productivity of the stores will come down. Hence, per store sales might come down over the years once they open stores in smaller locations," said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.

Profitability also remains a challenge. In FY14, Tata Starbucks’ loss at Rs 51.87 crore was more than half its total sales.

"They are in growth mode and will have to incur initial losses," Dutta said.

Starbucks, which opened its first India store in October 2012, had posted Rs 14.61 crore in sales for five months ended March 2013.

While its pace of expansion in India has been a record for Starbucks in its 43-year-old history, Cafe Coffee Day has been opening new outlets several times faster – the home-grown chain opened around 150 stores in the past 12 months, taking its tally to nearly 1,500 cafes.

(Published in The Economic Times)