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May 6, 2024
Sesa Sen, NDTV Profit
6 May 2024
Starbucks Corp., the world’s largest coffee chain, posted its slowest sales growth in India since the pandemic. The coffee giant is struggling to bring in as much business as it has in the past as consumers reduce their visits even as it prepares for ambitious store expansion in a tea-drinking nation.
The India unit formed in partnership with the Tata Group clocked net sales of Rs 1,218 crore, a growth of 12%, during the year ended March 2024, according to Tata Consumer Products Ltd.’s latest investor presentation.
The Seattle-based retailer experienced a compounded annual growth rate of 21.89% between FY17 and FY23 in the world’s most populous nation. The only exception to this trend was in FY21, when sales plunged by 33% as shops were forced to shut down due to the impact of Covid-19.
“Tata Starbucks had a subdued quarter given the overall trends that we’re seeing in the QSR [quick service restaurants] business,” said Sunil D’Souza, managing director and chief executive officer at Tata Consumer Products.
He, however, indicated that March was an improvement over February, and April was even better than March. “So, we see a better trend right now, and we remain focused on the larger India opportunity.”
Tata Starbucks Pvt. Ltd. took 11 years to scale its operations to a revenue of over Rs 1,000 crore. Although the joint venture turned positive at the EBITDA level for the fiscal year 2023, it continues to be loss-making. In the year ending March 2023, Tata Starbucks posted a net loss of Rs 25 crore on a turnover of Rs 1,087 crore, according to filings with the Registrar of Companies. The net profit figures for fiscal 2024 are not available yet.
The coffee chain has seen its popularity take a major hit over the last two quarters, ending in March and December, with a meagre 7% increase in sales during each period. This is a marked shift from its historical track record of double-digit growth, suggesting that consumers are now looking for more budget-friendly cafe experiences.
“Consumers have turned slightly more conservative with their spends, which is affecting both the frequency and of transactions,” according to Devangshu Dutta, head of retail consultancy Third Eyesight.
According to him, new store openings rather than an increase in sales at existing ones could drive growth.
The other reason is that the coffee market is more competitive today, with most local peers selling at price points lower than Starbucks, Dutta said.
Starbucks competes with Bengaluru-based Cafe Coffee Day and foreign entrant Barista, among others, in the country’s $400 million market. It also faces competition from private equity-backed Third Wave and Blue Tokai, which have opened about 200 stores between them in the last three years.
Since opening its first cafe in October 2012, Tata Starbucks’ store count has grown to 421, implying that on average, each outlet generated roughly Rs 3 crore in revenue from coffee, snacks, and merchandise sales in FY24.
The dwindling sales come at a time when the company plans to open 1,000 cafes in India. To meet the target, it seeks to open one new store every three days.
Starbucks added 29 net new stores between January and March, achieving a record of 95 stores opening in a year, according to the presentation.
The coffee chain had earlier said it plans to enter tier-2 and tier-3 cities in the country and increase the number of its drive-through, airport-based and 24-hour cafes. It also aims to double its headcount to 8,600.
To lure consumers back after a rough start to the year, the coffee giant is launching new products like a boba-inspired summer beverage.
“Over the past 11 years, the India market has grown to become one of Starbucks’ fastest-growing markets in the world,” Laxman Narasimhan, chief executive officer, Starbucks, said in a statement during his India visit earlier this year. “With a growing middle class, we are proud to help cultivate the evolving coffee culture while honouring its rich heritage.”
Starbucks faces challenges not only in India but also globally. A disastrous fourth quarter that saw a slowdown in store visits promoted Starbucks Corp. to lower its expectations for its full-year sales and profit. Its revenue for the January–March period dropped 2%, the first since the end of 2020.
admin
August 28, 2023
Viveat Susan Pinto, Financial Express
August 28, 2023
Coffee Day Global, which operates the Cafe Coffee Day (CCD) chain, has been given a temporary relief against bankruptcy proceedings initiated by lender IndusInd Bank last month. The Chennai bench of the National Company Law Tribunal (NCLAT) last week halted admission of IndusInd Bank’s plea against Coffee Day Global, a subsidiary of the listed Coffee Day Enterprises (CDEL), by the NCLT Bengaluru, till September 20.
What this means for CCD is that it get some more time at a time when it has swung into the black after struggling for the last few years, since the tragic demise of its founder VG Siddhartha in 2019. Coffee Day Global posted a net profit of Rs 24.57 crore for the June quarter of 2023-24 (FY24) versus a net loss of Rs 11.73 crore reported in the same period last year.
Revenue from operations stood at Rs 223.20 crore in the quarter under review, a growth of nearly 18% versus the year-ago period, CDEL results for Coffee Day Global showed.
More importantly, CCD outlets are down to 467 in the June quarter of FY24 from a peak of 1,752 stores in FY19, indicating that the company is shutting down unprofitable operations as it looks to manage its debt and other expenses. Group debt is down to Rs 1,711 crore, according to its latest annual report for FY23, versus Rs 7,214 crore reported in FY19.
“While the coffee retail market in India is growing, in CCD‘s case the need to downsize has to do with internal issues. Sometimes a smaller footprint just helps to manage operations better especially when you are dealing with larger problems such as a debt overhang,” says Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.
CCD’s financial health is critical for CDEL, which derives close to 94% of its group turnover from the coffee retail business, according to its FY23 annual report. In FY22, the contribution of the coffee retail business to group turnover was 85%. Losses of Coffee Day Global in FY23 narrowed to Rs 69.62 crore from Rs 112.48 crore in FY22. In FY19, the company had a net profit of Rs 10 crore.
Apart from cafes, CCD also has kiosks and vending machines installed in corporate offices, institutions and business hubs. While the number of kiosks has fallen over the last few years and is at around 265 now from a peak of 537 in FY19, the number of vending machines have been growing after briefly slowing down over the last few years. From a peak of 58,697 crore in FY20, it is now at 50,870 in number, the company’s latest results show.
CCD is also expected to fight the insolvency proceedings against it aggressively, according to industry sources. IndusInd Bank has claimed that Coffee Day Global defaulted on a loan of Rs 94 crore, which occurred on February 28, 2020. The company has disputed this in court.
(Published in Financial Express)
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August 18, 2023
Viveat Susan Pinto, Financial Express
August 18, 2023
Retail activity in the country is set to increase with some 20 foreign brands likely to enter India in the next 6-8 months, according to retail consultants and experts. This is double the number of about 10 foreign brands that would enter India annually in the pre-pandemic period.
An attractive retail market and growing affluence and consumer tastes are among the key reasons for the interest shown by foreign brands in India, said experts. Also, large groups such as Reliance and Aditya Birla are open to partnerships with foreign brands, with Reliance Brands, part of Reliance Retail, in particular, being the most aggressive of the lot.
“Global markets are witnessing slowdown and recessionary concerns, which is hurting retail sentiment. In contrast, retail sentiment in India is upbeat despite food inflationary pressures. Spending across non-essential categories will also grow as the festive season nears,” said Abhinav Joshi, head of research, India, Middle East & North Africa at consultancy CBRE.
The consultancy on Thursday released a report which said that retail leasing activity in India had grown 24% year-on-year in the first half of CY2023, led by foreign and domestic brands. The second half of the year was also expected to see a strong double-digit rate of growth in terms of leasing activity, with overall retail leasing likely to touch 5.5-6 million sq. ft. at the end of the CY2023, second only to the peak of 6.8 million sq. ft. seen in CY2019.
Of the names eyeing an India-entry in the next few quarters include labels such as Italian luxury fashion brand Roberto Cavalli, American sportswear and footwear brand Foot Locker, Armani Caffe, the luxury cafe brand of Armani, British luxury brand Dunhill, Dubai’s Brands for Less, Old Navy and Banana Republic from Gap, Chinese brand Shein, Maison De Couture from Valentino, Spanish luxury brand Balenciaga, EL&N, a UK-based boutique cafe, Galleries Lafayette from Paris, Kiabi, Mavi, Damat, Dufy, Tudba Deri, Avva, Boohooman and Miss Poem, all apparel brands from Turkey and Europe, say industry sources.
Barring Galleries Lafayette which has tied up with Aditya Birla Fashion and Retail for its India entry, most other names are either talking to Reliance Brands (part of Reliance Retail) or have tied up with the company, persons in the know said. For instance, Balenciaga, EL&N, Shein, Gap’s Old Navy and Banana Republic, Armani Caffe, Maison de Couture from Valentino have tied up with Reliance Brands for their India entry. Executives at Reliance Brands were not immediately available for comment.
Most of these brands are eyeing a presence in cities such as Mumbai, Delhi-NCR, Bengaluru and Hyderabad in the first phase of launch, before expanding their presence to other cities such as Pune, Ahmedabad, Chennai and Kolkata.
“The India retail opportunity is a compelling one, which most foreign retailers don’t want to miss,” says Devangshu Dutta, chief executive officer at Gurugram-based consultancy Third Eyesight.
“Some of the brands who’ve come earlier have also tasted success especially in the fast fashion category. This is an indication that brand awareness is growing and that people are ready to spend on global products as discretionary incomes grow,” he says.
On Wednesday, Japanese fast fashion retailer Uniqlo said that it was setting up two new stores in Mumbai in October, after launching 10 stores in the north over the last four years. The company’s chief executive officer Tomohiko Sei indicated that the retailer was open to new markets and store openings, but would focus on Mumbai for now.
CBRE says that Mumbai has seen retail leasing grow by 14.6% year-on-year in the first half of CY2023 on the back of a push by foreign brands to acquire space in the city. Delhi-NCR, meanwhile, reported a higher 65% year-on-year growth in retail leasing in the first half of the year, led by retail activity by both foreign and domestic brands.
(Published in Financial Express)
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June 7, 2023
M. Sriram and Aditya Kalra, Reuters (MUMBAI/NEW DELHI)
June 7, 2023
Starbucks is revamping its strategy to lure Indians, including children, with smaller, cheaper beverages as it looks to expand in small towns amid a fierce challenge from domestic startups in one of its fastest-growing markets.
Among the first foreign coffee brands to enter tea-loving India, the U.S. giant has taken almost 11 years to open 343 stores, in contrast with private equity-backed chains Third Wave and Blue Tokai that opened about 150 in the last three years.
“As you grow in size, you need to get new consumers,” said Sushant Dash, the chief executive of Starbucks in India, adding that the chain’s “pricing play” would help shatter a perception that it is expensive.
The company has launched a six-ounce drink, “Picco”, which starts at $2.24, and milkshakes for $3.33 as part of its revamp to target affluent Indians who prefer smaller servings.
Starbucks plans to open more stores in smaller towns, said an industry source, who spoke on condition of anonymity.
Both its new offerings are unique to India and unavailable in China, Singapore and the United States.
India’s small but fast-growing specialty tea and coffee cafe market is worth $300 million and set to grow 12% each year, Euromonitor estimates. Canada’s Tim Hortons and Britain’s Pret A Manger are also expanding, but have only a handful of outlets.
“Excessively large portion sizes are an American phenomenon,” said Devangshu Dutta, head of retail consultancy Third Eyesight.
“Indian consumers are value-conscious. If adjusting portion sizes down to what is more normal helps make prices accessible, that’s a double win.”
He was among the analysts who felt the move by Starbucks, operating in India in a joint venture with Tata Group, could further boost its sales, which hit a record $132 million in fiscal 2022/23.
Although Starbucks still dominates in India, rivalry is fizzing in the capital, New Delhi, and the technology hub of Bengaluru, where many Third Wave cafes are often as crowded as Starbucks outlets.
“We’ve lost 30 cups a day to them,” said a barista at a Starbucks shop in Delhi that sells 7,500 drinks a month, referring to a Third Wave that opened nearby months ago, but already sells 3,700.
Starbucks has faced homegrown challengers elsewhere, most notably in China, where its 6,200 stores service the biggest market outside the United States.
There, in just the last five years, Luckin Coffee has used discounts to lure customers to its 10,000 mostly pickup or delivery stores.
Bet On Chai
In India, where Starbucks has added domestic touches to its offerings over the years to boost their appeal, it is now stepping up that game, just as global giants McDonald’s and Domino’s have done.
It estimates that just 11% of Indian homes drink coffee, as opposed to 91% drinking tea. Hot milky tea, or “chai” as it is known in Hindi, is sold at roadside stalls by the hundreds of cups each day for as little as 10 rupees (12 U.S. cents).
Starbucks, which offered for years just one milk chai “latte” made with tea syrup, has launched “Indian-inspired” tea offerings laced with spices and cardamom, both favourites in many Indian homes, which start at 185 rupees ($2.24).
The drinks were introduced to attract those who do not drink coffee and shun Starbucks, said Dash, adding the company would retain its focus on coffee and not make chai a primary offering.
The launch of smaller, cheaper beverages in India indicates Starbucks may have seen “a decline in traffic related to a pushback” on higher prices, said Chas Hermann, a U.S.-based restaurant consultant and former Starbucks executive.
Competition, Small Cities Push
In May, people lured by a one-for-one offer queued in a street outside the first Starbucks store in the western city of Aurangabad, a YouTube video showed in scenes reminiscent of when it first opened in India.
But its rivals are catching up and a price war has begun.
Soon after Starbucks’ May launch of $3.33 milkshakes, designed to attract children, Third Wave launched its own range, a fifth cheaper at $2.71.
In Bengaluru, startup investors and founders hold meetings in Third Wave outlets. It has more than 40 stores there, exceeding the 35 of Starbucks, data from real estate analytics firm CRE Matrix shows.
Third Wave’s chief executive, Sushant Goel, said he planned to add 60 to 70 stores every year, with a focus on big cities. He saw Starbucks’ cheaper, small-sized drinks as a response to competition in “an incredibly price-sensitive market”.
Matt Chitharanjan, chief executive of Blue Tokai, said it had “seen success in converting customers from Starbucks”, partly because of lower prices.
While Dash said he was undeterred by competition, Starbucks recognises the threat, although privately.
In one lease deal for a Bengaluru mall reviewed by Reuters, Starbucks inserted a “cafe exclusivity” clause barring the mall owner from allotting space on the same floor to rival “premium” brands, including Third Wave and Blue Tokai.
“Going deeper into smaller cities, beyond the metros, is the only way to grow,” said Ankur Bisen, head of retail at India’s Technopak Advisors.
(Reporting by M. Sriram and Aditya Kalra; Additional reporting by Anushree Fadnavis in New Delhi, Varun Vyas and Euan Rocha in Bengaluru, Miyoung Kim in Singapore, Sophie Yu in Beijing and Hilary Russ in New York; Editing by Clarence Fernandez)
admin
June 5, 2023
Viveat Susan Pinto, Financial Express
June 5, 2023
A lot has happened at the Cafe Coffee Day (CCD) since its founder VG Siddhartha tragically passed away on July 29, 2019. Once India’s largest cafe chain, with a peak store count of 1,752 outlets in FY19, the company, part of Coffee Day Enterprises (CDEL), has now slashed its footprint by over two-thirds to 469 outlets in FY23, its latest results show.
The need to manage group debt and ensure that the business is profitable, say experts, has led to CCD shuttering stores over the last few years. The company was not immediately available for comment.
This has come even as the Rs 5,000-crore domestic coffee retail market is booming, with chains such as Starbucks and Tim Hortons announcing plans to ramp up store count over the next few years.
Consider this: Tata Starbucks, part of Tata Consumer Products, said in its Q4 investor presentation recently that it would introduce learnings from a pilot it ran in 2022, where the focus would be on introducing familiar and more beverage options, a new ‘Picco’ size (which is a smaller size) in beverages, a revamped food menu and more inviting store interiors. All of this was expected to aid sales growth and also help it get into newer markets, the company said of its future growth plans.
Tarun Jain, chief executive officer of Time Hortons India, meanwhile, said that the company was targeting 120 stores in the next three years and on its radar were metros as well as mini metros and satellite cities.
“The out-of-home market is booming after Covid-19 restrictions were lifted last year. And we are seeing this uptick in our stores,” Jain said of the response to Tim Hortons’ cafes in India, which were first launched in August last year. There are over 15 Tim Hortons cafes in the country across Delhi-NCR, parts of Punjab such as Chandigarh and Ludhiana and Mumbai. Starbucks has 333 cafes in 41 cities so far. “While the coffee retail market is growing, in CCD’s case the need to downsize has to do with internal issues. Sometimes a smaller footprint just helps to manage operations better especially when you are dealing with larger problems such as a debt overhang,” says Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.
Revenue from CDEL’s coffee retail business, which includes the CCD chain, wasRs 1,653 crore in FY19, which was down to Rs 869 crore in FY23. When compared to FY22, however, the revenue from this business has jumped by 75% in FY23, contributing as much as 94% to group turnover for the year. In FY22, the contribution of the coffee retail business to group turnover was 85%, its results showed. Losses in FY23 have narrowed to Rs 68 crore from Rs 112 crore in FY22. In FY19, the company had a net profit of Rs 10 crore.
Apart from cafes, CCD also has kiosks and vending machines installed in corporate offices, institutions and business hubs. While the number of kiosks has fallen over the last few years and is estimated at 250 now from a peak of 537 in FY19, the number of vending machines are growing after briefly slowing down over the last few years. From a peak of 58,697 crore in FY20, it is now close to 50,000 in number, the company’s latest results show. Group debt too, which stood at Rs 7,214 crore in FY19, is down by over two-thirds to Rs 1,711 crore as on March 31, 2023.
CDEL has over the last few years cut debt by selling assets, experts tracking the market said. Asset sales have included offloading a tech park in Bengaluru to private equity firm Blackstone for Rs 2,700 crore as well as selling off CDEL’s stake in tech firm Mindtree (which has now merged with L&T Infotech) for Rs 1,800 crore. CDEL still has around Rs 1,028 crore of dues to be recovered from Mysore Amalgamated Coffee Estates, a promoter entity, which owed around Rs 2,700 crore to the company five years ago.
(Published in Financial Express)
