Indian FMCG major Tata Consumer has denied reports that US coffee giant Starbucks is looking to exit India.
The company on Thursday morning said that the reports are “baseless.”
“The company would like to state that the information in the said article is baseless,” the Tata Group unit said in a regulatory filing.
Shares of the Tata Group company were in the green in the late hours of trading on Thursday.
The report had stated that Starbucks faces challenges in India due to local preferences for strong, aromatic coffee, which its offerings don’t always meet.
Many consumers find its products overpriced and less flavourful compared to local options.
Another reason cited for Starbucks’ struggles in India was stiff competition.
Local coffee chains like Cafe Coffee Day (CCD) offer more affordable and tailored menu options, intensifying the competition for Starbucks in the Indian market, the report had added.
Starbucks’ recent challenges in India
Tata Starbucks, the joint venture between the US coffee brand and the Indian conglomerate, operates the largest cafe chain in India, with more than 450 outlets.
Sunil D’Souza, CEO of Tata Consumer Products, spoke to Reuters earlier this week about a change in its strategy, noting, “We will calibrate for the short term — maybe instead of opening 100, we will open 80 now, and next year we will open 120 instead of 100.”
Despite the short-term adjustments, the company’s long-term goal of operating 1,000 stores by 2028 remains intact.
Tata Starbucks, India’s largest cafe chain with over 450 outlets, has doubled its footprint in the past four years.
In the first half of the current financial year, Tata Starbucks has opened 36 new stores and expanded into nine new cities.
This follows a strong performance in the previous financial year, during which the company opened 95 new stores.
Reasons for Starbucks’ change of plans
Tata Starbucks has paused its aggressive store expansion due to a combination of economic pressures and real estate constraints, the CEO detailed in the interview with the news agency.
- Economic pressures: Persistent inflation has led to reduced discretionary spending, particularly among India’s middle class. As a result, products like coffee and cafe treats are increasingly viewed as luxury items, limiting consumer demand.
- Real estate constraints: Securing high-quality locations for new stores has become challenging. Sunil D’Souza highlighted that finding prime real estate with good foot traffic is particularly difficult in India, in contrast to markets like China, where rapid mall development has supported Starbucks’ expansion.
Tata Starbucks’ financial performance
In the last financial year, the company’s revenue rose by 12% to ₹1,218 crore (£113.8 million).
However, its net loss widened to ₹80 crore from ₹25 crore.
Tata Consumer Products reported an 8% year-on-year rise in net profit to ₹364 crore for the September quarter.
Revenue from operations increased 13% to ₹4,214 crore, up from ₹3,734 crore in the corresponding quarter of the previous financial year.
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