Popular coffee chain Starbucks will overhaul its Indian business model after joint venture partner Tata Consumer Products indicated that fresh investments would come only after a more competitive, cost-effective format was agreed upon, The Economic Times reported citing people familiar with the matter.
Starbucks runs its India operations through a 50:50 venture with the Indian company. The shares of Tata Consumer Products closed 0.83 percent lower at Rs 1,175.50 apiece on November 27.
The Tata Group company has slowed down fresh investments into the India venture of world's biggest café chain until a profitable model emerges, the report added. Following this, Starbucks global chief executive Brian Niccol and other management executives met Tata Sons chairman N Chandrasekaran last week for discussions in Mumbai, it further said.
The Indian conglomerate has argued that Starbucks' global model, which is built around 3,000 sq ft stores having equipment designed for 700 cups a day at premium pricing of Rs 400 per cup on an average, does not suit the competitive out-of-home coffee market, value-conscious consumers and high rentals, sources told ET.
The reported overhaul would see the joint venture pivoting towards smaller and more efficient India-specific stores, aimed at improving unit economics. Lighter equipment, tighter hiring norms and more affordable pricing will also be part of the said restructuring.
Moneycontrol couldn't independently verify the report.
Starbucks is sharpening its focus on India, which CEO Brian Niccol earlier this year described as a "key part" of the company's global ambitions, according to a report by The Times of India. On his first trip to the country since taking charge last September, Niccol toured stores, met employees, and held discussions with Tata Sons chairman N Chandrasekaran.
Niccol said that the company plans to expand "in the right places", noting, "We are here to invest, share, and grow with India, building India's coffee culture for the long-term." He added that Starbucks is adapting formats "from compact neighbourhood cafes to immersive coffeehouses", aiming to offer everything from quick-service stops to deep coffee-culture experiences "that feel local, welcoming and distinctly Starbucks".
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
