Does India have demand for a new Starbucks launch every 3 days?
Operated as a 50:50 joint venture between the Tata Group and Starbucks, the India business has set a big target.
Starting in 2012, Starbucks India had always been on the slow lane.
Three reasons.
1️⃣ Market for coffee drinkers in India was small
2️⃣ Once who would go out for it, choose a premium experience, and would also be ready to pay a premium? Way smaller market
3️⃣ And in that market, Cafe Coffee Day was already KING with 1k+ stores even before Starbucks entered India
But, a few years back when CCD began to crack under the heavy debt, Tatas got the ball rolling, and a wave of crazy expansion followed.
Time for some numbers!
Total outlets | New outlets | Cities | Days to open a new store.
FY19: 146 | 30 | 8 | 12.3
FY20: 185 | 39 | 11 | 9.1
FY21: 221 | 39 | 18 | 9.1
FY22: 268 | 50 | 26 | 7.2
FY23: 333 | 71 | 41 | 5.1
FY24: 420 | 87 | 60 | 4.2
..
What now?
Well, the company has announced that by 2028, they’ll hit 1k outlets!
Meaning, some 600 new outlets in just about 5 years
Or 122 stores a year- 10 a month
And 1 every 3 days! 🚀🚀
..
And there is more.
Presently, its 420 stores employ about 4.5k people. Avg 11 per store
And it plans to double this number to support the 1k stores by 2028
Meaning, for the 600 new stores, it will be hiring about 4.3k more people
That’s an avg of 7 employees per store!
This means: As it expands into newer cities (as we saw in the data), the plan is to open a lot more smaller stores, which will need fewer people, and cover a larger geographic footprint!
This makes sense for another reason- Competition.
Opening larger stores in the same major cities doesn’t make sense when newbie VC-backed players are also expanding there
And for other cities, you need lesser space, as the market size is also smaller
To cater to the same, Starbucks India has already brought out a new menu
It has introduced things like smaller cups called Picco, filter coffee, masala chai, elaichi chai and multiple more milkshakes, to appeal to a wider audience class.
..
My only concern is one 📛📛
CCD crashed because of crazy expansion in times, when it was the only player.
Now that Starbucks is doing this, there are so many more players, who are also expanding rapidly.
Barista. Blue Tokai. Costa Coffee. Third Wave. And many more.
So, will things be all right this time? Or are the companies in this space being too bullish?
What do you think?
Best,
Jayant Mundhra
Insightful jayant keep going strong!!