Tata encounters pressure in Starbucks joint venture as consumers tighten budgets

Tata Consumer Products, experiencing lower foot traffic at its Starbucks cafes in India, will scale back short-term expansion plans but remain committed to its 2028 targets

Bengaluru: Tata Consumer Products Ltd. (TCPL), the FMCG arm of Tata Group, will delay the opening of some new Starbucks stores in the country, with fewer customers visiting its cafes, a top company official said.

“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,” Tata Consumer CEO Sunil D’Souza told Reuters.

He also added that Tata Starbucks is still focused on reaching its 2028 goal to operate 1,000 stores by 2028.

Starbucks-branded coffee chain in India is operated by a 50:50 joint-venture between Seattle-based Starbucks Coffee Co. and TCPL. Today, it operates over 450 stores across the country. 

In 2023, Starbucks marked its entry into 15 new cities across India by launching 71 new stores. Today it operates over 430 stores across the country. 

Its store count had more than doubled over the past four years by the end of the last financial year, but D’Souza noted that the shortage of quality locations remains a challenge.

“In India, good quality real estate with traffic… is a challenge,”he said, comparing it to the “massive development of malls” in China, Starbucks’ second-largest market and the world’s second-most populous country after India.

However, D’Souza still expects its bet on coffee to pay off in the longer run as the country’s coffee culture grows and cafe density is still low compared with other Asian countries such as Indonesia, Vietnam and the Philippines.

Separately, he also said TCPL’s revenue would increase in the double-digit percentage range in the second half of the financial year, with profit coming under pressure due to higher prices of raw materials, including tea.

TCPL was formed through the merger of Tata Chemicals’ consumer products business with Tata Global Beverages Ltd (TGBL). Now renamed Tata Consumer Products, it houses well-known brands such as Tata Tea, Tetley, Tata Salt, Eight O’Clock Coffee, and Himalayan Water, along with emerging brands like Tata Sampann, Tata Soulfull, Tata Gluco Plus, and Tata Water Plus.