Tata Starbucks sales growth decelerates in third quarter, down to 7% year-on-year
Tata Starbucks, the joint venture between Starbucks and Tata Consumer Products, experienced a significant slowdown in sales growth during the third quarter. The company’s year-on-year increase dropped to just 7%, a sharp decrease from the 21% and 14% growth witnessed in the first and second quarters, and a significant drop from the robust 42% growth recorded in the same period last year.
This decline in growth comes as Tata Starbucks continues its expansion plans, opening 22 new stores in the quarter and bringing the total count to 392 across 55 cities. In fact, in the first nine months of its fiscal year, ending on March 31, 2024, the company managed to add an impressive 59 new outlets.
Established in 2012, Tata Starbucks opened its first store in Mumbai, India, and has since been striving to strengthen its presence in the country. The company recently announced its ambition to have 1,000 stores in India by 2028, with a focus on drive-thru, airport, and 24-hour store formats. To achieve this target, Tata Starbucks will need to open approximately one new store every three days.
The deceleration in sales growth at Tata Starbucks is indicative of the broader challenges faced by the consumer market in India. This trend is evident in the reported drop in profits by Costa Coffee franchisee Devyani International, which attributed the decline to a “challenging macro-economic environment” and reduced consumer spending.
Tata Consumer Products, the parent company of Tata Starbucks and also known for its tea and water brands such as Tata Tea, Tetley, and Himalayan Natural Mineral Water, reported a 9% increase in total third-quarter revenue, reaching Rs 3,804 Cr ($458m). Furthermore, coffee sales specifically experienced a notable 17% year-on-year growth.
As Tata Starbucks continues to navigate the evolving consumer market in India, it remains to be seen how the company will tackle the challenges and pursue its ambitious expansion plans.
Analyst comment
Neutral news.
As an analyst, the deceleration in sales growth for Tata Starbucks indicates challenges in the Indian consumer market. However, the parent company’s overall revenue increased, and coffee sales saw growth. The company’s expansion plans may face difficulties, but their ambition to have 1,000 stores in India by 2028 remains unchanged.
