Tata Starbucks plans to improve sales, cut losses: CEO Navin Gurnaney

Published On: 22, Feb 2019 | Source: business-standard.com

Joint venture company Tata Starbucks, which runs the Seattle-based cafe chain in India, is looking to cut losses and improve sales even as it expands its footprint in the country. Speaking to Business Standard in his first interaction since taking over as company chief executive officer (CEO) in January, said the focus for the firm was on “unit economics” as it sought to widen operating profit. “It is all about thoughtful aggression,” Gurnaney said. “Our endeavour is to select our locations carefully where we can derive maximum mileage and sales throughput. Starbucks is positioned as the third place globally and that thinking guides us locally too,” he said.

In 2017-18 financial year (FY18), had reported its first operating profit at Rs 1.26 crore on a total revenue of Rs 345 crore. But at the bottom line level, the company remained in the red, reporting a net loss of Rs 30.5 crore (in FY18). While lower than the previous year (net loss of Rs 32.3 crore in FY17), analysts expect to break-even in the next few years as competitive intensity from the likes of Cafe Coffee Day, McCafe (from McDonald’s) and Barista apart from fast-food joints such as Domino’s, KFC and Pizza Hut (all of whom serve beverages) remains high.

Cafe Coffee Day, for the uninitiated, has over 1,700 stores, while McCafe has over 180 stores and Barista has over 200 outlets in India. In August last year, Coca-Cola globally acquired Costa Coffee in a $5.1-billion transaction, with plans to rejuvenate the brand here.

Gurnaney said the JV company would close FY19 with a total store count of 144 in eight cities, adding nearly 30 stores in the current financial year. “We have steadily increased the number of stores we add per year. In 2017-18, we added 25 stores. The year before that (2016-17), we added 16 stores (per year) and before that (2015-16) we added 10 stores a year,” Gurnaney, who took over from Sumitro Ghosh, the erstwhile CEO, said. Ghosh returned to the US after a three-year stint with the JV company. He has picked up a role within the Starbucks organisation, Tata Starbucks said when announcing his exit in October.

Gurnaney said work in terms of menu innovations as well as increasing store count per year would continue at the firm. Analysts expect Tata Starbucks to add around 40 stores in FY20 as it looks to cross the 180-store-mark next year. It is expected to cross 200 stores in FY21 by which time the JV company could touch Rs 500 crore in top line, experts said.