Tata Starbucks to Resume Aggressive Store Expansion Following Business Model Recalibration

Tata Starbucks is set to resume its aggressive store expansion strategy after nearly two years of recalibrating its business model. The operational adjustments come in the wake of a broader slowdown in discretionary spending that had previously prompted the company to moderate its growth pace.

Sunil D'Souza, Managing Director and CEO of Tata Consumer Products Ltd (TCPL), stated that the company used the last 18 to 24 months as an opportunity to review and restructure its entire business model. This process included adjustments to store sizes, capital expenditure per outlet, and beverage pricing.

Tata Starbucks operates as a 50:50 joint venture between US-based Starbucks Corporation and Tata Consumer Products Ltd. The joint venture currently operates around 500 cafes across India. While the company previously maintained a target of opening approximately 100 stores annually, that expansion pace was slowed amid softer demand in the quick-service restaurant and discretionary consumption sectors.

However, D'Souza noted that business conditions have started to stabilize, with Tata Starbucks reporting four successive quarters of same-store sales growth. The company reported an 11 percent revenue growth in the June quarter, during which it opened four new stores—including two Reserve outlets in Kolkata and New Delhi—bringing its total store count to 498 at the end of the quarter. For the full financial year, the joint venture posted a 7 percent rise in revenue to ₹1,367 crore, while narrowing its net loss to ₹98.95 crore.

Regarding the strategy for future growth, D'Souza indicated that the expansion will focus on combining new store additions with increased density in existing markets. Starbucks currently maintains a presence in about 80 cities, which leadership considers an optimal operating footprint. Rather than adding a large number of new cities, the brand intends to increase store concentration in current locations.

Operating a higher density of outlets within a city brings operational efficiencies, particularly in logistics, delivery, and kitchen operations once a city surpasses five stores. Looking further ahead, TCPL Chairman N Chandrasekaran previously shared a long-term ambition for Tata Starbucks to eventually work toward the scale of Starbucks in China, which operates around 8,000 stores.

"The strategic pause taken by Tata Starbucks over the last two years demonstrates the importance of unit-level economics during a consumption slowdown. By focusing on recalibrating capital expenditure, store sizing, and operational efficiency rather than forcing unbridled growth, the company has successfully stabilized its same-store sales. Building density in existing markets rather than expanding city counts rapidly is a practical approach to achieving scale and improving bottom-line performance in the competitive Indian retail and food-services sector." — Dr. Shishir Gupta, Founder & CEO, StartupLanes