Where does the growth lie for Tata Starbucks?

Monday morning around 11 am, it's easier to find a parking at Connaught Place, New Delhi than finding a place in Starbucks to sit. That was when I was half hour early in anticipation of this and hoping to grab a table before the other party arrived.

And the thing to be noted is that there are at least 5 other coffee shop outlets very nearby in the vicinity there. But I bet, none of them were as half as full. I think gone are the days when Starbucks was perceived expensive. Rather, it's quite the opposite these days. People seem very comfortable spending time and money in Starbucks.

Maybe that is why its same store sales(SSS) has been increasing by 7% till now. But the deal with same store sales is that it cannot be increased indefinitely. Because when the stores are already going full, where will the extra sale come from? An average Starbucks store does a sale of about 3Cr per annum. This is more than 5 times of the average store sale in other coffee shop chains (read CCD).

I’m sure this is causing a lot of sleepless nights for the competitors. But without a price revision, there isn’t much SSS growth expected in future.

And I think Starbucks is well aware of this fact. Hence the aggressive strategy of expansion. It has opened 25 new stores in the fiscal year 2017-18 whereas it was just 7 new stores in the year before that. It is scouting new markets and branding them as it goes.

The strategy seems right till now. Its targeting the top 1% of India and its doing quite well. This is a tricky demography to target, according to me, because they are the centre of attention for almost all brands, but Starbucks has managed to keep its hold till now.

Its attention to detail in the smallest things whether it’s the beverages or the food it offers or the interiors or even the launch of Teavana - it all points to the same thing - the grand plan Starbucks has for India. And these smallest things are not going unnoticed. There are two Starbucks stores in Noida - both are always full.

In one of the locations the Starbucks is right next to Chaayos - and if one wants to see the parity (or the lack of it), they should definitely visit the same. Our nation might run on Chai but they seem to be sitting in Starbucks only.

This fiscal year 2017-18, Starbucks has reported a positive EBITDA for the first time. And it's great. But what’s not so great is that it is running out of locations. The top 1% which it is targeting resides in a handful number of cities. And even within a city - in just a few areas. And those areas are quickly being ticked by Starbucks.

So where will it go now? Well, they say that they would be entering 2 Tier cities from the next fiscal year but that’s easier said than done. Will they will be able to post same stellar sale of Rs 3 cr per outlet?

The top 1% is value conscious which Starbucks has been able to provide - but the rest of the India is very price conscious. And I leave it upto you to fathom the difference between the two. But I wonder, can this expansion be continued without compromising on the quality and values which Starbucks has carried till now?

Is Starbucks going to change its strategy for the 2 Tier cities or is it hoping that just like the metro cities, the rest of the India will begin to see its worth? Well, I truly hope so.