In response to the pandemic-driven spike in-house consumption among consumers, Tata Starbucks has made packaging and delivery a major focus area. Sushant Dash, CEO, discusses the company’s plans for retail expansion and its growing emphasis on airport stores with Akanksha Nagar. Excerpts:
Tata Starbucks saw a 76% growth in FY22, with revenue at `636 crore. What’s your target for FY23 and what would be the growth drivers?
We remain bullish in terms of retail expansion and giving customers the Starbucks experience. Last year, we opened 50 new stores and expanded beyond the metros. We are currently in 28 cities, and this fiscal we opened our outlets in two new cities — Nagpur and Jalandhar. While we are looking at new formats for our stores, there is more focus on airport stores and we have opened eight airport stores in six cities in the last three-four months.
You joined the company last year, amid the pandemic. How has the brand’s vision and overall strategy been aligned to the new reality?
We had to re-prioritise because of the pandemic with innovation becoming more important to keep the brand relevant. The first and foremost task was to focus much more on digital solutions, for instance, working on mobile order pay, or payment through WhatsApp. We became more aggressive in terms of delivery and collaborating with aggregators. During this time, we also innovated with the menu to keep the interest level up among customers, introduced new food items and gave the existing food items an Indian twist.
We have partnered with aggregators— both Swiggy and Zomato—making our food and beverage items available through their platforms. Also, we have our merchandise available on e-commerce sites like Tata CLiQ and Flipkart. Although the merchandise isn’t a very significant part of our overall portfolio, it’s an important part and it is growing. Merchandise gives consumers the chance to experience the brand beyond just the food and beverage and it also helps us to grow brand affinity.
We have seen how the pandemic led to a major shift toward in-house consumption. What steps have you taken to beef up your delivery muscle?
The biggest challenge when the consumption moved in-house was to replicate the “out-of-the-house” experience. It had been a lot of hard work to understand what the consumer needed and in some ways what the barriers were. Intuitively, customers were hesitant to order coffee online, there were doubts about coffee reaching in time, keeping the taste and temperature intact, while maintaining the overall look and feel.
We did a lot of work in improving the packaging both in terms of compliance and ensuring quality standards, while also reducing the amount of spillage and ensuring the packaging is recyclable. Having cracked these challenges, we focussed on improving the overall delivery process.
Before the pandemic, home delivery contributed around 4% to our overall revenue. It has now grown to 14% and has become a significant contributor. While the offline order numbers in the stores have come back and are higher than what they were before the pandemic, the online delivery numbers remain strong too.
The company currently has 268 stores. How many new stores do you plan to open this fiscal?
We will enter new markets depending on the availability of customers who want the Starbucks experience and where we find the right kind of real estate to give the correct experience — which sometimes is a challenge. As and when we find these two conditions, we open our store since there is no fixed target. In terms of footfall, the numbers are higher than what it was before Covid struck. While expanding, we look at all formats, depending on the catchment of that geography. It is not like only smaller-sized outlets boost our presence in the tier-II and III cities. In fact, in many of the smaller cities, we have opened large-format stores. We have also invested in one drive-through on the outskirts of Chandigarh, which was launched a year back.
Having launched Baya in international markets, how serious are you about launching juice bars in the Indian market?
We will continue to innovate with our food items and beverages. Over the last year, we have launched products that are culturally in tune with the country. For instance, thandai drink during Holi, special drinks for Diwali, Alphonso mango Frappuccino for summers, and food items that are more in line with the festivals.