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Jul, 16 2018

Tata Starbucks posts its first positive Ebitda

The growth is nearly double compared to a year ago period when it mostly focussed on profitability and halted aggressive expansion.

Tata Starbucks, a joint venture between the Tata Group and Starbucks, posted its first positive Ebitda (earnings before interest, tax, depreciation and amortisation) after sales growth nearly doubled during FY17-18.

Tata Global, in its latest annual report said Tata Starbucks, improved sales by 28% in FY 2017-18 with robust in-store performance and new stores added during the year. With the JV posting sales of Rs 272 crore in FY16-17, a back-of-the-envelope calculation shows revenue to be about Rs 348 crore during the last fiscal. “For the first time since inception, the company recorded a positive Ebitda,” the report added.

The growth is nearly double compared to a year ago period when it mostly focussed on profitability and halted aggressive expansion. However, it added nearly 25 stores last financial year.

The JV narrowed net loss marginally to Rs 30 crore during the year to March 2018 compared to Rs 32 crore a year ago. “Various in-store initiatives and the loyalty programme coupled with the ambience provided in stores resulted in improved existing store performance,” the annual report said.

With 116 stores until March, a back-ofthe-envelope calculation shows that each Starbucks outlet sold coffee, snacks and merchandise worth Rs 3 crore. That’s more than rival Coffee Day Enterprises, which runs the country’s top coffee house chain, Cafe Coffee Day, and had retail revenue of Rs 1,590 crore from 1,722 outlets, or about annual sales of Rs 90 lakh per store. Jubilant FoodWorks, which runs Dunkin’ Donuts and Domino’s Pizza in India, clocked Rs 2.6 crore per store.

Starbucks, which started operations in India in October 2012, recorded the fastest store expansion in the company’s 45-year history in the initial few years.

Also, for global coffee chains including Starbucks, consumers are attuned to a takeaway culture, which helps them add margins at very little cost. In India, however, office-goers and students go to cafes to relax and spend hours over coffee and snacks. Real estate costs in India are high, making it important for retailers to realise average price per square foot of space.

Starbucks expanded its partnership with Tata Group beyond India by launching the latter’s single-origin coffee in the US and Himalayan mineral water in Singapore nearly two years ago.

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