What’s Brewing? Starbucks Responds to India Exit Rumours

Starbucks, a joint venture (JV) partner of Tata Consumer Products (TCP), has vehemently denied rumours that it intends to leave India. “Starbucks is fully committed to the Indian market. Any statements suggesting otherwise are false. Tata Starbucks currently operates more than 470 stores in 76 cities across India, which continues to be a key growth market for Starbucks globally,” said the brand. This comes after a report alleging that Starbucks was considering leaving the Indian market due to high costs, poor taste, and mounting losses.

On Thursday, December 19th, Tata Consumer Services, the venture that runs the coffee chain in India, also gave an official statement to the National Stock Exchange of India, Bombay Stock Exchange, and Calcutta Stock Exchange, stating, “The company would like to state that the information in the said article is Baseless.”

But how did this all begin?

Back in the early 2000's Starbucks was a popular coffee brand in the US. Looking at the success, the brand tried to expand its footprint in various other countries and in 2007 it planned to enter the Indian market. However, the attempt to tap into the Indian market was futile for the popular brand. But it did not lose hope and tried its luck again in 2012. The American coffee powerhouse made a cautious attempt this time, partnering with Tata Consumer Products in a 50:50 to form a joint venture "Tata Starbucks." The partnership was a hit, and slowly, premium coffee made its way to the Indian market. As per reports, between FY17 and FY23, the brand was unstoppable, and its sales saw a compound annual growth rate (CAGR) upwards of 20%. 

Until recently, this year, the company made a loss of Rs. 82 crores, which was almost three times what they were in the previous year. The sales growth also plummeted from double digits to just 7% in the second half of FY24. 

Considering the situation, a media organisation called The Philox published a report suggesting Starbucks could soon leave India. Published with the headline “Starbucks to Exit India Due to High Costs, Bad Taste, and Mounting Losses,” the report speculated that the hugely popular coffeehouse chain could shut shop in India due to price-conscious Indian consumers preferring cheaper local substitutes. This report was published days after Starbucks India confirmed that it would delay the planned launch of new store openings.

All the speculations were denied by both TCP and Starbucks, as mentioned above. "Tata’s relationship with Starbucks stands strong with shared values and commitment to India,” the company told in a report to CNBC-TV18.