‘Home delivery has seen strong growth over last year’
Sushant Dash speaks to Venkata Susmita Biswas about cracking the home delivery code for beverages during the pandemic, and business recovery post the second wave.
Starbucks recorded a 33% y-o-y fall in revenue in FY21. What has been the level of recovery?
Business is improving sequentially as the unlock progresses and people have more confidence to step out. The recovery after the second wave has been better than what we had seen after the first wave. In Q2 of FY22, we registered 120% growth in revenue over Q2 FY21. Around 91% of our stores are open right now, operating at 50-75% capacity as per local regulations. Some stores that are still shut are in IT parks, office complexes, etc, because people have not come back to work in full force yet. Footfalls in stores located on high streets are better than those in malls. With malls opening, that segment is also picking up pace. The average ticket size on a constant price basis has increased marginally over pre-Covid levels.
You added 40 stores in FY21. Will you be prioritising any particular store format going ahead?
In the current fiscal, we aim to open a similar number of stores as FY21. In the last quarter alone we opened 14 stores. Between August 2020 and now, we entered nine new cities including Jaipur, Kanpur, Indore, Ludhiana, Kochi and Amritsar. People are going back to their routines, and continue to work out of the Starbucks stores. There hasn’t been a change in behaviour and that’s why we are doing the positive numbers.
We will continue to look at all store formats as we add more stores. Lean stores are a critical part of our strategy as we expand. We are also looking at experimenting with new formats. We opened our first drive-thru in Chandigarh. While we will open more of these, I am not sure whether it will happen this fiscal.
Dine-in is a big draw for Starbucks’ Indian customers. How easy was it to adapt to the delivery model?
During the pandemic, we enhanced our presence in delivery. We worked on improving packaging to address issues like spillage and to ensure the beverage reaches the customer at the temperature at which it is meant to be served. These were the two factors that made customers hesitant about ordering a beverage home. We have not changed our menu for delivery because when people order, they want what they usually have at the store.
After safety and hygiene related changes, our focus was on digital innovations. We began using digital payment solutions through the Starbucks app — people could order on the app, and also pre-order to skip the queue. They could also order via WhatsApp using a QR code displayed outside the store.
While deliveries have dropped, with people returning to stores, our home delivery orders are now much higher than pre-Covid levels. Delivery contributed approximately 18% to the overall sales this year, and witnessed strong growth over last year.
Have you made any significant additions to the food menu?
We launched ice creams in flavours like java chip and caramel macchiato. Ice creams are available in takeaway tubs and single scoops at the store. People can also enjoy them as modifiers to their beverages. Ice creams are now available in around 50-60% of our stores. We have also launched the Sanjeev Kapoor menu at Starbucks — it’s specially curated by him and reflects the best of global and local tastes. Further, we launched one-litre freshly brewed beverages and at-home coffee keeping in mind the interest in home delivery. The coffees can be bought at the store or ordered through food delivery aggregators like Swiggy and Zomato.
Tata Cha now has 12 stores in Bengaluru. Will Tata Starbucks defocus from the tea segment as Tata Cha grows?
With Tata Cha, the idea is to offer Indian flavours. The price point of products at Tata Cha and its customer segment are quite different from that of Starbucks. Tea remains an important part of Starbucks’ portfolio, and we will continue to focus on it and innovate. In fact, we recently launched two new variants in tea.