Even as Starbucks expands its store network in India, its financials point to pressure on the operating model. Tata Starbucks reported revenue of about Rs 1,277 crore in FY25, up around 5% year-on-year, while losses widened to Rs 135.7 crore from about Rs 82 crore in the previous fiscal. Recent reports indicate that the company is doing a rethink on pricing and store formats to improve competitiveness in a price-sensitive market. Sushant Dash, CEO of Starbucks India, in an interview with Nandini Oza says the company is banking on rising out-of-home consumption and premiumisation to drive growth. Excerpts:
Q. What is the priority – growth, profitability or market share?
A. It has to be a balance of all three. Growth is important, but it has to be profitable and deliver returns.
Q. Would lower pricing expand your market?
A. At current price points, we are addressing our target segment effectively. Entering a different segment would require a different pricing strategy and model.
Q. India is largely a tea market. Are you seeing a shift towards coffee consumption?
A. Coffee penetration has moved up to about 18-20%. Seven to eight years ago, tea was at 92-93% while coffee was around 11%. The shift is led by younger consumers who are experimenting more. Coffee is still largely an out-of-home habit initially, but over time it moves into offices and homes.
Q. What is driving coffee consumption outside the home?
A. In India, tea remains the first beverage at home. Coffee is linked to occasions like meeting friends or work interactions. That shift from tea to coffee for such occasions has been significant. The cafe is not just about the beverage; it is about the experience and the aspirational value attached to it.
Q. How do you balance frequency and ticket size in a price-sensitive market?
A. We operate in the premium segment and price accordingly within that space. Even a small percentage of the population is a large addressable base. The focus is on delivering value within the premium experience rather than competing on entry-level pricing.
Q. You have indicated a target of 1,000 stores. What is the timeline?
A. We remain bullish on expansion and the category’s growth, but not tied to a specific deadline like 2028. Store additions will be aligned with the strength of the business model and market readiness.
Q. Which consumer segments are you targeting?
A. We do not define consumers by demographics. Our stores see a wide mix – from teenagers to older customers. In many cities, cafes are becoming spaces for families and celebrations across generations.
Q. How do you approach expansion beyond large metros?
A. The opportunity is not about Tier I or Tier II labels. We are already present in over 80 cities. Expansion depends on building the right supply chain, distribution and cost structures to sustain the model in newer markets.
Q. Who do you see as your primary competition?
A. Anyone who sells coffee or competes for the same consumer occasion is a competitor. The category is still underpenetrated, so competition helps expand the market.
Q. Are you seeing higher repeat consumption?
A. The market is evolving. Over the past decade, consumers have become more discerning, with interest in origin, brewing methods and quality, similar to how other premium beverage categories evolve.