Starbucks is reworking its India strategy after Tata Consumer Products temporarily halted new investments in their 50:50 joint venture, The Economic Times has reported. The pause, the newspaper says, reportedly stems from rising operating costs and concerns over store-level profitability.
According to the report, Tata has questioned the relevance of Starbucks’ global store format in India. The standard 3,000 square feet outlets—capable of producing around 700 cups a day—have not aligned with local cost structures. With beverage prices averaging about Rs 400 and rental costs remaining steep in major metros, the model has become difficult to sustain in a value-conscious market.
To address these challenges, Starbucks CEO Brian Niccol met Tata Sons chairman N Chandrasekaran in Mumbai last week to discuss adjustments to the business model. The discussions reportedly focused on developing smaller, cost-efficient stores designed specifically for Indian conditions. These new formats would involve lighter equipment, fewer staff, and lower fixed costs, potentially accompanied by pricing revisions to attract a wider customer base.
Despite the near-term restructuring, The Economic Times noted that India continues to play a key role in Starbucks’ long-term global plans. During an earlier visit, Niccol described India as a high-potential market where the company is testing varied formats—from compact kiosks to larger cafés catering to longer stays.
The shift marks a strategic attempt to balance brand positioning with local affordability, a challenge global coffee chains have faced in India’s competitive café segment. The next phase of expansion will hinge on how swiftly Starbucks and Tata can implement these changes and achieve sustainable profitability at the store level.
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Naresh Khanna – 10 February 2025
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