Fresh business blend at Starbucks: Global CEO meets Chandra as Tata pauses investment pending lower-cost model

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Starbucks will overhaul its India business model after joint venture partner Tata Consumer signalled that fresh investment would flow only after a more competitive, lower-cost format was agreed upon, said people with knowledge of the matter.The Tatas took a hard line on the current high-cost strategy of the world’s biggest coffee house chain, they said. Tata Consumer has slowed fresh investment in the venture until a profitable model emerges. The push for a reset prompted Starbucks global chief executive Brian Niccol and the company’s top management to visit Bombay House and meet Tata Sons chairman N Chandrasekaran last week for discussions, the people added.Tata has argued that Starbucks’ global model — built around large 3,000 sq ft stores, equipment designed for 700 cups a day and premium pricing at an average ₹400 a cup — is ill-suited to the competitive out-of-home coffee market, value-conscious consumers and high rentals. Under the proposed overhaul, the joint venture will pivot to smaller, more efficient, India-specific stores, aimed at improving unit economics.It will also opt for lighter equipment, tighter staffing norms and a more accessible pricing and menu architecture. Store layouts, product mix and throughput targets are being recast from scratch to suit local consumption patterns and real estate realities.Live EventsThe mismatch has forced the venture to pause its earlier goal of reaching 1,000 stores by 2028, after Tata Sons reduced funding due to declining same-store sales and an unsustainable cost structure, one person said. With the first outlet set up in India in 2012, the store count is now at 500. Starbucks has 8,000 cafes in China, opened over 25 years. Both sides have reached an informal understanding to rewire the India business around the new, leaner model, said the people cited.Fresh capital from Tata will flow once the revised format—covering store size, capex per outlet, productivity metrics and localisation of offerings—is locked in, they said.Evolving BrewEarlier attempts by Tata group and Starbucks’ previous global leadership to reshape the India model stalled, prompting group holding company Tata Sons to question the venture’s long-term viability.Tata Starbucks is a 50:50 joint venture owned by Tata Consumer Products and Starbucks Corp. Starbucks has the option to acquire Tata’s stake from 2032, said the people cited.“As part of our business strategy, we constantly evaluate and make refinements to the business model,” said a Tata Consumer spokesperson. “During our last review, we worked on the store ambience and aesthetics... especially in tier II cities.”Revenue posted by the India business rose 5% to ₹1,277 crore in FY25, but losses widened nearly two-thirds to ₹135.7 crore.Meanwhile, competition is intensifying. Tim Hortons and Pret a Manger have begun rapid rollouts, while homegrown rivals Third Wave and Blue Tokai operate more than 300 outlets combined. Older chains such as Barista remain profitable through leaner structures and less costly real estate choices. Blue Tokai now gets about 15% of its revenue from in-store retail, helping strengthen unit-level returns.“The macro indicators and demographics of the country make it especially attractive and the QSR (quick service restaurants) category overall has tailwinds spurring its growth,” the Tata spokesperson added.Add as a Reliable and Trusted News Source Add Now!
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(You can now subscribe to our Economic Times WhatsApp channel)Read More News onStarbucks India business modelTata Consumer investmentcoffee shop joint ventureTata Starbucks overhaulcoffee market competitioncompetitive coffee market IndiaStarbucks business strategyStarbucks store expansionStarbucks store count in IndiaStarbucks(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online....moreless