Starbucks brews lower-priced coffee to revive same-store sales

New Delhi: Starbucks has rolled out a ‘Classic’ coffee menu priced at a discount to its regular offerings in select stores as the cafe chain tries to counter lower footfalls seen across the wider food services industry.

Launched in September, the menu includes the Classic hot and iced coffee—starting at ₹150 for a small offering. This is at least 20-30% cheaper than regular coffee offered at Starbucks.

The move comes as restaurants and cafes feel the pinch of a slowdown in the wider eating-out industry. This can be attributed to high food inflation that is adversely impacting households.

Starbucks reported a 2% jump in revenue from the three months ended 30 September in line with soft demand trends being witnessed by the sector, according to quarterly filings by Tata Consumer Products Ltd, the chain's local partner in India.

“Same-store sales growth was a bit of a challenge, and it's been a challenge for a couple of quarters now. Towards the end of the quarter, we launched a 'classic menu’,” Sunil D'Souza, managing director and chief executive officer, Tata Consumer Products, said in an interview with Mint Monday. “This is a different coffee and a different set of food items, but it so happens that they're also far more affordable. We will use this to draw more consumers into the store.”

Also read: After US, China struggles, will Starbucks pay the price in India?

Starbucks entered India in 2012 through a 50-50 joint venture with the Tata group firm. It opened 19 net new stores in the September quarter, taking its total store count to 457 across 70 cities.

Reducing footfall

D'Souza said footfalls have slowed while consumer spending remains intact. “If a consumer walks into the store, they are spending as much as they used to spend earlier as well. The catch is there are lesser people coming in. That is why the impact on sales and same-store sales. We are going to use this classic menu to draw people into the store.”

The menu that also includes some sandwiches will be rolled out in stores that are seeing “visible stress” in footfalls. “We are going to ensure we are locally targeting communication around it,” he said. Last year, the coffee chain rolled out a new menu to include a smaller 6-ounce cup size called ‘Picco’, along with bite-sized food options aimed at appealing to a wider audience.

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Starbucks is following the quick service restaurant (QSR) industry as burger, pizza and other fast-food chains rolled out lucrative in-store offers and revamped their look and feel to lure customers back to their outlets even as delivery business remains strong.

Earlier this year, Domino’s pizza chain operator in India, Jubilant Foodworks, launched the ₹99 lunch feast for in-store consumers to lure diners back.

India’s cafe market remains a “long-term opportunity”, D’Souza said. Last year, the company had announced plans to open 1,000 Starbucks outlets by 2028. “We continue to expand. In the short-term, you will have some hiccups as you go through these various cycles,” he said.

Meanwhile, competition has increased with more homegrown cafe chains expanding across metros.

Also read: QSR pack in the soup, looks for a quick way out

New players are bound to come in given the rise of India’s consuming, said D’Souza.

"There will be moments when a new entrant comes in, opens a store for some time, there is a bit of a disruption, especially because some of them would use pricing, etc., to draw consumers,” he said. “But as long as we remain focused on offering value to consumers, building our brand, building the consumer experience in store, I don't think I would be worried about it.”

In fiscal 2024, the coffee chain reported revenue of ₹1,218 crore.