Starbucks makes coffee at a lower price to revive same-store sales

New Delhi: Starbucks has launched a ‘classic’ coffee menu at a discounted price to its regular offering in select stores, as the coffee chain attempts to counter lower footfall seen in the broader foodservice industry.

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

The move comes as restaurants and cafes feel the effects of a slowdown in the eating out industry. This can be attributed to high food inflation that is negatively affecting households.

starbucks reported a 2% increase in revenue from the quarter ended September 30, in line with weak demand trends the sector is witnessing, according to quarterly reports from Tata Consumer Products Ltd, the chain’s local partner in India.

“Same-store sales growth was challenging, and has been for a couple of quarters. Towards the end of the quarter, we launched a ‘classic menu’,” Sunil D’Souza, MD and CEO, Tata Consumer Products, said in an interview with Mint Monday. “This is a different coffee and a different set of foods, but it turns out they’re also much more affordable. “We will use this to attract more consumers to the store.”

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.

Reduce influx

D’Souza said footfall has slowed while consumer spending remains intact. “If a consumer walks into the store, they are also spending as much as they used to spend before. The problem is that fewer people come. Hence the impact on sales and same-store sales. “We are going to use this classic menu to attract people to the store.”

The menu, which also includes some sandwiches, will be implemented in stores that are experiencing “visible stress” on footfall. “We’re going to make sure that we address the communication about this locally,” he said. Last year, the coffee chain launched a new menu to include a smaller 6-ounce cup called ‘Picco’, along with bite-sized food options aimed at appealing to a wider audience.

Starbucks is following the quick-service restaurant (QSR) industry as burger, pizza and other fast-food chains launched lucrative in-store offerings and revamped their appearance to entice customers to return to their establishments, even as the home delivery business remains strong.

At the beginning of this year, domino Indian pizza chain operator Jubilant Foodworks launched the $99 consumer lunches in stores to attract diners.

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

Meanwhile, competition has increased with more local coffee chains expanding into metropolitan areas.

New players are likely to enter given the rise in consumption in India, D’Souza said.

“There will be times when a new entrant comes in, opens a store for some time, there will be a bit of disruption, especially because some of them would use pricing etc. to attract consumers,” he said. “But as long as we stay focused on delivering value to consumers, building our brand and creating the consumer experience in the store, I don’t think I’ll worry.”

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