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SA’s first two Starbucks stores to open in April

Starbucks, the New York Stock Exchange-listed company, signed a license agreement with Taste Holdings last year, giving it exclusive rights to roll out the coffee chain in SA and tap the income of the burgeoning middle class’s burgeoning penchant for posh coffees.

The first two stores will bring the full Starbucks experience including fresh food and handcrafted beverages to South African consumers. Taste will own and operate the stores directly.  

Taste expects to manage up to five Starbucks stores by the end of the year, with a total of 16 stores in a few years. CEO Carlo Gonzaga is upbeat about the tie-up.

“There is no doubt that there is enormous potential for the Starbucks brand in SA. Our focus is building this business store by store. It’s a different approach to how people think we would bring the brand here with a big focus on store numbers,” Gonzaga told Moneyweb.

It’s not the first time Starbucks has dabbled in the SA; back in 2010 the company made a temporary venture via a partnership with Southern Sun and Tsogo Sun offering coffee at hotels. But this will be the time Starbucks opens stand-alone stores.  

Founded in 1971, Starbucks today has more than 22 000 stores around the world with annual revenue of more than US$16-billion.

Taste is starting small with coffee chain rollouts. The 485m² Starbucks Rosebank store will be located at the corner of Cradock and Tyrwhitt Avenues, and the Starbucks Mall of Africa store, located in the centre’s upper level, will be 289m².

Says president of Starbucks Europe, Middle East and Africa Kris Engskov: “Both Rosebank Mall and the new Mall of Africa have a young and vibrant neighbourhood and we will offer local shoppers and coffee fans the very best of Starbucks.

“Our store designs will be inspired by South African art and culture, creating a remarkable third place experience that our customers know and love.”

Over the last three years, SA’s fast food industry has transformed with a swathe of international food and beverage chains setting up shop. Brands like Burger King, Pizza Hut and recently Krispy Kreme entered the local market. Grand Parade Investments, which launched Burger King in SA, is looking to bring Nasdaq-listed Dunkin’ Brands into the country to open Dunkin’ Donuts and Baskin Robbins stores.

Taste has had its share of the action, as the group already holds the license agreement to develop US pizza brand Domino’s Pizza in SA.

Starbucks will be tweaking its offering for the SA market. New to the coffee chain will be the offering of Rooibos tea as part of hand-crafted beverages – a first for the company.

But questions are emerging if there is a big enough coffee market in SA to lap up Starbucks’ offering. It is widely believed that most South Africans still drink instant coffee rather than premium coffee.

Gonzaga thinks otherwise: “There is a big coffee market in SA. Coffee is a simple category and growing enormously. There are probably 1 000 more coffee outlets than five years ago. The market certainly exists.”

But SA is not a big grower and roaster of coffee beans, and Starbucks might look at the country’s African neighbours for supply. Gonzaga says the food offering at the coffee chain will be locally sourced and supplied.

Also, the domestic coffee market is decentralised with independent coffee shops and brewers all vying for market share. One player likely to watch Starbucks’ inroads is coffee house Mugg & Bean, a subsidiary of Taste’s competitor Famous Brands. Mugg & Bean has been growing its clout throughout the African continent by opening stores. 

Source: Moneyweb.co.za

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