Taste Hold­ings to ex­pand Star­bucks over 18 months in or­der to break even

The Mercury - - BUSINESS REPORT - Sandile Mchunu

TASTE Hold­ings is plan­ning to ex­pand its Star­bucks brand over the next 18 months to en­able its food division to break even.

Taste chief ex­ec­u­tive Carlo Gon­zaga said the ex­pan­sion would be pri­mar­ily to KwaZu­luNatal (KZN).

He said the com­pany wanted to have 10 trad­ing Star­bucks out­lets by the end of the year, with a solid pipe­line for an­other 12 next year.

“We are go­ing to open two Star­bucks in KZN and one will be opened next month,” he said.

“Cape Town will get its chance on Star­bucks next year.”

Star­bucks will en­ter the KZN mar­ket in Novem­ber with the first store in Florida Road, to be fol­lowed by a 400m² site in Gate­way Theatre of Shop­ping.

Taste brought Star­bucks this year and Domino’s Pizza in 2014.

Gon­zaga said both brands had proven pop­u­lar with lo­cal con­sumers.

In the six months to end Au­gust, Taste’s food division had 69 stores with 6 Star­bucks and 63 Domino’s cor­po­rate-owned stores, up from 34 stores re­ported a year ago.

The division con­sist of Star­bucks, Domino’s, The Fish & Chip Co, Ze­bro’s Chicken and Maxi’s brands.

Its lux­ury goods division con­sists of re­tail out­lets branded un­der NWJ, Arthur Ka­plan and World’s Finest Watches.

The com­pany said group rev­enue for both di­vi­sions de­creased 9 per­cent to R483.1 mil­lion, down from R529.2m, while gross profit rose 4 per­cent to R207.8m, up from R200.6m as com­pared to last year.

Op­er­at­ing profit extended losses to R73.3m, com­pared to R41.2m last year, and head­line loss per share took a knock to 15.9 cents a share. Last year the loss amounted to 9c.

Gon­zaga said after mul­ti­ple years of record fi­nan­cial per­for­mance, the lux­ury goods division ex­pe­ri­enced its tough­est six months since 2008.

“Given that lux­ury goods are cycli­cal and tend to closely follow the ex­change rate, dis­pos­able in­come and con­sumer sen­ti­ment, we fully ex­pected a sales de­cline in the lux­ury goods division.

“What we didn’t ex­pect was the speed and depth of the de­cline,” Gon­zaga said.

He added that while the first quar­ter same-store sales de­clined 19 per­cent, this slowed in the sec­ond quar­ter to 11 per­cent and in the last quar­ter to Septem­ber this de­cline again im­proved to 3.4 per­cent.

In April Taste an­nounced plans to sell off the lux­ury goods division in the fu­ture.

Gon­zaga said hav­ing ini­ti­ated the sale process, it was swiftly ev­i­dent that the cur­rent tim­ing was not ideal and the group has stopped the process.

He said Taste would con­tinue fo­cus­ing on the op­er­a­tional and tac­ti­cal re­quire­ments for both di­vi­sions.

Taste shares de­clined 3.23 per­cent on the JSE yes­ter­day to close at 90 cents.


A Star­bucks store in New York. Taste Hold­ings wants to have 10 trad­ing Star­bucks out­lets by the end of the year.

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