Why Starbucks is opening shop in SA
No stranger to making waves in the fast food sector, Taste Holdings CE Carlo Gonzaga has done it again, inking an agreement with Starbucks as its exclusive partner in SA.
Taste’s alliance with the global coffee store giant follows another Gonzaga coup: Taste’s 30-year franchise agreement for Southern Africa with global pizza heavyweight Domino’s Pizza, secured in 2014.
Gonzaga is upbeat about the Starbucks alliance. “SA does not have anything like Starbucks yet,” he says. “Starbucks is not just about quality coffee, it is the experience its stores offer. The stores are a neighbourhood meeting place built around community involvement.”
Through Taste’s alliance with Seattleheadquartered Starbucks comes the backing of a group with more than 22 000 stores in 66 countries and annual revenue of US$18bn. Forbes puts the Starbucks brand’s value at a staggering $79bn.
“We have spent a lot of time with the Taste team over the past several months and got to know them well,” says Kris Engskov, Starbucks’ Europe, Middle East & Africa president. “We share similar core values.”
Engskov says: “We will bring design inspiration to the stores. We also be doing something very special around our African reserve coffee range.”
SA coffee lovers will not have to wait too long to savour the Starbucks experience. “We will open the first full format store in Johannesburg in mid-2016,” says Engskov.
All Starbucks stores will be owned and operated by Taste. While giving nothing away on targeted store numbers, Gonzaga is thinking big.
“We see substantial potential,” he says.
Engskov is as positive. “We see this as the right time to enter the SA market,” he says.
“The number of aspirational consumers with a growing appreciation of great coffee is increasing rapidly.”
New to SA will be stores in which quality tea is also a big part of Starbucks’ offering. It threw its weight behind the tea segment in 2012 through its acquisition of Teavana for $620m. “We see a giant opportunity globally and in SA to grow the premium tea segment,” says Engskov.
Gonzaga does not view Starbucks as a direct rival of its larger competitor Mugg & Bean, owned by Famous Brands.
However, Taste and Famous Brands are facing each other down in the pizza market. Famous Brands CE Kevin Hedderwick left no doubt when, at the time of Taste’s tie-up with Domino’s, he declared in a statement: “Let the pizza war begin.”
The war could be going Taste’s way, judging by initial results of an exercise to rebrand its 140 Scooters and St Elmo’s pizza stores as Domino’s stores. Taste reports a 60% postrebranding sales uplift in former Scooters stores.
Taste has come a long way since its humble beginning as one Scooters store opened by Gonzaga 15 years ago. Given his flair for pulling off game-changing alliances, Taste still has a long way to go.