Local franchises prepare for Starbucks onslaught

GLOBAL coffee brand Starbucks is on track to open its first two South African stores in Johannesburg this month, but will have to contend with local franchises entrenching themselves in shopping malls and offices.

Starbucks, a 45-year-old brand, which will be operated locally by Taste Holdings, believes its combination of store environments, ethically sourced product and high public awareness will give it a firm foothold in what Euromonitor International estimates is a R2-billiona-year local industry.

The global coffeemaker opened more than 1 000 outlets in the past five years, and will include Rosebank and Mall of Africa in that list before embarking on the rest of its roll-out in the country, which Taste has said will involve 12 to 15 new stores in 2016 and 20 a year after that until it is in the 150- to 200-store range.

Local competitor Vida e Caffé will turn 15 this October and has more than 200 outlets in metro areas, 90 of which were opened in the past year.

CEO Darren Levy said the chain was still geographically skewed to the Western Cape, where it was established, but has aggressive espresso-based expansion plans in Gauteng and KwaZulu-Natal.

Although four stores in Gauteng had closed in the past year — the result of breaching trading performance levels — the aggressive rollout strategy remains unchanged.

“We opened at Vaal Mall, south of Johannesburg, and we’re opening at Clearwater Mall on the West Rand this month or in May, so there’s a full pipeline of stores for the year ahead,” said Levy.

The expansion strategy included other African countries, and Vida was committed to maintaining stores in high-profile areas where it did not believe there were alternatives.

“It protects the brand and keeps distribution and coverage at required levels.”

Despite the closure of the four stores, including in Parktown North in Johannesburg, Levy said thanks to its existing footprint there was “disproportionate opportunity” to reopen stores in the northern suburbs of Johannesburg, as well as in Pretoria, the northern suburbs of Cape Town and in Durban.

High-street or mall stores are not the only route — Levy said Vida’s partnership with Shell for forecourt stores had been successful, as well as its strategy to open outlets in corporate head offices, such as at Foschini and Standard Bank.

“We’re opening some niche stores in that environment. It gives you some idea of the scale of growth for the business.”