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Johannesburg – Starbucks South Africa subsidiary owner, Taste Holdings [JSE:TAS], is focusing on delivering a “quality” Starbucks experience and is in not going to add any “pressure” on itself to churn out more Starbucks stores for the time being.
This is according to Taste Holdings CEO Carlo Gonzaga, who was speaking at the recent FNB Franchise Summit held at Montecasino. He shared on the progress of the two Starbucks outlets, in Rosebank and Midrand, since being launched in April 2016.
“The path to breakeven in Starbucks is not far off. We need four or five stores to get to breakeven,” he said. There are unofficially three Starbucks stores in South Africa. The third is the canteen at Taste Holdings. “It’s the most expensive canteen in the world,” quipped Gonzaga. The canteen was built to incorporate the Starbucks culture in the group.
“It’s all about establishing a cultural fit,” said Gonzaga. Taste Holdings “courted” the coffee company for two years before obtaining the licence. “You need to have a cultural fit, it’s the only way to have a share of value that is sustainable,” he said.
READ: 10 things you need to know about Starbucks
“South Africans are net beneficiaries from bringing in international brands like Starbucks and Domino’s Pizza,” said Gonzaga. He explained that South African companies benefit from the exchange of knowledge and training. For example, Gonzaga said his team worked with designers from Starbucks and were exposed to training they otherwise would not have been.
No ice in Winter
Since launching, one of the challenges was keeping up with demand for the frappuccinos. Both the Rosebank and Midrand stores ran out of ice in Winter, so to speak. Gonzaga explained that during the school holidays the demand for frappuccinos was so high that that the machine, with a capacity of 400kg of ice, was “flattened”.
Starbucks South Africa has been getting advice from stores in Miami, where the demands for ice drinks are just as high.
Taste Holdings also had to deal with a downturn in its share price earlier in the year. “We had to choose to deny the opportunity to give shareholders the benefit of the work put in, or to stay listed and deal with the pain,” said Gonzaga. “We are certainly dealing with it, the share price fell materially.”
READ: Investors ditch Starbucks SA owner amid profit slump
Gonzaga said the decision to stay listed was not made based on the short term. He explained that starting a business takes time. He made reference to Scooters Pizza which took six years before it started showing profit.
AUDIO: What Taste Holdings looks out for when acquiring a franchise
Coffee is complex
“Coffee is complex, it is a wonderful journey filled with people,” he said. What sets Starbucks apart is that coffee is “theatre”. “It’s not a push button approach. A lot of work goes into making coffee,” he said, referring to the Reserve Bar where patrons can engage in a coffee tasting experience.
When visiting stores in Singapore, Gonzaga said that he noticed crowds of teenagers at stores doing homework. He wanted to establish that same “third place” culture in South Africa. To do that the store offers Wifi, about 140G of Wifi is used daily over the store’s network. “Wifi should be part of the bill of rights,” he said.
He also explained that the furniture was loose, so that people could move things around, and feel like the store was their space. “It should be a place for people to express themselves,” he said.
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