Starbucks has reportedly hit the headlines for abandoning its ambitious expansion plans in South Africa. As per trusted sources, the coffee giant was set to take the country by storm after the opening of its first store located in Rosebank district, Johannesburg in 2016, which saw lots of customers queue up for hours to get the Starbucks’ experience.
A loyal customer stated that it seemed the store would run out of coffee before he could get a chance to taste it. He added that it was unbelievable to see how many people had actually shown up and although he loved choosing ingredients and hanging out at the café, the high prices always bothered him.
According to sources familiar with the matter, Taste Holdings, Starbucks’ local licensee had launched 12 cafes throughout Johannesburg, Durban, and Pretoria and aimed for 45 additional stores by 2020 with a target of 150 stores throughout the nation. Unfortunately, plans for further openings have been ruled out as the company is struggling with operational costs and debt, cite trusted sources.
Previously, Taste had announced plans to pause the expansion stating that although it is profitable to have a Starbucks store network, it is not producing enough returns required on store investment. Furthermore, in its financial report, the company mentioned that food division operating costs surged by 7 percent in the six months to August, owing to Starbucks’ operating costs doubling over the comparative period attributed to the additional eight stores.
Reportedly, Taste Holding’s entire food division including brands like Domino’s Pizza has struggled to make a profit since 2015 and had to be refinanced by stakeholders to pay off its debt.
The company also raised a $14 million loan from Riskowitz Value Fund, it’s current majority shareholder and may look for fresh refinancing in the coming years. However, the company remains optimistic and hopes to reconsider its Starbucks plans after securing long-term funding, Taste stated.