Taste Holdings has revealed its long-term costs and strategy with launching Starbucks in South Africa – including when the first store will open, and how many of them there will be.
Taste announced in July 2015 that it had secured the rights to open full-format Starbucks stores in South Africa. It’s the brand’s debut in Sub-Saharan Africa.
According to Taste, the first Starbucks will open up in “the first half of 2016”, and following the grand opening, 12 to 15 more stores will open over the next two years.
The group expects future store growth of 20 outlets per year.
Taste’s research into the market opportunity for the brand – taking costs into account – is for 150 to 200 stores in South Africa.
But it won’t stop there – Taste’s agreement with Starbucks has the group owning and operating the brand directly for the next 25 years, with certain rights for other African countries.
Taste has also revealed how much the Starbucks brand will cost to operate in the country.
The group lists first store opening, pre-opening marketing and market research and establishing IT and other infrastructure costs amounting to R29 million.
The next 12 to 15 stores will cost the group R108 million to set up – and subsequent outlets are pegged at between R3 million to R10 million.
This means that for a hypothetical 200 outlets, it could cost Taste as much as R2 billion.
However, the group expects the business to achieve Ebitda break-even during the second year of the first store opening, and has set a target ten year internal rate of return at store level of 30%.
Taste announce that it intends to raise up to R226.3 million by way of a renounceable rights offer to finance its Starbucks plans, among others.