Starbucks SA sold as Taste Holdings exits food business
Taste Holdings has been burned by Starbucks coffee. The retailer announced in November 2019 that it would be selling the Starbucks franchise for R7-million.
From licencing fees, to recapitalisation and loans, it is estimated that Taste spent over R1.4-billion trying to keep Starbucks afloat. The company said it would cost at least R700-million more to reach positive cash flow, and that Starbucks would need to expand to up to 200 cafes to become profitable.
Taste now says it is exiting the food business completely as it takes a new strategic direction, this includes selling its Domino’s pizza franchises as well.
It is being bought by a consortium of shareholders, including Rand Group, which is owned by Adrian Maizey, a non-executive director of Taste.
There are currently 13 Starbucks stores in Johannesburg, Pretoria and Durban. Taste opened the first Starbucks store to wild excitement in Rosebank, Joburg, in 2016.
Taste also plans to sell its other food brands – including Domino’s Pizza, Maxi’s and The Fish & Chips Co – after the company calculated that it would need at least R700m to generate a positive cash flow from these businesses.
According to a statement, the Starbucks network would need to expand to between 150 and 200 cafés and Domino’s to between 220 and 280 restaurants.
“After careful consideration, following months of operational reviews and canvassing potential partners and capital providers on this long-term objective, it has become evident that the capital investment required for this expansion strategy cannot be secured, given the current structure of the business and existing market conditions,” Taste said in a statement in November 2019.
Following the deals, Taste will focus on its jewellery retailers NWJ, Arthur Kaplan and World’s Finest Watches.
Taste has been battling a large debt burden and cash flow issues over the past few years.