STARBUCKS SA: Fresh Connections Fill Starbucks with New Confidence in SA

South Africa is home to two of the greatest Starbucks baristas in the world. Cape Town’s Phuti Mmotla was crowned the EMEA champion for 2022 in the company’s standout coffee challenge, held in Milan. In 2019, Durban’s Teddy Nzama scooped the same award at a competition in London. The annual competition is held to demonstrate innovation and creativity in the coffee game, with ten of the world’s best coming together at iconic locations to compete for the prestigious award.

Starbucks in South Africa has been a beacon of hope in the country since Rand Capital Coffee took the brand and began brewing something special. The symbol, recognised worldwide as an emblem of coffee and business excellence, is now growing strongly in South Africa and is providing opportunities for its people as well as the communities in which it operates.

For Mmotla and Nzama, without Starbucks, there would be no world-conquering success and South Africa would not have been put on the map as a coffee destination.

“It is extremely rewarding and is proof of what Starbucks can create for these guys,” says Adrian Maizey, Director of Rand Capital Coffee (the holdings company behind the brand in South Africa).

In 2019, as Nzama, of the Florida Road store in Durban, claimed his title, Rand Capital Coffee was busy cooking up its move for Starbucks.

“When we took over the business in December 2019, there were 13 stores and we closed one, so we started with 12 stores,” says Maizey.

At the time, the brand was stagnant and new store growth had been slow. Maizey and team quickly went about revitalising the culture in the business and aimed for the perfect blend of scale and sustainability. However, achieving success with a major restaurant brand in a time of lockdowns and restrictions on movement is not easy. Learning of the Covid-19 pandemic, just as the company started to roll out its Starbucks plan, left a bitter taste.

“We purchased the business and then went straight into Covid – we have only ever been in survival mode,” he says. “At the same time, we have been growing. So, to get to this point, we are proud of that. Growing with the people around us is the fun part.”

Today, Starbucks South Africa has 600 people alongside its international barista champions, with a group of seasoned leaders at the helm. More than 60 stores across the country make the business a powerful player. South Africans can experience the world-famous hospitality of Starbucks, which doesn’t always compete against other coffee shops – instead it rivals customer experience businesses – creating a space between home and work for people to relax and engage. Globally, the vision for Starbucks, right from the start has been to become a company that celebrated coffee but also connection.

SOUTH AFRICAN

With 32,000 in 80 countries, Africa is the last global geography that remains relatively untapped. When Rand Capital Coffee took the brand, even through the pandemic, the goal has been to capitalise.

“We’ve been very busy and we grew tremendously during Covid with most stores built in the last two years, and the first nine months of our ownership being in hard lockdown. 2021 was a very tough year for South Africa on the Covid front with omicron coming around in December – that knocked the legs out from underneath the entire economy,” remembers Maizey, adding that human capital flight and a general slowdown in spending ensued.

“Even so, things have been hectic from a growth perspective and we have been aggressive. We are pro Africa and we hold a long view on South Africa. We believe in its future and we saw an opportunity to put money in while everyone else was hedging or withdrawing.”

This deliberate optimism has helped accelerate growth from four store opening per year between 2016 and 2019, to more than 16 per year between 2019 and now. Retail Capital Coffee is, according to Maizey, “laser focused on Starbucks South Africa” with no distractions. There is no competing interest, and South African success is the driver of every decision.

“We deal with our own money, we are not a publicly listed entity,” reminds Maizey. “We are true owners and operators, and we have all of our skin in the game. That means the incentives are quite different. We have really done everything we can to ensure the business gets on the right footing and is successful.”

As customers sit in stores, sipping warming espresso or cooling with an iced caramel macchiato, much of the news that hits the smartphone is difficult reading – economic and political meltdown and more. But even in such an environment, where the most innovative and long-standing businesses, are challenged, Starbucks blossoms. Like Nzama and Mmotla, the company is making the most of the opportunities afforded by this famous brand.

“As South Africans, we want to showcase to the world what we can do in what has been a distressed period and scenario,” smiles Maizey. “Our ability to get through that, while many competitors have not been growing, highlights our vision of South Africa. We are taking a long-term view on SA, and it has meaning for us. We have huge support from Starbucks, but this is local South Africans making things work to build something special in a country that, at this point, requires good news. We want to build an oasis in what is a bit of a desert, where people can grow and mature and develop while being best-in-class and world class. We are against a backdrop of lacking water, lacking power, lacking governance, lacking infrastructure, and we want to be a seed that starts to turn things around.”

STRONG RECIPE

Like the coffee its baristas lovingly prepare, Starbucks takes the best of the world in its continued rollout in South Africa. The relaxing environment of Mmotla’s store in the V&A Waterfront is similar to what would be found in London or New York City. The laid-back style of the Florida Road store is like what you’d find in Paris or Milan, and the modern design of the Rosebank store is akin to that of a Los Angeles corner-block site. But delivery of world-class is not easy.

“In our minds, it was necessary to bring scale to the business and that was complex,” admits Maizey. “You might think it’s ‘only selling coffee’ but there are so many moving parts that go into Starbucks. The number of products that we sell dwarf any of the competition. All of that product is effectively imported so you need a sophisticated infrastructure to handle those products, which expire, from Europe, Asia, and America into southern Africa.”

This distribution challenge is a long-term dilemma that must be navigated correctly, with carefully considered back up plans. Many international businesses coming into Africa through South Africa underestimate the size of the task that is scale on the continent.

“The distance to market is a challenge – we are very far away,” says Maizey. “No one appreciates how large Africa is and we have to import all the way to the southern tip of the continent and then distribute across South Africa, which is larger than France, Spain, and Germany combined. That is a real challenge.”

But the company’s nimble approach and focus on success has allowed it to jump quickly when faced with hurdles. An ambitious culture installed by Rand Capital Coffee, as well as a strategy of brand partnerships to position Starbucks in front of customers, has helped propel the company forward. Now, Maizey and team are concentrating on managing the company through an extended period of development while building out infrastructure to ensure the business is sustainable.

“Looking forward, we are all about managing growth and people. We have moved from a small business to a turnaround business, to now being a mid-sized business which is more difficult. It is often lost at how difficult it is to scale a business of this type. You have to build in a system of checks and balances, and controls, that are not easily replicated without a franchisee. We have to rally a group of 600 people, in a restaurant business, dispersed round a very large country, while managing a team that was still there when the business was just 12 stores. Those growing pains and the maturity going from entrepreneur-owner operator to midsized company is now our big challenge,” he says.

Providing something sustainable for South Africa, and for the people working hard every day in Starbucks, is what warms Maizey. His vision is not to leverage the brand and then sit back while the coffee grinds.

“I get a lot of pleasure from the opening of new stores and the growth and stability that we create for our colleagues to operate in. The ability to create a going concern, on a stable base, that is a viable successful business, with nice stores that our people are proud of, that sells great products – those are the things that make you happy,” he says. “Our goal is to build something really special that is self-sustaining and can reward those in the system to be themselves.”  

PART OF THE ECO SYSTEM

With weak expectations for growth in developed markets, many large corporations are looking for growth in new regions. IMF predictions highlight sub-Saharan Africa as a region expected to grow by 3.7% in 2023, notably lower than the area’s strong performance of the past, but positive considering the inflationary pressure and socioeconomic uncertainty that continues to bite in global markets.

Some African nations are projected to grow at more than 5% – Rwanda, Benin, DRC, Côte d’Ivoire, Ethiopia, the Gambia, Mali, Niger, Rwanda, Senegal, Togo, and Uganda all have decent outlook, and this is encouraging for those looking to build a continental presence.

By investing while others are cautious, Starbucks will take advantage of every sign of potential and every hint of opportunity. In January, the company relaunched its ever-popular Oat Lattes in the EMEA region with the Honey Hazelnut Oat Latte and Caramelised Macadamia Oat Latte at the top of the menu board. Brining the best to SA, Rand Capital Coffee affirms its long-term vision.

“Dovetailing with being a successful and sustainable business, getting to scale so that we are significant in the market, for Starbucks global, we want to be a prominent and successful part of that eco-system. We want to show up at a level that no other region can show up at. There are very important and successful regions within Starbucks global and we aspire to be one of the top performing regions. We believe that we can show a ‘wow’ for South Africa – given all of its headwinds, we have been able to build a successful business that is far removed from where it was. Even when we obtain our stock, we were not on an equal playing field with everyone else, but to still succeed is the goal,” says Maizey, concluding by stating that the dream is for 500 stores to be built locally, and 1000 across southern Africa in the next decade.

“We have a plan to get there and we have full belief that we can get there. At that point, we believe we would be a real relevant part of the eco-system that is Starbucks Corporation,” he smiles.

When Phuti Mmotla won his title as the best barista across all of EMEA, he was the recipient of a ticket to Rwanda to take part in the Starbucks Origin Experience, visiting coffee farms and learning more about the journey from plant to cup. As the company and brand grows in southern Africa, perhaps the region can be further etched into the map, following the example of Mmotla and Nzama, becoming recognised as a powerful force for good.