Taste Holdings sells Starbucks franchise for a song after spending over a billion

By Kopano Gumbi, CNBC Africa reporter

South African franchisor Taste has been burned by Starbucks coffee. The retailer announced on Friday that it would be selling the Starbucks franchise for R7 million. According to its 2016 annual results, the flagship Rosebank store cost R8.3 million to build. They went on to build 12 more stores.

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 will be sold to a consortium including Rand Group Limited, which is controlled by a non-executive director of Taste Holdings.  The separation comes after years of struggling to operationalise the American coffee brand.

Rand Group’s Adrian Maizey that it will work with “Starbucks in this new capacity with a well-funded consortium of investors to help achieve the aggressive growth targets we have for the brand in South Africa”.

In response to the purchase Starbucks said “in partnership with Taste, we have opened 13 successful stores across 3 cities and this new relationship will provide the necessary capital to achieve our ambition of up to 200 stores.”

In 2018, Taste had to suspend the roll-out of stores after financial troubles in the group saw losses grow significantly. They did a rights offer in January 2018, were extended an additional line of credit by their American investor, Sean Riskowitz, and then did another capital raise of R132 million, by floating an additional two million ordinary shares at 10 cents each.


Partner Content

VIRTUAL VDJ EXPOSES LOCAL CREATIVE AND ENTERTAINMENT INDUSTRY

The City of eThekwini pulled out all stops to give fans of the annual Vodacom Durban July (VDJ). The Virtual Vodacom Durban...

GAUTRAIN – Why It Matters

Economic growth continues to be one of the focus areas for the Gauteng Provincial Government (GPG) and the Gautrain responds to that...

Tata International concludes a securitization transaction for its African Subsidiaries

UAE financial centers act as a gateway to benefit African businesses GCC, July 13th, 2020: Tata International Limited (TIL)...

Uber launches its largest region-wide initiative in partnership with Mastercard

Uber, in partnership with Mastercard to provide 120,000 free trips to frontline workers in MEA, including South Africa, Nigeria, Kenya, Ivory Coast...

Trending Now

Nigeria’s Okonjo-Iweala shares her vision for global trade

As the race for the top job at the World Trade Organisation heats up, Nigeria’s candidate for the position says part of her vision is to build a trade institution where there is greater trust among its members. Dr Ngozi Okonjo-Iweala further notes that at this critical time the WTO is needed to ensure that trade and global markets remain open. She joins CNBC Africa’s Godfrey Mutizwa and Kenneth Igbomor to share her plans for global trade....

Zimbabwean govt. continues crackdown on activists amid reports of torture

Silence descended on the streets of Bulawayo and central Harare in Zimbabwe on Friday, where businesses shut down. This is as Security Forces were deployed to prevent anti-government and anti-corruption protests, by opposition parties. A number of high-profile figures were arrested over the weekend. Dumisani Muleya, Chairperson of the Zimbabwe National Editors Forum joins CNBC Africa for more.

Redefining Africa’s Workforce Through Digital Transformation

Covid-19 has forced businesses globally to re-evaluate their business models and to adapt to new working environments....

Nigerian investors not surprised by Shoprite’s exit, here’s why

Releasing its trading update for the year ended 28 June 2020, Shoprite announced that it will be exiting from Nigeria.

Subscribe to our newsletter

Sign up for free newsletters and get more CNBC AFRICA delivered to your inbox

- Advertisement -