India’s Tata faces pressure in Starbucks joint venture as consumers cut back

India’s Tata Consumer Products “will calibrate” its plans to open Starbucks stores in the near term at a time when fewer customers are walking into its cafes in the world’s most populous country, its top boss said on Monday.

City dwellers in India are cutting spending on everything from cookies and coffee to fast food as persistently high inflation squeezes middle class budgets, with wages failing to keep pace.

Tata Starbucks, a joint venture between US coffee brand Starbucks and the Indian conglomerate, operates the largest cafe chain in the country with more than 450 outlets. Starbucks has more than 40,000 stores globally.

“We will calibrate for the short term … In the near term there will be pressure,” Tata Consumer CEO Sunil D’Souza told Reuters, adding that its Tata Starbucks joint venture is still focused on reaching its 2028 goal to operate 1,000 stores by 2028.

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However, Tata Consumer’s CEO still expects its bet on coffee to pay off in the longer run as the country’s coffee culture grows and cafe density is still low compared with other Asian countries such as Indonesia, Vietnam and the Philippines.

Separately, D’Souza also said Tata Consumer’s revenue would increase in the double-digit percentage range in the second half of the financial year, with profit coming under pressure due to higher prices of raw materials, including tea.