JSE-listed Taste Holdings expects its Starbucks Coffee Company outlets in South Africa to grow from a conservative market opportunity of more than 150 outlets, initially, to more than 200 outlets in five years, following market analysis.

“Despite this material market opportunity, Taste is, in the first 24 months, committed to launching the brand and all its elements; building human capacity through training for future growth and establishing a robust store unit economic model prior to capitalising on the full market opportunity,” the company noted in a statement on Wednesday.

Taste envisaged 12 to 15 outlets being built in the first 24 months after opening the first store, as scheduled, in the first half of 2016 in Gauteng. “Our initial indications are that product pricing will be aligned with that of current premium offerings in the South African market,” Taste advised.

The company added that the response from landlords and interest in careers with Taste had been unprecedented, with its first training facility expected to be operational in March 2016.

The company had announced on July 14 that a Taste subsidiary had signed an exclusive agreement to develop Starbucks outlets in South Africa.

Meanwhile, Taste released its trading statement for the six months ended August 31, expecting core earnings before interest, taxes, depreciation and amortisation (Ebitda) for the group of between R17-million and R18-million, down from the corresponding period’s R23.3-million. The food division’s core Ebitda was forecast to decline to between R7.5-million and R8.5-million from the R18.4-million reported for the six months ended August 31, 2014. In terms of luxury goods, core Ebitda was expected to be between R18.5-million and R19.5-million, up on the prior period’s R11.5-million.

The group’s core headline earnings were pegged at a loss of R500 000 to a gain of R1-million on 2014’s R8.8-million, with core headline earnings a share estimated at between -1c to 1c compared with 4.3c in the prior period.

With regard to launching and establishing the Starbucks brand in South Africa, Taste expected to incur one-off investment costs relating to the initial training and travel, and employment costs of a dedicated Starbucks team well in advance of the first store opening, which would be preceded by pre-opening marketing and market research and the establishment of information technology and other infrastructure.

“As with Domino’s, these costs will be excluded from core earnings and it is anticipated that the exclusion from core earnings will not be material beyond the year ended February 28, 2017,” Taste advised.

Core earnings excluded once-off costs and revenues, as well as Domino’s upfront costs. These costs related to the launch of the Domino’s brand in 2014; the establishment of dough production and food distribution facilities, including the temporary Domino’s ingredient subsidy as ingredient suppliers and specifications were localised; and the conversion of Scooters Pizza and St Elmo’s stores into Domino’s stores.

Taste estimated that this adjustment, in respect of Domino’s, would continue during the
current financial year, but would not be material to the group for the year ended February 28, 2017.

Taste's interim financial results were expected to be released on or about October 13.