Starbucks’ new Brazil operator targets 1,000 locations in aggressive expansion

BRAZILIAN restaurant operator Zamp is looking to expand Starbucks’ presence in the country to 1,000 locations – a nearly ten-fold increase from today.

Zamp, which is backed by Mubadala Capital, sees the aggressive expansion starting in about two years, according to a source familiar with the matter who asked not to be named discussing private information. While the timeline for the recently acquired business still is not exact, the company sees it as a mid-term target, the source said. The strategy will focus on big cities and their airports, including Rio de Janeiro and Sao Paulo, where robust demand is anticipated, and Zamp is looking at different store sizes.

The company, which also operates Popeyes and Burger King restaurants in Brazil, agreed to purchase the Starbucks rights from SouthRock Capital for 120 million reais (S$28.3 million) in June after SouthRock lost its license with Starbucks amid bankruptcy proceedings. SouthRock closed almost a third of its Starbucks locations before it exited the business, arguing its operations were hobbled by high inflation and interest rates coming out of the pandemic.

Zamp’s plans would build out a Starbucks presence that is still relatively small. Starbucks, which works with third-party operators in Latin America, Europe and some other regions, reported having 128 licensed Brazil stores in its most recent quarter, compared with 850 in Mexico, 609 in Indonesia and 1,937 in South Korea.

Mubadala, which is a unit of Abu Dhabi’s sovereign wealth fund, took control of Zamp in February. Since then, Zamp has moved aggressively to acquire popular international food franchises in Latin America’s largest economy. Earlier this week, it agreed to operate the Subway brand in Brazil. It’s looking for more fast-food opportunities in the region, according to the source.

Zamp’s share have fallen about 27 per cent since Mubadala took control of the firm in late February, in part due to investor concerns related to its exit from the Novo Mercado segment of Sao Paulo’s stock exchange. Companies trading on the Novo Mercado segment have more stringent disclosure and governance requirements. Zamp’s chief executive officer and co-founder also exited earlier this year.

The company is looking to grow aggressively following an investment of about US$200 million earlier this year from Affinity Partners – the private equity firm founded by Jared Kushner – into Mubadala. Part of the funding is earmarked for Zamp expansion.

Representatives for Zamp did not respond to a request for comment. Starbucks said it did not have any comment on its conversations with Zamp.

Starbucks has said it seeks to expand its global store footprint to 55,000, compared with nearly 40,000 today. However, the company’s operations are in flux following the surprise appointment last month of Brian Niccol as CEO and the abrupt departure of his predecessor following two-quarters of slumping sales. Niccol, who gained prominence for engineering a turnaround for burrito chain Chipotle Mexican Grill, arrived at Starbucks last week and has started to outline his strategy and make changes to management. BLOOMBERG