Coffee giant Starbucks will open stores in sub-Saharan Africa for the first time next year after agreeing a deal with Taste Holdings on Tuesday, sending the South African company’s shares soaring 20 percent.
Under the exclusive agreement, Taste, which acquired the licence for Domino’s Pizza in South Africa last year, can operate Starbucks coffee shops for 25 years.
“We are proud to be bringing Starbucks to South Africa next year,” Starbucks EMEA President Kris Engskov said in a statement.
“The coffee market here is vibrant and growing fast – we want to be part of that growth,” Engskov said.
Starbucks operates in about 66 countries with over 22,000 retail stores.
The Starbucks deal includes rights to other African countries, Taste said, without giving specifics.
Starbucks currently sources coffee from nine African countries: Ethiopia, Rwanda, Tanzania, Uganda, Zambia, Cameroon, Burundi, Democratic Republic of Congo and Kenya.
Global restaurant brands are increasingly investing in Africa to tap into the continent’s growing middle class. U.S. coffee and doughnut chain Krispy Kreme said in May it will open 31 stores in South Africa within five years.
Investors are often drawn to South African companies who can offer a gateway into faster-growing economies elsewhere on the continent.
“It’s quite a big market in South Africa. We have got established players with lots of experience,” said Wayne McCurrie, portfolio manager at Momentum Wealth.
“Maybe more importantly, if Africa shows the growth potential over the next decade that everyone expects, then this is a good base to start from,” McCurrie added.
Shares in Taste hit a record high in the session and were up 19.9 percent at 5 rand per share, more than 56 percent year-to-date.