Overview
This transcript analyzes Starbucks' failed initial entry into the Australian market, contrasts it with local and competing coffee cultures, and examines current strategies aimed at attracting tourists and international visitors.
Starbucks' Expansion in Australia
- Starbucks opened its first Australian store in Sydney in July 2000.
- The company expanded too quickly, reaching 87 stores by 2008.
- Rapid growth led to lack of consumer appetite and over-saturation of locations.
- Starbucks did not adapt its model or menu to fit local tastes and cafe culture.
Causes of Failure
- Starbucks accumulated $105 million in losses during its first seven years in Australia.
- By 2007, the company relied on $54 million in loans from the U.S.
- In 2008, Starbucks closed 61 of its 87 Australian stores amid financial crisis and low demand.
- Australian consumers were indifferent to Starbucks' departure due to established local cafes.
Differences in Australian Coffee Culture
- Australia has a strong café culture introduced by Italian and Greek immigrants.
- Local consumers prefer sophisticated espresso-based drinks and personal relationships with baristas.
- Starbucks' American-style menu and larger, sugary drinks did not appeal to the market.
- Starbucks' higher prices compared to local cafes discouraged customers.
Competing Brands: Gloria Jean's Success
- Gloria Jean's adapted to local preferences, offering a wide variety of espresso drinks.
- The brand was franchised by Australians and entered the market earlier, contributing to its success.
- Gloria Jean's now has over 400 locations and serves 35 million customers annually in Australia.
Starbucks' New Strategy in Australia
- In 2014, Starbucks Australia was sold to the Withers Group, prompting a revised approach.
- The company now focuses on tourist-heavy locations in major cities and shopping malls.
- Target customers include U.S. and Chinese tourists, as well as international students.
Lessons for Future Markets
- Starbucks plans to enter the Italian market with local sensitivity, opening a roastery in Milan.
- The company aims to integrate more respectfully with Italian cafe culture to avoid past mistakes.
Decisions
- Refocus Australian operations on tourist and international student markets
- Adapt approach in Italy with humility and respect for local coffee traditions
Action Items
- Late 2018 – Starbucks: Open the first Italian store in Milan as a roastery.