Starbucks in Australia: A Case Study

Overview of Starbucks

• Starbucks has over 28,000 locations worldwide across 76 markets.
• Rapid expansion, particularly in China with a new store opening every 15 hours.
• Faced significant challenges in Australia, leading to major closures.

Initial Expansion in Australia

• 2000: Starbucks opened its first location in Sydney.
• Rapid expansion led to 87 stores by 2008.
• Key issue: Failure to adapt business model to Australian market.

Reasons for Struggles

• Speed of Expansion:
  • Opened too quickly without allowing local market to develop an appetite for the brand.
  • Entered regional and suburban areas, making Starbucks too common.
• Cultural Misalignment:
  • Australians are accustomed to a rich café culture, emphasizing local connections and quality.
  • Starbucks offered a basic menu with sugary drinks, not aligning with local tastes.
• Financial Losses:
  • $105 million in losses in the first seven years.
  • By 2007, accrued debts of $54 million.
  • 2008: Closed 61 stores amid financial struggles and market retreat.

Competitors in the Market

• Gloria Jeans:
  • Founded in Chicago, now thriving in Australia with over 400 locations.
  • Success attributed to adapting menu to local tastes and having a strong local presence.

Lessons Learned for Future Expansion

• Starbucks attempts to enter Italy with a new strategy:
  • Plans for a roastery to showcase coffee culture and roasting processes.
• Acknowledgment of past mistakes in Australia and focusing on cultural respect.

Current Status in Australia

• 2014: Starbucks locations in Australia purchased by Withers Group.
• New strategy: Target tourists rather than local consumers.
  • Focus on high-traffic tourist areas in cities like Brisbane, Melbourne, Gold Coast, and Sydney.
• Tourism statistics:
  • 9 million tourists visited Australia from 2017-2018.
  • International visitors spent over $30 billion in 2017.

Conclusion

• Starbucks is attempting a comeback in Australia by redefining its market strategy to cater to tourists, while learning from past mistakes.