Starbucks, the coffee giant from Seattle, has its presence in over 76 markets across the world. You can spot their outlets almost everywhere. From Shanghai to Guantanamo Bay to the small hidden countries, Starbucks is literally everywhere and has been unanimously loved by the audiences. But there is one market which the coffee corporation failed to capture. That place is Australia.
Despite Australia's deep affection for coffee, the US-based chain didn't find the amount of success it did in other countries. Starbucks opened up in the continent in 2000 and by 2008 it had already opened up 90 outlets. Now to a layman, this would seem like massive success. The issue was that Starbucks was moving too rapidly, and was growing faster than its actual popularity amongst the masses. The Australian market is also known to be one of the toughest markets to break into. So tough, that Starbucks had to literally shut more than 2/3rd of its stores back in 2008.
So what went so wrong with Starbucks in Australia? Let’s hop into it.
In July of 2000, Starbucks opened up its first store in Sydney. From there, it amplified fast. By 2008, Starbucks had 87 outlets across the region. However, this growth rate was short lived.
No attention to product differentiation and optimization
Firstly, much attention wasn’t stated to product specialization from their side. In brief, they tried to chance upon what worked for them back home, and tried the same in Australia. Sadly for Starbucks, what worked in the US was harsh, frail coffee supplemented by massive quantities of milk and saccharine syrups. That was less of coffee, and more of smoothies which were coffee based. For the consumers in Australia who were raised on a real espresso diet, it was equivalent to simple sugary drinks.
Too rapid growth
Starbucks launched way too many stores concurrently while setting shop in the region. The thing was that this rapid growth didn’t give the Australian audience a chance to really grow a palate for what the brand had to offer. The coffee chain was way too available for consumers in the continent, and their extension as a result was a non-organic one.
Australia’s massive coffee market
Australians are spoilt for options when it comes to caffeine. The Australian coffee market is one of the biggest in the world. They’ve had a café culture since the mid 1900s when the Italian and Greek immigrants started travelling to the continent. They instituted Australians with Espresso. Further, Aussies have also grown accustomed to specialty menu products., like the flat white or an Australian Macchiato which are amongst fan favourites. Australians also indulge in the art of coffee making by enrolling in special workshops which only goes on to prove how seriously they take their coffee. A majority of Australians also like having their morning coffee with their comrade Baristas where they can indulge in conversations about the everyday life.
Crisis of 2008
The financial crisis was a heavy blow and affected the masses. Starbucks entered the year 2008 with hefty wounds. As a result of which, the number of outlets in Australia went down to 26.
Taste and preferences/ Expensive
Starbucks didn't go too well with the Australian palate. The company served sweeter coffee options which the Australians did not enjoy, all the while charging way more than the local coffee chains. Starbucks did not feel like equating the prices with those of the local Baristas to maintain a certain brand name which only ended in them losing out on customers.
Composed lifestyle and a sheer love for communication are what differentiate Australians. Citizens of the country, love going to their local coffee chains as it makes them feel closer to their community. A lot of locals saw this as a western attack on their culture.
Starbucks gathered $105 million in losses in its first seven years in the continent which forced the company to close around 60 locations.
But the Seattle-based chain hasn't given up just yet in Australia. Since the 2008 crises and closures, the organization has been steadily opening up more outlets in the country and making their presence felt.
As of today, there are around 40 locations in parts of Melbourne, Sydney, Brisbane, Gold Coast and more cities. The reason for their comeback is surely the shift in their target market. Starbucks in Australia now caters to the tourists who visit the country, and that is what is really working for them. By decelerating its growth while catering more to tourists, Starbucks may have found a formula for success down south.
This article is based on a report and video released by CNBC.
By Rohan Chaturvedi