Starbucks entered the Australian market in July 2000. At its peak, it had a total of 81 stores nation wide. Now it’s stores have been reduced to just 23 and out of the 4 outlets in Canberra, there is not one store left for the Canberra population.
I have read John Simmon’s book: My Sister’s a Barista: How they made Starbucks a home away from home and from reading it, you get the impression that Starbucks could do no wrong; their business model is almost flawless and can only grow from strength to strength.
The book was published in 2005 and a lot has happened since then. There is no doubt that Starbucks is an incredible story of innovation, niche markets and successful chain operations.
Something happened in Australia though. I didn’t quite work out. If McDonalds, KFC, Subway, Dominos are anything to go by then it couldn’t have failed. Somehow it did. Enough talk, here is what I think happened.
Starbucks arrived in America at a great time. The 90s was a decade of fast growth for globalisation. The American coffee industry at the time was in need of improvement in quality and product. When you watch repeats of the TV show: Friends, what you would mostly see is that black stuff in a glass container being poured into coffee cups. What is that? McDonalds in Australia used to sell coffee that way about 10 years ago. If you watch enough American movies and television shows it seems as though espresso machines have been boycotted and electronic filter drips are the only machines offered to consumers.
- America drank crap coffee, not even espresso.
- Starbucks came and sold espresso.
- Americans realised espresso tasted about 100% better than drip coffee.
- Starbucks started opening heaps of stores.
- Americans noticed that Starbucks was everywhere so they decided it was good (if a store is everywhere it has to be good).
- Starbucks was a success.
- Starbucks were aware of what McDonalds and Coke did to conquer the world so they started devising their own plan which basically consisted of: opening stores all over the world.
- Starbucks comes to Australia in the year 2000.
Unbeatable combination. Quality assurance and consistency in all the stores, arabica coffee beans ground on demand, espresso coffee competing with drip filter coffee for around the same price. What could go wrong?
Here’s how Australia was (and is) different to America when it comes to coffee. Australia had a culture and appreciation for coffee for many decades before Starbucks appeared. While Australia is heavily influenced by English culture, people still enjoy and consume coffee as much as tea. The European immigration (particulalry the Italian) was responsible for Australians experiencing European cuisine and customs. In other words, we had espresso machines in operation here, long before international chain stores started opening.
Australians like strong coffee, whether it’s a long black, macchiatto, short black or flat white. They all contain a shot of strong tasting coffee and small quantities pack a strong punch – well at least till 11am.
Starbucks came into the Australian coffee industry without customising their product for Aussie market, same menu, same size (apparently they’re even bigger in US), same price. Two things alarmed me when comparing Starbucks to independent cafe equivalents.
- The sizes of the cups at starbucks look like they’ve all been supersized
- The coffee is way weak in taste.
I attributed observation number 2 to being linked with number 1 – larger cups means more milk, meaning weaker taste. The staff at Starbucks once corrected me saying that as the sizes increase, so does the amount of coffee that goes into the cup so the taste should be consistent.
The smallest size cup at Starbucks is called “TALL”. It takes a long time to drink (similar to what schooner drinkers go through when ordering a pint at an Irish pub). The quick coffee break turns into a mini marathon/drinking competition.
I was disappointed with Starbucks coffee early on. The quality wasn’t good, the service wasn’t as comforting as local cafes and the price didn’t justify the product. Australians soon realised that Starbucks was similar to McDonalds (of the 90s) – fast food, average quality.
People started going back to their independent coffee outlets for their energy charge. Places where the staff knew what you drank and could estimate what time you’d get there every day to place an order. Places where the espresso operators would practise in their free time to enter in national barista competitions.
I think Starbucks would have been a bit surprised to see its stores do it hard here. Many people abroad think we’d have the same culture and therefore characteristics as American consumers. Gloria Jeans have set up a similar styled operation to Starbucks here and it seems they have been more successful. I actually don’t mind their coffee, it’s somewhat consistent and they use a high percentage of rainforest alliance beans. Their coffee sizes are parallel to the Australian standards. Maybe they understood the market a bit better.
I put it down to quality, price, branding and perception. Starbucks prices weren’t too bad, although you did feel like you were paying top dollar for medium level quality and experience. Perhaps one day Starbucks comes back better and stronger to address the Australian coffee market. I’m just glad that coffees in Australia have improved greatly from what they were 9 years ago. Even McDonalds trains baristas nowadays. Donut King have a special royal bean – and pretty great coffee for a chain store.
Not wanting to be too hard on Starbucks, it serves a lesson for all international coroporations to never underestimate a foreign market.