Why Starbucks Failed In Australia

Summary

The script discusses Starbucks' struggle in Australia, a market known for its tough entry and coffee culture. Despite a rapid expansion in 2000, the brand closed two-thirds of its stores in 2008 due to a lack of consumer interest and competition from local cafés. Starbucks' basic menu and high prices were out of sync with Australian tastes, favoring specialty coffees and a more personal café experience. In contrast, Gloria Jean's Coffees succeeded by adapting to local preferences. Starbucks plans a strategic return, focusing on familiarizing tourists and students with its brand in popular Australian destinations.

Takeaways

• 🌏 Starbucks has a global presence with over 28,000 locations across 76 markets, but faces challenges in certain regions like Australia.
• 📉 In 2008, Starbucks closed more than two-thirds of its cafes in Australia due to difficulties in entering the market.
• 🏙️ Starbucks' rapid expansion in Australia without allowing time for consumer adoption led to its downfall.
• 📈 The Australian coffee market is highly competitive and successful, with the industry expected to surpass six billion dollars in revenue in 2018.
• 🇦🇺 Australians have a deep-rooted coffee culture, influenced by Italian and Greek immigrants since the mid-1900s.
• ☕ Australian consumers prefer specialty coffee menus, including 'Flat Whites' and Australian macchiatos, which Starbucks did not offer.
• 💸 Starbucks faced financial struggles in Australia, accumulating losses of 105 million dollars in its first seven years.
• 📉 The financial crisis of 2008 exacerbated Starbucks' situation, leading to the closure of 61 Australian and 600 underperforming American cafes.
• 🏆 An American coffee company, Gloria Jean’s, succeeded in Australia by adapting to local tastes and offering a variety of espresso-based beverages.
• 🇮🇹 Starbucks is cautious about its expansion into Italy, known for its rich coffee culture, by opening a roastery to showcase the coffee-making process.
• 🔄 Starbucks plans a strategic re-entry into the Australian market by targeting tourists, particularly Chinese and American, who seek familiar brands.

Q & A

How many Starbucks locations are there worldwide?

There are more than 28,000 Starbucks locations around the world.

In which year did Starbucks open its first Australian cafe?

Starbucks opened its first Australian cafe in Sydney in July 2000.

What was the rapid expansion strategy of Starbucks in Australia?

Starbucks tried to expand the company very quickly, opening multiple locations rapidly instead of slowly integrating into the Australian market.

Why did Starbucks fail to gain popularity in Australia?

Starbucks failed to adapt to Australian coffee culture and preferences, offering a basic menu with many sugary drinks, which did not appeal to Australians.

How many Starbucks cafes did Starbucks close in Australia in 2008?

In 2008, Starbucks announced the closure of 61 cafes in Australia.

What was the financial situation of Starbucks in Australia in its first seven years?

Starbucks accumulated 105 million dollars in losses during its first seven years in Australia.

How did the Australian coffee market differ from Starbucks' approach?

The Australian coffee market is known for its sophisticated tastes and preference for espresso-based drinks, unlike Starbucks' basic menu and sugary offerings.

Why did Australians prefer local cafes over Starbucks?

Australians preferred to pay less for their coffee at local cafes they trusted, rather than the more expensive Starbucks.

Which American coffee company succeeded in Australia where Starbucks failed?

Gloria Jean’s, an American coffee company that adapted its menu to Australian tastes and culture, succeeded in Australia with over 400 locations.

What is Starbucks' strategy for its return to Australia?

Starbucks plans to focus on locations that cater to international tourists, particularly Chinese and American tourists, providing a familiar brand for visitors to recognized destinations in Australia.

What is the significance of Starbucks' new approach in Australia considering the tourist market?

Australia is a popular tourist destination with a large number of international visitors, including students, who spent over 30 billion dollars in 2017. This presents an opportunity for Starbucks to avoid past mistakes and cater to a familiar market.