Starbucks fall in Australian markets
Australia’s history with coffee and cafes
Australia’s coffee market is one of the biggest in the world. Since the mid-1900s, with the advent of Italian and Greek immigrants, Australians have been immersed in the caffeine culture. It was Italians who introduced Australia to the idea of Cafes which was more than just coffee. It was about the simple leisure of catching up with friends and knowing the local barista, a more human and authentic experience. Everyone was familiar with each other and the cafe being the local meeting point, the coffee was just the added incentive.
It was the immigrants only who introduced the locales to espresso. They also introduced Australia to several ‘special menu’ items like a Flat White or an Australian Macchiato. By the 1980s, Australians were fully engulfed in this caffeine culture.
About the relationship between Starbucks and Australia
Starbucks, North American’s one of the largest sources of caffeine, based in Seattle, has branches across the globe, in more than 28,000 locations and 76 markets. A new Starbucks store opens every 15 hours in China, but the hype over the biggest coffee brand in the world was not enough to take over Australia. Why? What went so wrong with Starbucks that it had to close more than two-thirds of its outlets in Australia?
- Underestimation of local baristas and Australians morals: In July 2000, Starbucks ventured into the continent with its first store in Sydney. It expanded like wildfire and there was no stopping for it. By 2008, Starbucks opened over 80 stores across Australia. It branded coffee as a high-end product/commodity in Australia with the American-style coffee culture, but on the other hand, the costs also went higher than their local barista of the local cafes. Australians opted to pay less for coffee and trusted their local barista over Starbucks.
When Starbucks left the Australian market, the retreat was quite embarrassing for the brand, with a large number of stores being shut down. The Australian customers did not care anyway. The reason for that indifference could be the plethora of choices that Australians enjoy when it comes to their beloved coffee.
2. Problems in adapting to foreign taste preferences: The sugary drinks that the basic Starbucks menu offered were also unpopular amongst the Australians. Also, Starbucks failed to understand the ethical relationships that many Australian already held for its pre-existing cafes. To accommodate a foreign brand within their taste buds turned out to be much harder than what Starbucks had expected. Starbucks just expected the Australians to greet it with the same enthusiasm as the Americans did — as they solely relied on the perception of a less ‘psychic distance’ between both the cultures.
It was not easy to survive there, Starbucks had to adapt and for that, it had to localize accordingly to the local environment and people which was neither easy nor very effective. It can be considered as their biggest pitfall. They thought that their business model would run smoothly and would not need any adjustments or modulations in it, but little did they know how opposite the picture and the truth was — almost stranger than fiction!
When Elvis Presley said, “Only fools rush in”, Was he talking about Starbucks in Australia?
Starbucks was no doubt a fool when it entered the Australian market, it was in a rush to expand and grow the empire too fast by rapidly opening up stores at multiple locations instead of slowly blending with the local market.
3. Rapid expansionism: With all the rush, Australian consumers could not get the opportunity to develop their taste for the Starbucks brand. It became a brand that was readily available for the consumers, hence, a feeling was never generated for their products. In the rush to expand, it slipped and couldn’t find its footing there, hence, its downfall.
Starbucks had not cared about promotions and advertisements when it entered Australia for it assumed its brand success beforehand and did not really pay any heed to develop sentiments for their brand which turned out to be a big mistake for them.
After the closure in 2008, the company realized the need to adapt to the local environment and people. Therefore, it is seen that Starbucks hasn’t completely given up on Australia. They are still looking for a recipe of success in Australia. It has slowed down its growth and is now trying to focus more on catering to the tourists that visit Australia.
Lessons that can be learned by their mistakes?
- Know your target market: Localisation is not restricted to just expansionism, one needs to understand the social cultures and sentiments of their customers and not just impose their brand upon their choices. Australians have always had a sentimental connection to their baristas and with the introduction of digitalisation that Starbucks exposed Australians to, this strategy wasn’t really appreciated. Australians love their traditional queues and to have a friendly relationship with the staff of a particular store. However, since Starbucks aims at providing faster coffee preparations services, none of the sentiments mentioned above was met by Starbucks
- Effective research: Had Starbucks taken out the time to search and understand the trends and preferences of the Australian markets (like Tesco or Ikeadoes before opening in any foreign land), the company could have saved its dollars, time and the huge embarrassment it stamped on itself. Also, adjusting the items it served on its menu (as none of the Australians liked or understood the concept of too sugary drinks or drinks such as green tea) in Australia would have been really beneficial for the brands' success.
In 2014, Starbucks store license was bought by the Withers family (who already own 7/11 stores) and have introduced Australians favourite- the ‘flat white’ in the market. As they understood the taste palette difference between Americans and Australians, they have been successful in thriving within the Australian markets.
By Geetanjali Mehta
Team Loc-N-Apps
for similar articles visit — locnapps.com/blogs
