Why Starbucks Failed In Australia

Why Starbucks Failed In Australia


Starbucks has coffee shops all over the world There are more than 28,000 locations and 76 markets From Shanghai to Guantanamo Bay And in China, a new Starbucks location opens up every 15 hours But there is one continent that seems uninterested in the hype over the Seattle based coffee chain And that continent is Australia It’s proven to be one of the toughest markets in the world to break into So tough in fact, that Starbucks closed more than two-thirds of its stores on the continent back in 2008 So what went so wrong with Starbucks and Australia To answer that let’s go back to July of 2000 When Starbucks opened its first Australian shop in Sydney From there it expanded fast By 2008 Starbucks had 87 stores across the continent I think one of the problems with Starbucks and its true for a lot of businesses that have been successful in one country is that they thought that their business model could just roll out to a different environment and there was no need for them to adjust But that was the problem They tried to grow the Empire too fast Starbucks rapidly opened up multiple locations instead of slowly integrating them into the Australian market When they launched they launched too rapidly and didn’t give the Australian consumer an opportunity to really develop an appetite for the Starbucks brand They also moved into regional areas into outer suburbs of major cities And so for the Australian consumer it was almost like it was too available for them And so there wasn’t this point of difference, this want, this need for Starbucks And it wasn’t an organic growth which is what we very much saw in the US In its first 7 years in Australia, Starbucks accumulated $105 million in losses By 2007, Starbucks Australia was hanging on by a thread taking big loans from the US, totaling up to $54 million And in 2008, Starbucks announced it was shutting down 61 stores But of course 2008 was a difficult time for businesses due to the financial crisis Along with Australia closures, Starbucks also closed 600 underperforming American stores But even still such a retreat in Australia was embarrassing for the brand When you’re shutting down 75 stores For the Australian consumer when they, when they did leave the market or at least a large number of bestowals were shut down they didn’t really care It’s partly because Australians are spoiled for choice when it comes to coffee Australia’s coffee market is one of the biggest in the world the industry is expected to hit more than $6 billion in total revenue in 2018 They’ve been immersed in nuances of cafe culture since the mid 1900s when Italian and Greek immigrants began traveling to the country The immigrants introduced Australians to espresso By the 1980s, Australians were fully engulfed in cafe culture They’ve also grown accustomed to specialty menu items like a flat white or an Australian macchiato So cafes in Australia were born out of
like the Italian culture of, you know, meeting of friends and knowing your local barista and it being kind of like a local meeting place where everyone knew each other and that coffee was just a part of that and then Starbucks came in with what is more of an American style like coffee culture which is essentially just like coffee is a product, coffee is a commodity Coffee is like, like perk me up in the morning it’s caffeination Starbucks had a basic menu and offered more sugary drinks which most Australians didn’t like in Australia where, you know, local tastes are different So we don’t really want a coffee that’s, you know, hundreds of ounces with lots of sugar in it We want something a little more sophisticated Plus Starbucks charge more than local cafes So Australians instead opted to pay less for coffee they liked from a local barista they trusted And so when you come in with this big like hey, we’re going to open all these cafes And they’re all gonna be to go focus It just was the complete wrong market for what, what the Australian was used to But there is one American coffee company that’s thriving in Australia Founded in Chicago and now based in Australia Gloria Jean’s got the traction in Australia that Starbucks couldn’t Gloria Jean’s has more than 400 Australian locations And serves more than 35 million consumers in Australia each year So what is Gloria Jean’s doing in
Australia that Starbucks isn’t Well the company attributed to success to two Australians who franchised the business in their home country Shops started to show up in Australia in 1996 Fast forward to today, the company has a presence in every Australian state The reason? Its menu The chain offers a wide variety of espresso drinks and specialty coffee Failing to adapt its menu to Australians coffee culture proved to be a mistake for Starbucks And the company faces another challenge later this year Italy Starbucks is opening its first store in Milan in late 2018 home of the espresso, Italy is rich in cafe culture But according to Starbucks it’s not
going to make the same mistakes that it did in Australia The company said that it would develop in Italy with humility and respect for its coffee culture It announced it would be opening a roastery which is not your average cafe It gives customers a chance to see coffee beans roasted and processed before their eyes So there’s a chance that it won’t struggle like it did in Australia But Starbucks isn’t admitting defeat in Australia either Starbucks is staging a comeback on the continent In 2014, Starbucks locations in Australia were purchased by the Mount Waverley base withers group Starbucks told CNBC that since its sale to the withers group the company learned a lot So this time it’s taking a different approach to putting Starbucks on the continent So if you just think about Australia as a big tourist destination There’s a lot of U.S. and Chinese tourists Starbucks has been very successful in China and it makes a lot of sense for
them to build out because there are people looking for something that’s familiar to them Now with 39 locations in Brisbane, Melbourne, the Gold Coast, and Sydney areas this time it’s not looking to appeal to Australians but instead the coffee giant hopes to be a familiar face for tourists visiting popular vacation destinations in Australia free Australia has always been a high-volume tourist market The same thing in terms of international students at our universities are potential opportunities for them And we’re starting to see Starbucks
enter into some large shopping malls here in Australia as well Australia welcomed 9 million tourists from 2017 and 2018 And those international visitors spent more than $30 billion in 2017 alone So tourists could possibly be the key to keeping the company afloat and preventing another downfall Hey there, thanks for checking out CNBC
on YouTube be sure to subscribe to stay up-to-date on all of the day’s biggest stories You can also click on any of the videos around me to watch the latest from CNBC Thanks for watching

You May Also Like

About the Author: Oren Garnes

100 Comments

  1. Starbucks I think will do well in cold climates where a cup of hot coffee would be cozy. Australia is such a hot arid desert environment that I think coffee would not do well. Just my intuition

  2. Australians drink espresso or black coffee it seems. Starbucks is about whipped cream and sugar and lots of flavors. It just did not appeal to Australian tastes.

  3. I live in the Southern Highlands south of Sydney which is very popular with tourists (both Australian and overseas) and we have 100+ coffee shops in the area (including one Gloria Jeans). On a busy day you can fight for a seat in one of the local coffee shops or go to Gloria Jeans which is invariably less than half full, most of the customers being kids rather than adults. I think Starbucks just served poor quality coffee which was bitter and had to be loaded with sugar, creamy froth and every other sweet garbage to give it anything like a reasonably decent taste. We tend to use coffee beans from Australia, Papua New Guinea or South Africa which are not as bitter as South American coffee beans and, more importantly, our baristas know how to make a decent cup of coffee for a fair price. Just so I could say I'd been there, I went to the first Starbucks in Seattle and I'll never get the half hour of my life back waiting in line for probably the worst cup of coffee I'd had for years. It's not hard to see whey Starbucks failed in Australia – we know what a good cup of coffee is, we have a good choice of coffee styles/tastes and the price we pay reflects the quality we receive when ordering a coffee.

  4. I mean Starbucks is getting popular again in Australia especially in Sydney because of the younger generation we are one of the main reasons why Starbucks is on the rise again.

  5. I don't like Starbucks they over price there stuff all you need is whipped cream and coffee then you can make any of those over priced drinks you want without a long line

  6. The coffee used in Starbucks is the residue of many cheap beans !!! visit Colombia and you will never have coffee from Starbucks

  7. I think the main reason which has kept Stuckbuck survive in Australia is that they just focus their business on the travellers and international students, especially Asian students.

  8. I'm an ex-pat from the USA living in Australia, now in my 15th year. 15 years ago it was tough to find a good cup of coffee in regional Australia. That's changed dramatically. Aussies get it. When we visit back in the USA, and we have a home in Seattle, it's almost impossible to find a cup of coffee as good as we have in Australia.

  9. USA here…. i cant wait to see Starbucks trying to sell burnt bean sugar water to the Itailians…… i will be on the floor laughing !!!!

  10. the exact same happened in New Zealand the entire Starbucks NZ franchise was sold for 1milllion dollars the coffee in new Zealand is also amazing and we have the same cafe culture, NZ and Australia are coffee snobs Starbucks would never last.

  11. We called it charbucks where I lived (in america), my dad and I only went there when we had a hankering for burnt beans or needed a place to sit quietly and use wifi. It's much better in Korea but still not superior to the hundreds of coffee shops in a 5 mile radius that care about what they serve.

  12. Internet: makes fun of cafe culture where there are 5000 types of coffee
    Also Internet: Starbucks failed because it didn't offer much variety

  13. Starbucks is for tourists. Aussies know what good coffee is hence why we dont waste our time or money on starbucks.

  14. Americans can't make coffee. Ask for my money back in Carmel near San Fran. Been all over the world and have never had worse coffee than in America. Dishwater in a milkshake container. Your kidding.

  15. American companies never adapt to local markets. This is a massive mistake.
    McDonalds are still trying to put pickles on their crap burgers. Horrible

  16. Is this old or something? Starbucks are all over here now and there have been a few more open recently. Their coffee is quite good, even compared to a few local places so maybe they have improved and adapted to our market…

  17. Meanwhile in third world country like Indonesia, Starbucks means luxury. I wonder why we have that kind of mindset too😅
    I honestly like local coffee shops better, they only charge 1-2$ for good coffee.

  18. Australian here. they're complicating the reason. Starbucks failed because starbucks coffee sucks and for every starbucks store here there are 20 better coffee shops to choose from.

  19. People in Australia love cafes with a character. Also cafe people start knowing their customers and their taste in few days. If I forget to mention “extra hot “on my order guy will double check with me if I like my coffee extra hot? It seems like they are also your friends. I love going out and try different cafes and I can tell mainly those independent local cafes make best coffees

  20. I don't think that you can say why Starbucks didn't do well here because it was too available, it's because Australian coffee is just better. Starbucks is too overproduced, and while I do occasionally have a Starbucks coffee, I'd much prefer a local cafe coffee.

  21. As a big fan of (specialty) coffee, I feel proud of the Australians. Here in Saudi Arabia people are giving high attention to high quality coffee as well as our Arabian coffee yet Starbucks is doing very well I guess. I can't stand Starbucks and Costa's coffee any more.

  22. Yea, I have been to Australia a few times and for all my gripes about how they layout their streets and drive on the wrong side, how their public transit isn't as good as Japan, and the obnoxious flies, they have some amazing food and drinks. Amazing burgers, beers, coffees etc. If you think hipsters in America have taste, Australians put them to shame. Seriously, just try putting beats on your burger. No ketchup, use aioli instead.. It sounds crazy but f******k its good.

  23. It should failed here in Indonesia too since we've got a lot of great coffee beans, but the consumerism of trendy lifestyle still consumes people the most to the core of their selves and it looks cool to goes to the Starbucks (people who goes there isn't even a coffee-head), another reason is because there's not a lot of original Indonesia coffee shop back in the day but now almost everyone opened the shop cause it is a great deal business also supported by a trend of coffee lifestyle the teenagers driven by.
    Back in the day there's a few coffee shop here which unfortunately didn't make it big or popular among the citizens and unfortunately couldn't give a challenge to Starbucks, people still goes to Starbucks cause it looks cool, classy and so on… the mindset of the third world countries people, people who goes there isn't even for the coffee but more to the sweets or magic of the mix/toppings inside their glass.

  24. Haha meanwhile in indo: witss biar gengsi ,hits nih cuy dan mahal nich wkwk dasar padahal rasanya mah hahahah isi ndiri dah b aja hype nya aja . Good job Australian

  25. Way too expensive, I shouted my friends and bought 3 take away coffees. Charge $18 …. more than double what I was paying elswhere in the city and this was more than 15 years ago. This was to me an overated rip off. The coffee was warm not hot and wasn't that great, it became last resort if I was desperate and have only bought from them about 3 times in the last 15 years. And isn't Gloria Jeans now experiencing some problems? If you want to survive in the coffee business you have to sell add ons, light meals, snacks etc. Coffee sales only give around 40% of your total earnings.
    In the news 2 days ago.

    Retail Food Group expects to its earnings to take another hit as it closes another 130 stores this financial year, but the embattled Donut King owner is nonetheless forging ahead with a $160 million capital raising.

    Shares in the Michel's Patisserie, Gloria Jeans, Brumby's and Pizza Capers franchisor were placed in a trading halt on Friday as it prepared to issue 1.5 billion ordinary shares at 10 cents apiece to raise $150 million

  26. I am so proud of Australia
    When will people realize that starbuck's coffee taste bad and it is way too expensive for one cup? Or am i that poor? 😂
    I will support local vendors not making rich companies richer that's just me though

  27. By seeing this series of why so & so company in so & so country, I realized that India didn't suffer much in 2008-09 economic crisis. Thanks to our then prime Minister mahmohan Singh who is a great economist

  28. Starbuck Coffee too expensive for the Aussy ..lol 🤣 you can see their tourist here in Bali, can afford drunk local beer "Bir Bintang" which is very cheap for the most of the tourist .. Lol 🤣🤣🤣

  29. I am an American born citizen who grew up in Australia. I drink instant coffee made in Kentucky and costs me about 10 cents a cup and it is as strong as I want! Proud of you Aussies for refusing to pay 5 bucks a cup for BS rot. Take a good look at the faggy logo. No thank you star punks Im good.

  30. Starbucks isnt even going to try my country 😛
    Without a joke, american coffee culture is incompatible to Croatian coffee culture.

  31. Hahaha… Starbucks at least is not all the way succeed in monopoly game. Plus, if I would like any fixed taste coffee; I would rather to drink 7-11 cheap $1 coffee. Also we got the best coffee in the world in Melbourne city in the same price as Starbucks sitting alone in different historical streets or natural scenes melting into coffee. Rather like Starbucks in the boring concrete box. Even in pretty Kyoto I wouldn't care about this coffee shop at all. We, Oz, got the best coffee. And welcome to visit Australia and enjoy our coffee and wine. You won't feel be disappointed, remember it…..STF:)…..

  32. Why are you referring to and calling Australia a continent but then showing a depiction of Australia the country ?

  33. Sells $8 a cup coffee in countries near Brazil or asean where coffee beans is super common and expecting mega success. Bold move.

  34. Arghhh, I'm a Melbourne Barista and Starbucks is seen as total trash. Not really coffee, it is called the Macdonalds of coffee. It's kind of seen as coffee for children and teenagers who aren't ready for the real thing. Gloria Jeans is failing here too and is in total disgrace. Underpaying their staff by half the minimum wage at $8 an hour might explain why they lasted so long…..

  35. I'm a little sceptical about the claim that Gloria Jeans serves 35 million Australian consumers each year when our population is 24 million haha

  36. Maybe because of one likes Starbucks here i live in Australia and have never visited Starbucks in all my life.

  37. Starbucks in Thailand is also too expensive. Compare to current economic situation, i think it is overpriced. Also, other coffee brands tried to match this price of Starbucks which I don’t think it was a very good strategy. Hopefully, this trend will be change somehow soon.

  38. The two worst American brands in Australia is Starbucks, there coffee is sh*t and domino's. I live down the bottom end of Victoria nd there's a place called La Lupa and there pizza is the best domino's pizza shouldn't be called pizza because all it is, is a dough pizza. There aren't any toppings!

  39. Because the Australians have good taste whereas the rest of the world does not. People have to be eased into a thing that tastes bad.

  40. The Australian coffee culture was pretty much more already established by the time Starbucks came around to the Southern parts of the world. It was very influential in the growth of Indonesia's cafe culture in the 2000s. Although Starbucks came to Indonesia around the same time, the coffee culture brought over by Australian expats and Indonesian graduates of Australian universities was much more influential.

  41. I am SO HAPPY that a 'giant' like Starbucks have to learn it the hard way. It makes them more humble. And it is good for them. Plus it makes a good business lesson to everyone. 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *