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
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100 thoughts on “Why Starbucks Failed In Australia

  1. Could they have found a cafe owner with more of a rising inflection!!??!!
    Way to represent the annoying aussie twang mate! 🙂

  2. What a load of academic crock! Their product was rubbish and nobody went back a second time. If you want to compete in a new market, do your homework instead of group think.

  3. i live in australia and this is not true. Starbucks is growing in the major cities like Sydney and Melbourne. The only places that fail are in rural/remote/regional aus

  4. as an Australian I occasionally (like twice a year) purchase from Starbucks..

    although Starbucks may not be catching on, 'Milk-Tea' retailers have been popping up EVERYWHERE!!

    their drinks taste worse than Starbucks, yet cost the same. and despite that.. I still buy from them more..

    I don't know why..
    they're just more attractive I suppose?

    – an Australian dilemma –

  5. Starbucks don't offer a good food menu like our other cafe's either. Even Australia's McDonald's has a Mc cafe that's better than starbucks

  6. Those guys said it, why would I pay $4 for a coffee to be made by some corporate robot barista with a scripted greeting when I can make it much cheaper at home? I would pay for the experience, socializing at a coffee shop, not just grab and go product

  7. oh well that explains why i hate gloria jeans coffee so much 🙁 figures that shop is a chain. those are the worst kinds of cafes, chains always have cheap poor quality beans. there is literally a coffee shop every few meters in australian cities though, plus nespresso coffee is so good these days so you can make really good quality coffee at home too

  8. I like coffee, I like tea…..the more I drink, the more I pee…….how much coffee can make me pee? A cup, a cup, a cup, a cup, a cup.

  9. Asians really love their Starbucks. Especially in Malaysia, it signifies status among the upper class folks. I used to spend a dime on Starbucks but no more. I opted for McCafe with same quality but cheaper rates. I also go for other local brews as well.

  10. This is the kind of news makes love Australia…. clever!!! There is nothing special in Starbucks coffees’ just a high price for a ordinary coffee.

  11. I’m Australia and when I went overseas to the uk all the brits loved Starbucks it was disappointing to have one and realise how bad and overpriced because I’d heard such good things about starbucks

  12. Australia and NZ emulated Italy's cafe culture, which incidentally is another market that Starbucks has struggled to penetrate. We don't want your huge vat of coffee flavoured milk drink.

  13. Lolslolslools 😂 Starbucks failed in Australia because the coffee is crap and overpriced. Australia has many coffee shops to choose from. Anyway, Starbucks failing in Australia is something to be proud of js

  14. I live in Melbourne and just about the only customers I used to see in a Starbucks downtown (which is no longer there) were young, Chinese students living in the city (I tried a Starbucks coffee once and it could best be described as an overpriced, coffee-flavoured milkshake).

  15. I think McDonalds gets decent coffee sales. I'd assume that's why Hungry Jacks (Burger King) is seeking to get coffee options. Petrol stations offer (probably cheap and nasty) coffee to go. So there does seem to be some space for coffee-to-go (at least now).

  16. Also in Greece.. we have strong coffee culture and excellent local coffee chains.. in my city that is a one million city 4 Starbucks opened and 2 of them had shut down. Also McDonald's have shut down in my city and were shut for Ten years. Last year they reopened

  17. What do you mean in aus when you see a Starbucks it’s busier than McDonald’s and there’s a lot of Starbucks

  18. Cause Starbucks sucks honestly. It's too sweet, expensive, and just bla.
    Go to most coffee shops and they are so much nicer.
    Coming from working in a coffee shop from 8 years and qualified barista.

    Not being biased just way it is

  19. the argument at the end that Starbucks should attract tourists who visit Australia is not even serious. Why would US and Chinese tourist go to starbucks instead of local coffee, even considering the fact that they actually "need" coffee in their tour time, which they only go and grab somethings while they are working. NOT Significant revenue stream to operate!

  20. Why does Thomas O'Connor look as the care sales man I would avoid???

    That said, it's sad to see how "brand of the century" fails on such beginners'-potholes they did. But maybe that's the answer to it, being a "brand of the century" you begin to fail "sniffing the local market" and think you are great everywhere. Sadly this as proven true to quite a few US brands but also EU and other brands. Which means, you always must know your local market. Emphasizing *know*.

  21. I had add of some energy company just before this video…
    You should a vid about why oil corporations even make adds (and why they trying to paint themselfes green)

  22. Australian coffee market is light-years ahead of Starbucks.
    Starbucks focuses is high margins with very low quality products.
    It's like trying to sell a Xiaomi phone for an iPhone price in California.. who is going to buy that.

    Only point to Starbucks was to catch Chinese tourists and students so they can sit and use WiFi.

  23. Starbucks is such a big brand in the Philippines and is seen as a luxury brand. Whenever I go back to see my relatives, they always look forward to me treating them to a sugary Frappuccino from Starbucks, and some of them would take selfies with the drink, reuse the cup with the logo, savour every moment. I don't really see the appeal since I'm spoiled for coffee choices in Brisbane where I'm from (Brisbane isn't even the best city for coffee in Australia). Gloria Jeans isn't even a good coffee place compared to the local cafes here.

  24. I once had a cup of coffee at a Starbucks in the Adelaide CBD. The brew itself was nothing to write home about and the ambience of the place more resembled that of a fast food chain than the "at-homeness" I'd long grown accustomed to in the high-quality owner-operated cafes that these days proliferate everywhere, even in outer suburbs and small country towns. Not much more to be said really.

  25. why starbucks failed in australia 101;

    vsco gals be like
    ‘why still the damn plastic straws?’

    (ok fr tho, they might remove plastic straws soon im not sure i am dumb and did not do my research so i am not trying to assume)

  26. Basically, Australia had a coffee culture like that of Seattle in the 70s, but Starbucks was successfully able to destroy the Seattle culture it was birthed in, and not so with Australia.

  27. Grind coffee brew it and pour it in a cup cost AUS $0.50 if you include the milk. Reason I don't waste my money on coffee outside. I tried the stuff in the US a couple of years ago not worth the money.

  28. All these being said about Starbucks being pricy but in Canada the local brands like Secondcup and Blenz coffee are just equally pricy. Only cheap alternative is Tim Hortons whose quality isn’t top either. All neighborhood coffee shops are around the same price as Starbucks also.

  29. I once bought white chocolate milk from Starbucks Dubai(cost Dhs. 15 apprx $4),it tasted like plain milk with sugar and little cream i was so disappointed as there wasn't even a bit of chocolate taste, ever since that i said goodbye to them. Customers are willing to pay high for quality, not for trash.

  30. I went only once to Starbucks. The coffee was garbage, it has ice pieces inside and the taste was below average. The price was quite high though..

  31. Two interesting missed points, huge wage increases during the 7 year Labor government at 2007 which greatly affected hostpo staff and explosion of rent prices for inner city properties.

  32. Reason failing because of ;
    – Rapid expand
    – customer prefer italy’s coffee/ contain less sugar
    – high price
    – take huge loan
    – financial crisis in 2008

  33. Gloria Jeans make the worst coffee I've ever tasted. Who tf goes to Gloria Jeans for coffee? There are so many wonderful local coffee shops, even if Starbucks made decent coffee (which they don't), they still wouldn't stand a chance. Their shops are disgusting.

    I have to say the $2 coffee I usually get from BP when fueling up my car is better than both Gloria Jeans and Starbucks. They just don't know how to make coffee at all.

  34. There is a Starbucks in Manly Sydney on the beach front plus it uses soooooooooooo much plastic save the turtles sksksksk and I oop sksksksk and I oop

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