Lessons from A Coffee Chain
Updated: Jan 12, 2021
What can we learn from a Powerful coffee chain, Starbucks, a Seattle-based coffee chain, when it fails to meet the mark.. The Australian Coffee Marketplace and culture has already evolved over the course of a century and it’s one of the toughest markets to break into, so let’s examine, in detail, the reasons that caused it’s initial failure.
Key Observations :
Failure to understand the $6Billion Australian market, the Australian Coffee Culture, and the Australian consumer, which is one of the fastest growing, most diversified and sophisticated coffee-drinking industry in the world.
Coffee first came to Australia through the Italian and Greek immigrants and they have been immersed in the nuances of coffee culture since the mid-1900s, via the introduction of boutique expressions like expresso, and in the 1980s to specialty items like Flat White and the Australian Macchiato - simple observations that were not recorded by Starbucks.
Lack of Organic Growth - Expanded too quickly, with multiple locations, instead of slow and steady organic growth, which makes it “too available” and omnipresent everywhere in Australia, and the need to create a “need” or a “want”.
Assimilation failure - Lack of integration into the coffee marketplace and consumer market - failure to adjust, to adapt and to innovate, and to allow the consumer to develop an appetite for the Starbucks brand.
The coffee menu was not consumer-oriented - similar to the Italians, the Australians have their own coffee-centric preferences; Starbucks ignored this observation, and the menu just copied the US style, with loads of sugary drinks. Traditional favourites like Long Black and Macchiato were completely ignored for the Australian market; the Aussies prefer sophistication and taste mattered.
Starbucks did not adjust to market dynamics in Australia; they merely replicated what they did in the USA, but this just does not cut the cake. Starbucks did not tailor their business model to suit the Australian market.
Many Australians prefer to drink coffee in boutique cafes and suburban coffee stores with their familiar neighbourhood baristas, for the purpose of daily chat and routine.
Huge financial crisis in 2008, which was untimely and led to 2/3 stores being closed in Australia in that year.
Pricing policy - Almost all of the items on the Starbuck menu was more pricey than the local Aussie cafes and baristas.
Mindset acceptance - The Aussie coffee culture is one filled with friendship, meeting of friends, bonding and a personal meeting space for interpersonal communication; the pressure of a foreign entity led to rejection of the American Starbucks brand, as it was presented as a commodity, and as a product, and not ”as a meeting place” or “as a place where everyone knew each other”.
Australian coffee lovers are smart and knowledge-saavy; they know their coffee, from traits to types to flavours, and the need for quality coffee, albeit a very ordinary or plain coffee, has increased over time; Starbucks failed to recognize and resuscitate this important basic value and trait in taking pro-active action to engage their smart consumers.
(Credit : CNBC + Youtube)
Back in 1994, places like Milton in Brisbane, Queensland, Australia, already has a steady boutique, bespoke, and curated coffee scene with interesting brands, like La Dolce Vita Ristorante with it's own mini Eiffel Tower as a decor piece, eclipsing the backdrop of Milton.
Drinking coffee is, as much a lifestyle, as it is a past-time, a habit, a daily piece of the action, a meeting between friends, mothers, colleagues and students, and very much a part of the OZ way of life; understanding the consumer behaviour of the Aussie coffee lover, the mindset, the sentiment and the cognitive dimensions of this behaviour is paramount in tackling and conquering the coffee scene, amid a tough market.