Why Starbucks failed in Australia? Blame lack of market intelligence

Starbucks coffee is a global brand with presence in 77 countries serving in stores numbered 30,000 and still counting. The breakthrough strategy worked in every nook corner of the world but could not get off the ground in Australia.

Espresso brand and Starbucks go hand in glove and the first store in Australia was opened in Sydney in 2000 and rapid expansion saw by 2008 it had 87 stores spread mainly in places of high tourist traffic, where the brand recognition was excellent. Elsewhere instead of recognizing brand the consumers were put-off by ubiquitous nature in which the stores were located.

Then came the crash! Lack of business forced Starbucks to close 61 stores in July 2008 thereby making a crucial error. The retrenched employees were all trained well and most of them started their own baristas. As Starbucks sold its franchise and remaining stores to Rich Lister Withers family in 2014 business strategists pondered why the giant succeeded elsewhere and failed in Australia. The prime suspect was none other than market intelligence.

The next most competitors to Starbucks is Gloria Jean’s coffee who have started way back in 1979 and grew in controlled phase increasing stores gradually in almost 40 countries with nearly half of them located in Australia. They blended brand, texture, milk and crème to give unique expression in taste to the consumers that too with friendly and charming service.

But close upon 75% of the retail coffee houses are not big companies but small independent outlets most of them had Ex-Starbucks personnel. Business strategy of these small outlets underpinned customers to relax, sit-back and enjoy every sip of the coffee sitting around table inside and outside baristas with friends and colleagues. They also proudly broadcast the place of origin where the coffee beans were picked up. While for Starbucks, Espresso was a mere commodity, for the independent guys serving coffee in whatever form is a pleasure.

A proper market intelligence study would have alerted Starbucks to understand the local culture and the manner in which coffee chains act in providing value proposition to customers and capturing attention of customers and their loyalty too. Because most of these customers are repeaters and acted as referees of the coffee stalls to their kith and kin. In this manner reputation by word of mouth spreads so much so customer loyalty gets built-up around the coffee shops.

The hard lesson learned can be summed –up as follows: Business strategy muse be adapted to the findings of market intelligence!

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail:   cosmicgems@gmail.com

Blog:   Business Strategist