Starbucks in Australia

US based world’s largest coffee chain Starbucks entered the Australian market in 2000 but have had to close 61 of its 84 stores in 2008 with losses of at least $143 million due to some of the macro and micro environmental challenges that Starbucks had to persevere, failing to make an impression to Australian coffee consumers.

The problems that associated with it were- not considering product optimization and failing to grow organically into the market. According Mescall (2010), Australian consumers preferred more good brewed coffee to milk and syrups augmented hot coffee-based smoothies of Starbucks. In addition to their rigid offerings, Starbucks expanded to the country by opening multiple store openings in every city. The latter created more supply than existed demand to the “long and predefined coffee culture in Australia which Starbucks would need to bring an organic taste that far surpassed the usual experience.” (Park, 2008)

To resuscitate its business, the company licensed its local chains to the Wither Groups which operates 7-Eleven in Australia and they “plan to open company-owned rather than franchised stores in close proximity to its 7-Eleven outlets within CBD areas.” (Boothroyd, 2014) Starbucks anticipates to benefit from the Withers Group’s extensive retail and marketing experience and direct investment in the Starbucks brand.

However, one of the Starbucks president stressed that “the coffee chain had no intention of modifying its offering to appeal to the local market. We are just focused on delivering the best quality coffee and the best customer experience we can and continue to focus on what we do well," said Hansberry. We believe that when we do those things well our customers respond by visiting our stores more frequently and telling their friends and that's what we're focused on." (Hansberry, 2014)

From this case, we could learn that choosing the same methods of branding the products in different geographical markets could lead to failure. Here the key is to establish a sound basis in the market. Starbucks being a foreign brand, it faced strong competition from local cafes that take measures to provide what Australians need. A thorough market research from Starbucks part would have been appropriate too so that products could to delivered to the needs of a target market. In addition, a high quality, good tasting coffee brew was expected due to their high premium prices.