Mom and Pop Shops Flexing Muscle
It’s not often you hear that goliath’s like Starbucks have to back away from a market due to competition from small “mom and pop” shops, but that seems to be exactly what happened in Australia. The US coffee giant has apparently given in to intense competition brought on by thousands of small Australian coffee shops and closed 61 of its 85 shops across the country. I’m sure the cultural challenges of working in a nation with more than 235 ethnicities speaking more than 270 languages and dialects didn’t make things easier.
While it isn’t exiting completely, Starbucks said it is refocusing its business in Australia’s three biggest cities: Sydney, Melbourne and Brisbane. John Roberts, a professor from the University of New South Wales and a member of Development Crossing, said, "It's much easier for the local store to differentiate itself as being local whereas Starbucks had this slightly schizophrenic positioning where it wanted to be the global, local store.”
A clear victory for “the little guy,” and the local community as well. It reminds me of Wal-Mart’s recent failure in trying to penetrate the German market.
What do you think? Did Starbucks ever stand a chance? Could they have done anything differently?
While it isn’t exiting completely, Starbucks said it is refocusing its business in Australia’s three biggest cities: Sydney, Melbourne and Brisbane. John Roberts, a professor from the University of New South Wales and a member of Development Crossing, said, "It's much easier for the local store to differentiate itself as being local whereas Starbucks had this slightly schizophrenic positioning where it wanted to be the global, local store.”
A clear victory for “the little guy,” and the local community as well. It reminds me of Wal-Mart’s recent failure in trying to penetrate the German market.
What do you think? Did Starbucks ever stand a chance? Could they have done anything differently?
Tags: corporate social responsibili…, australia, csr, green marketing, greenwash, starbucks, sustainability, sustainable development
Replies to This Discussion
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Permalink Reply by Brad Ewing on -
Nice to see the "little guy" win once in a while :) What happened in the Walmart/Germany situation? Typical Wal-Mart arrogance or something else?
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Permalink Reply by Marcus Westling on -
You can find more details on the Germany/Walmart story here.
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Permalink Reply by Brad Ewing on
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Thanks Marcus.
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Permalink Reply by Aimo Berg on -
I actually talked to the SVP of M&A of Walmart during a conference and asked him about the scenario in Germany and South Korea. He told me it was their "first" international experience for them and they implemented wrong strategies, selling electronics and clothing in South Korea while rivals focused on food and beverages which was more popular with South Koreans. Not customizing to the local markets, big mistake. He told me though they actually used the failure, learned from it and are now using very different strategies in China and India. Let's see. Starbucks supposedly is doing the same with Australia, they are not fully giving up on the market but adjusting.
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Permalink Reply by Erle Frayne Argonza on
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I am amazed at how diverse Australia's ethnic composition has become. And I'm happy that the Aust shops are competing strongly against the Starbucks. Starbucks is quite luckier here in Manila, where it enjoys high growth patterns even if there are so many sprouting local cafes, this is because coffee consumption here is still hitting up higher scales. Contrast this to the USA where dozens of Starbucks have closed shop and the pattern is towards shrinking market. This explains largely the aggressive marketing of the biggie Starbucks in the Pacific area, from Korea up North to AustNZ down south.
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Permalink Reply by Aimo Berg on
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I actually heard the same for other companies, KFC, McDonald and so on, focusing on Asian markets. Obviously China is a big target but do you see it in smaller countries too?
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Positive the companies you mentioned are campaigning hard in smaller countries including the Philippines. We got Filipino firms though that compete better: Jollibee, our burger giant, long ago beat McDonald's and is making waves in Asia as well; Max Fried Chicken, a classic local firm, has been checkmating KFC here, and is also expanding its wings to other countries. ...Figaro, a local coffee shop firm, is doing good and its blends taste better than Starbucks, and has begun to test the market overseas.
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Permalink Reply by Brad Ewing on
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It sounds like there is probably a good correlation between the obesity challenge you mentioned a few times in your blog posts and the success of places like Jollibee and Max Fried Chicken. By the way..."expanding its wings to other countries"...not sure if you intended the pun, but that's funny! :)
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Brad, you're right, the Pinoys (Filipinos) have become consumerist in taste and enjoy eating greasy foods. It's good that a large portion of Pinoys are fond of physical wellness unlike Americans who are lazy in burning excess fats (I found this out when I resided in California), so the obesity is still gradual in growth. As to Max Fried Chicken 'spreading its wings' (sounds funny really though indeed it's going transnational), I say good luck to it, I still prefer its chicken over KFC or Kenny Rogers...By the way Brad, Aimo, Walmart is getting a tough time here, as it could hardly make a dent on the market that's been the niche of established local retailers (Robinson's, SM, Uniwide) that are now establishing branches overseas. In Pinoy lingo, "Walmart should better eat more rice" (kumain muna ng maraming kanin), it just can't have its destructive ways take effect here and other small countries.
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Permalink Reply by Kenneth Westling on -
I'm happy to see the little guy win! I guess Australia finally realized Starbucks' over priced coffees actually were not that good.
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Permalink Reply by Chris Jarvis on -
Not sure how important the ethnicity or language diversity was to the closings. Here in Toronto there are over 100 languages/dialects spoken and 3/4 of the population is from another country or have parents from another country, and Starbucks is thriving. Could have been an issue, but the two times I was there on business in the past couple years, I noticed diversity in front of and behind the counter.
Also, the closures seem pretty much in line with the 600 stores (that's 19% of all it's US owned stores) being closed on the home turf. Starbucks is adjusting their business strategy in light of the hard realities - Jim Collins would be proud.
But Starbucks had a huge failing in Australia - they couldn't make a Flat White.
A flat white is a coffee beverage served in Australia and New Zealand, prepared with espresso and milk. The drink is generally made with an ⅓ espresso and ⅔ steamed milk. The volumised milk is prepared by folding the top layer into the lower layers [1].
A flat white is the same as a properly made North American Cafe Latte, but differs from a Starbucks style latte in the preparation of the milk. Australian lattes and flat whites are usually served in 215-240ml cups, making them stronger than some lattes in other countries. (Wikipedia)
My take on the lack of success in Australia compared to other countries like, say, Canada is - differentiation. They couldn't offer their products at the same standards as local stores (waaaay better coffee all around, and the flat whites...forget about it). So they didn't differentiate on product as superior by quality or price - they were in fact, below standards. And then they didn't differentiate in any other way. For example service.
Australia has this weird thing about store hours. Everything closes early - Malls, stores everything (except pubs). It used to be that way a long time ago here in Canada. But now we stay open all the time (almost) like the US. So in downtown Sydney, when I was wondering around and all the other coffee shops were closing, why in the world didn't Starbucks say 'hey, we'll stay open later and at least stand out somehow'?
So that's my thought. They couldn't make a flat white. They kept serving North American Latte's and expecting that to be good enough.
Oops.
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Permalink Reply by Marcus Westling on
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So in essence, guilty of resting on its laurels? I guess it doesn't help that there seems to be one on every street corner these days.
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