2 August 2008

Starbucks in Australia

This week, Starbucks closed the majority of its Australian stores. Included in the 685 staff who were dismissed, one of my friends lost his job—his first full-time position since he moved to Australia.

Wei is certainly going to move on to an even better job, and probably one more in line with what he has been studying, so I’m not too worried for him. I am a bit concerned that it took Starbucks this long to realise that their Australian strategy isn’t working though. The first Australian Starbucks café opened in Sydney in July 2000—more than eight years ago.

On the weekend of the ICFP programming contest, I took the opportunity while most of the cafés in the city were closed to taste-test the two coffee chains which have outlets on my way to the office: Gloria Jeans and Starbucks.

Unfortunately, I was quite disappointed. I ordered a small flat white at both places, and the prices at $3.40 were a full 40-50% more than I would pay at one of the coffee shops around the office that are open on weekdays. Expensive coffee was kind of what I expected. But what was completely unexpected was the Starbucks barrista making my flat white with a shot of coffee, half a cup of milk, and half a cup of hot water!

Wei tells me that this is American-style coffee, and what people want when they come to a Starbucks café. Perhaps the franchise way of producing the same coffee everywhere worked for a while for Starbucks, but I have a feeling this is part of the reason their stores haven’t been a huge success in Australia.

Starbucks in Australia have been making coffee that is different to what many first-time customers expect, charging more than other cafés in the area, incurring high expenses from prime real estate and large numbers of staff (it seems like typically three people are behind the counter to take the order and make the coffee). It definitely seems like it was time for them to reevaluate their approach to the Australian coffee market.