YouTube explainer (created/uploaded by Patrick Biddiscombe on October 9, 2022) that examines why Starbucks failed in Australia: misreading local coffee culture, expanding too rapidly without customer validation, and offering products/pricing misaligned with Australian tastes. The video cites concrete outcomes (opened then closed 87 stores, accumulated about $105 million in losses) and recommends regular market research; it notes Starbucks later refocused on tourists and now operates 58 Australian locations. It includes a brief sponsor mention of HubSpot.
Questions this video answers
July 2000.
87 stores.
$105 million.
Six billion dollars per year.
From one store in 2000 to 87 stores by 2008.
Chapters
Starbucks tried to break into the six billion dollar a year Australian coffee market. Within seven years of that move, they opened and closed 87 stores while accumulating $105 million in losses. Here's what happened. It's July 2000 and Starbucks is on top of the world. Throughout the 90s, this Seattle based caffeinated giant attained monster success. Netting huge profits and becoming a billion dollar brand within the decade. They had so much success domestically that they started spreading the brand internationally, opening up successful stores in both China and Japan. With the energy of successfully breaking into fore, they set their sights on Australia. But upon launching, they ran into some problems. One, a poor go to market plan. I think one of the problems with Starbucks was that they thought that their business model could just roll out to a different environment and there was no need for them to adjust. In Australia, the Australian coffee culture involves meeting a friend and knowing your local barista. Starbucks wasn't a friend and felt more like a cold corporation. For Americans, coffee was a product often geared more towards to go. For Australians, it was an experience. Two, they didn't speak with local customers. Their growth wasn't organic like they assumed they'd be successful in the new market based on past experience in double down on store locations, going from one store in 2000 to 87 by 2008. All without confirming the model with customers in the Australian market. Because they expanded faster than their popularity called for, they didn't give Australian customers the much needed chance to become familiar with the brand number. Three, the product didn't align with customer expectations. Australia has been steeped in coffee culture since the early 1900s. When Italian immigrants arrived after World War II. They helped develop the coffee scene that many now regard as one of the best in the world. With this came a specific palette. They have a taste for a long black or flat white coffee. Starbucks sugary frappe and macchiato drink options were not a hit. Customers demanded a higher quality than what was being served. Pricing made the product unattainable in the market. Starbucks charged more than local cafes. As it turned out, customers decided to pay less for coffee they liked from a local barista they trusted. So what can we learn from all this? Conduct thorough market research. Starbucks obviously conducted research before aggressively expanding into Australia. But without regular testing, it led to high prices, no emphasis on the local taste and the company failed to thoroughly understand the most crucial concept of a business, the customers. By doing market research, I'm talking about customer surveys, focus groups and SWOT analysis, you can get a complete understanding of the market you're trying to break into before you break into it. But remember, test regularly. Don't just let it inform your prelaunch. Let the data you continue to collect inform your post launch as well. By continuing to test regularly, you can be made aware of what trends and issues may be developing after launch. Download our offer right now to get started. It includes free templates that you can use to start figuring out exactly what your customer wants in terms of Starbucks in Australia today. Since the failure, they've slowed their approach and decided to pivot strategy. They now focus on appealing more to tourists who already know and love the brand rather than Australians who are turned off by it. They currently have 58 locations. As always, if you like what you heard and you want to hear more, comment, like and subscribe to hear more, bye bye. I can't find this client info.
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