Starbucks pulled out of Israel because the CEO assumed Israelis wanted filter coffee to go, when they actually preferred espresso drinks consumed in cafes. Zach Selch argues that founders skip real market research, relying instead on gut feelings and distributors, then fail when they don't talk to actual customers or visit the ground.
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So Israel has a really vibrant coffee scene. Everybody drinks coffee here in the morning. Literally 2 or 3 million cups of expensive coffee drinks being sold here every day. But you're not going to see Starbucks here. Starbucks tried and pulled out. It's one of the only markets in the world that they pulled out. So how come the world's largest coffee company have a couple of chains, local chains, that are doing so well, and Starbucks does so well everywhere in the world, didn't succeed? Well, the story goes, the CEO was here and had some coffee in his hotel, got very excited that the coffee was so bad, asked for a cup of coffee in a few different hotels, couldn't find a good cup of coffee, and he figured there's no way to get a good cup of coffee in Israel, Starbucks will do really well. So he set up. What he didn't realize was that if he had gone out and he'd actually seen how Israelis drink coffee, it would have been a totally different market, at least from what he perceived. Israelis drink coffee in a very different way from Americans. Typically, they don't take coffee to go. They sit for their coffee. They're much more used to espresso-based drinks and not filter-based drinks. And they have a whole series of different products, sort of like the Australians with their flat white. So Starbucks floundered for a couple of years and then pulled out, where 3 Israeli chains have done very, very well in the market here with coffee, making millions and millions of dollars. Now, what do we learn from this? Well, first of all, is the CEO founder really the right person to be doing market research? Very often they think they should be, but what do they really know about intelligence? What do they really know about research? Right? And they're very emotionally connected to what they think their product is and what they think the market should be. The other thing is, really, he was doing extremely unscientific research. They're professionals. Do they know how to go out and find what's true actionable intelligence and what isn't, and then put together a plan so that you can attack the market? If somebody else had gone out, some of the people I've worked with, probably even I think myself, in all due honesty, if I'd gone out, I definitely wouldn't have stayed in the hotel. I would have gone out and talked to people and seen places like this, drank the coffee that Israelis are drinking, and see what the market requires. Anybody could look around and see the vast potential to a market like this and maybe design products that would be a better fit for the market. And that's what you should be doing too. When you look at a market, you don't want to just talk to your distributor. That's a huge mistake. Very often people will say, well, I did market research, I talked to my distributor. If your product doesn't work for your distributor, he's going to find other products and he's going to keep going. If you invest in going into a market with a distributor and he makes If he makes some bad judgment choices, you're the one who's going to pay for it, not him. There are a lot of ways of gathering information. I've never started to sell in a market without actually physically visiting that market. Well, I almost never start selling in a market without physically visiting that market, because it's extremely important to see what's going on, to talk to my actual end user customers. So, good luck. When you decide it's time to grow your international sales, Call us.
