HOW AND WHY A GLOBAL BRAND STARBUCKS FAILED IN AUSTRALIA

PRESENTATION BY: VIREN BAID | LOHITHA LEKKALA | RAM VIGNESH S | JAYESH SRIVASTAVA
MENTOR: MS. ZEYNEP ROBERTS
AGENDA
Background Research Research
Objective
Information Problem Questions

Research
Literature Review Conceptualization
Design

Data Analysis Conclusion Recommendations

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BACKGROUND INFORMATION
World’s largest coffeehouse company
Over 21,000 stores worldwide
The Starbucks experience
2nd Most Valuable Brand in Fast Food Industry
Brand Value of $ 25.8 Billion

3
RESEARCH PROBLEM & OBJECTIVES
RESEARCH PROBLEM: Failure of Starbucks in Australia
OBJECTIVES:
Starbucks hasn’t understood the coffee market in Australia
Australians preference towards Australian brands
Competition from McDonalds, Gloria Jeans & local coffee shops
High Price – Low Quality
Not enough stores to access
Cultural Differences

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RESEARCH QUESTIONS
Starbucks Australia : What went wrong
Understand the Australian Coffee Market
Is Starbucks delivering what consumers need ?
What do consumers like & dislike about Starbucks?
How willing are consumers to buy from Starbucks?

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RESEARCH DESIGN
Literature Qualitative Quantitative
Review Research Research

Study existing Interview industry Conduct consumer

academic journals experts, consumers surveys to
and news articles and understand what
on the history of representatives they feel about
Starbucks in from various other Starbucks and what
Australia coffee shops to changes Starbucks
understand their should make
strategies

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LITERATURE REVIEW
Culture included smaller boutique type coffee shops
Coffee was more about relationships than a product
Australians like their coffee stronger without any
flavoured sugary syrups, unlike Americans
Highest consumption of instant coffee in the world
14,000 cafés generating income of $9.7 billion per year
Gloria Jean’s dominates coffee retailing market

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LITERATURE REVIEW (CONTD.)
Price of an
Number of stores Year established Business Model espresso (similar
in Australia in Australia sized cup)
Gloria Jeans 500 1996 Franchise $3.25

McCafe 488 1993 Store-owned $3.25

Coffee Club 220 1989 Franchise $3.40

Wild Bean Café 105 2004 Franchise $3.40

Hudson’s 45 1998 Franchise $3.10

Starbucks 23 2000 Store-owned $3.60

Figure: Competition in the Australia speciality coffee chain market (2008)

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LITERATURE REVIEW (CONTD.)
What went wrong in the Australian market?

Unsustainable business model

Failure to communicate the brand
Late entry into a highly competitive market
Quick expansion
Declining service quality

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EXPERT OPINION
Gloria Jeans
Straighter and Stronger coffee (less flavors)
Use only Soymilk
Franchise based model

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EXPERT OPINION
Starbucks
Flavor based coffee
Use Soymilk, skim and regular milk
Most selling coffee:
Frappuccino
Caramel Macchiato
Flat latte
Owned by 7/11
New stores to open

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CONSUMER SURVEY

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 Brand Loyalty

Gloria Jean's
20%

Doesn't matter
44%
McCafe/McDonald
10%

Starbucks
18%
Local independent
coffee shops
8%

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 What do Consumers Like about Starbucks
50.0%

32.5%
30.0%
25.0%
22.5%

12.5%

Beverages Food Ambience CustomerStarbucks

Service Overall Experience
Others

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 Consumer Beverage Consumption :
47.5% Starbucks

30.0%

20.0%
17.5%

7.5%
2.5%

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 Consumer Feedback on Starbucks
46.2%

38.5%
35.9% 35.9%

17.9%

2.6%
0.0%

High Quality Unique Value for Bad Overpriced Poor Quality Good
money Customer Customer
service service

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 Consumer Expectation Vs Starbucks
Value for Money

Ambience

Customer Service

General
Accessibility
Starbucks

Price

Taste

0.0 1.0 2.0 3.0 4.0 5.0

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 Consumer Preference Vs Starbucks

Hot Chocolate

Frappuccino

Tea General

Starbucks
Espresso

Coffee

0.0 1.0 2.0 3.0 4.0 5.0

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 Very
Starbucks Overall Satisfaction Willingness to Buy :
Dissatisfied
0% Starbucks Products
Somewhat
Dissatisfied Very
2.7
13% Satisfied
18%

Neither Somewhat
0.0 1.0 2.0 3.0 4.0 5.0
Satisfied nor Satisfied
Dissatisfied 25%
44%

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CONCLUSION
There is NO Brand Loyalty
50% of consumers like Starbuck’s Beverages (47% liked Espresso/Coffee)
Consumer Feedback
46% - High Quality
38% - Overpriced
Consumer Expectation
Taste (Espresso & Coffee)
Price & Value for Money
Accessibility

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RECOMMENDATION
Fulfil Consumer Expectation
Taste (Espresso & Coffee)
Price
Create Value for Money
Increase Starbucks stores gradually

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THANK YOU!