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

BackgroundInformation

ObjectiveResearchProblem

ResearchQuestions

ResearchDesign

Literature Review Conceptualization

Data Analysis Conclusion Recommendations

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BACKGROUND INFORMATION

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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

RESEARCH PROBLEM & OBJECTIVES

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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

RESEARCH QUESTIONS

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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?

RESEARCH DESIGN

6

LiteratureReview

Qualitative Research

QuantitativeResearch

Study existing academic journals and news articles on the history of Starbucks in Australia

Interview industry experts, consumers and representatives from various other coffee shops to understand their strategies

Conduct consumer surveys to understand what they feel about Starbucks and what changes Starbucks should make

LITERATURE REVIEW

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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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Number of storesin Australia

Year established in Australia

Business ModelPrice of an espresso (similar 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)

LITERATURE REVIEW (CONTD.)

LITERATURE REVIEW (CONTD.)

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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

EXPERT OPINION

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Gloria Jeans

Straighter and Stronger coffee (less flavors)

Use only Soymilk

Franchise based model

EXPERT OPINION

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StarbucksFlavor based coffee

Use Soymilk, skim and regular milk

Most selling coffee:

Frappuccino

Caramel Macchiato

Flat latte

Owned by 7/11

New stores to open

CONSUMER SURVEY

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Gloria Jean's20%

McCafe/McDonald10%

Starbucks18%

Local independent coffee shops

8%

Doesn't matter44%

Brand Loyalty

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50.0%

12.5%

32.5% 30.0%25.0% 22.5%

Beverages Food Ambience Customer ServiceStarbucks Overall ExperienceOthers

What do Consumers Like about Starbucks

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30.0%

47.5%

20.0%

2.5%7.5%

17.5%

Consumer Beverage Consumption : Starbucks

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46.2%

35.9%

17.9%

2.6%

38.5%

0.0%

35.9%

High Quality Unique Value formoney

BadCustomerservice

Overpriced Poor Quality GoodCustomerservice

Consumer Feedback on Starbucks

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0.0 1.0 2.0 3.0 4.0 5.0

Taste

Price

Accessibility

Customer Service

Ambience

Value for Money

Consumer Expectation Vs Starbucks

GeneralStarbucks

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0.0 1.0 2.0 3.0 4.0 5.0

Coffee

Espresso

Tea

Frappuccino

Hot Chocolate

Consumer Preference Vs Starbucks

GeneralStarbucks

18

Very Satisfied18%

Somewhat Satisfied25%

Neither Satisfied nor Dissatisfied

44%

Somewhat Dissatisfied

13%

Very Dissatisfied

0%

Starbucks Overall Satisfaction

2.7

0.0 1.0 2.0 3.0 4.0 5.0

Willingness to Buy : Starbucks Products

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CONCLUSION

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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

Fulfil Consumer Expectation

Taste (Espresso & Coffee)

Price

Create Value for Money

Increase Starbucks stores gradually

RECOMMENDATION

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THANK YOU!