As a part of our Research Project - II at the S P Jain School of Global Management, Sydney we conducted a research on how one of the biggest brands of the world Starbucks failed to local competition in Australia

1. 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

2. AGENDA
Background
Information
Objective
Research
Problem
Research
Questions
Research
Design
Literature Review Conceptualization
Data Analysis Conclusion Recommendations
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3. BACKGROUND INFORMATION
3
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

4. 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

5. 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?

6. RESEARCH DESIGN
6
Literature
Review
Qualitative
Research
Quantitative
Research
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

7. 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

8. 8
Number of stores
in Australia
Year established
in Australia
Business Model
Price 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.)

9. 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

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

11. EXPERT OPINION
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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

12. CONSUMER SURVEY
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13. Gloria Jean's
20%
McCafe/McDonald
10%
Starbucks
18%
Local independent
coffee shops
8%
Doesn't matter
44%
Brand Loyalty
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14. 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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15. 30.0%
47.5%
20.0%
2.5%
7.5%
17.5%
Consumer Beverage Consumption :
Starbucks
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16. 46.2%
35.9%
17.9%
2.6%
38.5%
0.0%
35.9%
High Quality Unique Value for
money
Bad
Customer
service
Overpriced Poor Quality Good
Customer
service
Consumer Feedback on Starbucks
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17. 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
General
Starbucks
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18. 0.0 1.0 2.0 3.0 4.0 5.0
Coffee
Espresso
Tea
Frappuccino
Hot Chocolate
Consumer Preference Vs Starbucks
General
Starbucks
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19. Very
Satisfied
18%
Somewhat
Satisfied
25%
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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20. 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

21. Fulfil Consumer Expectation
Taste (Espresso & Coffee)
Price
Create Value for Money
Increase Starbucks stores gradually
RECOMMENDATION
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22. THANK YOU!