By now, you probably know that Starbucks in Australia is closing all of their regional stores, and keeping only the banner stores on the East coast. It is interesting to note that the Super brand that starbucks has become is a two edged sword. The very thing that has made them famous, now makes them a very newsworthy failure story, and the press is having a field day with them.

Their PR spin on the Australian retreat is that the issues that they came up against in Australia were unique in their experience. They did not go into detail, however it is clear that their level of competition both in terms of retail brands such as The Coffee Club, Gloria Jeans, Michel’s and similar, as well as the very high quality coffee and training suport being provided by boutique regional roasters like Genovese, Merlo, Dimattina, and hundreds of other well loved coffee brands. Has been too much for the Starbucks juggernaut to overcome.

It is a case of the corner cafe outperforming the mega brand.

Why do Australian coffee drinkers choose to go to their local cafe instead of the “Third place” made famous by Howard Schultz CEO of Starbucks?

1. The coffee at the local is often better. Australians have had access to great coffee for many years. Very few cafes which set out to serve exceptional coffee fail as a business.

2. You know the staff, and the more regular you are the more involved, and engaged you become, you become a part of the cafes ‘tribe’. Whilst this was the goal of Starbucks initially, it is impossible to maintain over 15,000 stores.

3. ‘Buy local’ resonates with most Australians.

4. Starbucks has become almost a caracature of the American way of life, and many Australians reject that iconography. Their high visibilty in the hands of movie stars and tabloid freaks, whilst selling heaps of magazines, most Aussies want to read about them, but do not necessarily want to become one themselves.

What Starbucks does do well is to upsell, and offer a wide variety of drinks made on premesis.

To reject flavoured coffee, frappes, and flash flavours is like throwing the baby out with the bathwater ( no coffee pun intended). Whilst Starbucks have become synonomus with the Half caf, no fat, caramel mochacinno. these value added drinks are not the cause of the company’s demise.

Flavoured coffee definitely increases profitability in any cafe which offers them to their customers, and given that around 70% of all coffee sold in a cafe has sugar added, the more it is offered, the more profit is available!

It is important to ensure that the coffee that the syrup is added to is of good quality ( as must be the syrup used).

That is what Australians have made clear.

We want great coffee.

Served by someone we know.

Made how we want it.

In a place we are comfortable visiting regularly.

Ironically these were the principals which Starbucks were founded on.

So what can we learn?

We are among the best coffee cultures on earth!

We are doing many things right.

Bad coffee = bad business.

Upselling wisely done, makes a big difference.

The bigger you get, the harder it is to control values and culture.

No one is immune to the market forces.

How is your business looking?

Cordially Yours.

Michael Bishop.

Founder.

Alchemy Cordial Company.