BRAND MISTAKES AND

FAILURE
-STARBUCKS AUSTRALIA
Problem Overview: Starbucks opened in Australia in the year 2000 and grew to 90 locations by 2008.
Where Australia is considered to be the land of coffee lovers, the brand couldn’t survive in the market and
had to close down 70% of the stores. Starbucks, being the most famous coffee company for Americans
could not woo the Australians, they opened stores aggressively and left no space for the new consumers
to adapt to the taste. Also, Australian take their coffee very seriously and they liked their coffee to be real
espresso, smaller sized coffee, black and unsweetened coffee where Starbucks offered tall glasses
loaded with sugary syrups and milk. They used the same business model of united states in the new
continent which lead to the loses worth of $107 million for the business.

Brand Profile:
 Brand believed in these principles:
a. there would be eye contact,
b. their name would be remembered,
c. Visiting the store was a place to relax, socialise, read, surf the internet and be seen.
 Starbucks doesn’t consider itself in “coffee” business, but a “service” business, they offer a culture
of warmth and belonginess where everyone is welcomed with a great variety and taste of the best
roasted coffee.
 There is high contact between the baristas and the customer to provide personalized experience
for each customer.
 Starbucks treat its employees well buying giving them benefits like medical, study, competitive
salaries, etc. which can be seen in the way the baristas treat the customers.
 Starbucks do not believe in the traditional advertising but considers social media to be much more
powerful to advertise the brand.
 Customers think of Starbucks as a cool place to hangout for college student or post work meet-
ups, or have a business meeting, for university students to finish their assignments. It is equally
about the product and the experience which Starbucks offers.

Overview of the audience profile and insights:

Audience profile: The brand is trying to capture educated working class living in major cities, Premium
coffee drinkers, High social media users, Brand Savvy and tech Savvy. looking for an experience from a
coffee shop and not just the coffee.

Insights: The company started to setup internationally with a motive of expansion, the Australian market
being one of the highest coffee drinkers attracted the company.

Starbucks wanted to be the most successful coffee chain in Australia, they opened so many stores in the
continent to make the product easily available, they wanted to implement the same culture of US
Starbucks being a place to hang out and do meetings and business in the Australia.

Positioning strategy: The Brand had positioned itself as a third place between home and work providing
rich experiences of the finest coffee, which is easily locatable. The brand used the same positioning strategy
for the Australian market as used for the US market. They showed this by opening large number of stores
and using the social media to attract the customers.

Communication Strategy: Advertising: Only spends under 3% of revenue on ads, but spends more on
ensuring customer satisfaction to increase word of mouth, store décor, viral videos, sample vans,
billboards, newspaper, magazine, and social media
Starbucks never engaged in traditional advertising, they believed in Large number of store presence and
word of mouth to be all the advertising and promotions they need. Similarly, in the case of Australia, the
company never introduced the brand to people, there were large number of stores coming up by the
company without any engagement with consumers which made them feel that the brand is being imposed
on them.

What went wrong?

Multiple things went wrong while establishing the market in Australia:

Didn’t understand the Australian customer: Australian took their coffee very seriously and did courses to
understand the coffee making. They were also Brand loyal to their local coffee shops, people preferred
drinking in small cafes with a small and community feels and sharing their stories with baristas instead of
being in a queue for not liked taste of coffee and paying extra bucks for a Brand name with which they
can’t relate. Australian population strives to buy local, think local and, most importantly, support their local
economy.

No product optimization: The company tried to replicate the US Business model in the Australia and did not
do the research on understanding the Australian customer’s taste. Starbucks offered different sizes of
offerings with syrup and milk loaded coffees and drinks, whereas the Australians with their sophisticated
coffee culture are into the small sized, black and unsweetened coffee. The major thing Starbucks failed to
do was to make their product more suitable and price it perfectly.

Showed arrogant image: The goal of being the most successful coffee chain in Australia appeared to be
very arrogant to the Australian customers. The Australians were aware of the Coffee culture much before
Americans, hence the Australian audience didn’t like an American brand trying to impose their arrogant
image of being the best. This was a Brand image issue and had nothing to do with the product.
Customers felt like the Brand wanted to teach them how to drink coffee.

Didn’t advertise: Starbucks relied much on its reputation before entering the market and did not advertise
to the mass media. The company trusted on Australia to gain sufficient publicity via word of mouth. They
opened many stores in the country without introducing it to the public.

Aimed rapid expansion, instead of steady growth: As discussed in the previous point, the company
opened many stores in a short span of time without introducing themselves to the public they grew faster
than the demand which made them too available for the public. Due to this there was no organic growth,
the customer did not get time to adapt for the taste of the Brand and they felt like they are being imposed
of this American giant. They should have gone slowly in the market by creating an artificial scarcity for the
expected “different” Starbucks experience.

Barisas experience: the customers felt that were not knowledgeable enough about the products they were
selling, The Baristas of Starbucks were also forced to achieve the target of customers handled in an
hour/day which resulted in the baristas not giving the personalized time it required for each customer.

Fierce competition: Starbucks did not consider the competition it would get from the local coffee houses
found in every street and the established coffee houses of Australia. With the High Brand loyalty rate in
Australia, it is very hard to attract the customer in such an established market place.

Negative effects: The consequences of the business model used for Starbucks Australia resulted in

Company: the company suffered around $104 millions in the business, they had to close down around 70%
of the stores setup in the continent.

Consumer: In the international market customers were losing trust with the brand.
Employees: Due to the closure of 70% store in the continent, there were many jobs layoffs.

Recovery: Starbucks has re-entered the Australian market by giving franchise to the local brand to
understand the market. It is clear for the company that understanding the market scope, its customers are
very important for the business.

Recommendation:
Company should consider partnering with other companies in foreign markets so that they can understand
the local customers which helps in reducing cultural resistance.
The company should continue to be more innovative in design and development and take this as an incident
for better learning. As this experience can impact the business positively.

Citations:

https://mpk732t12016clustera.wordpress.com/2016/04/10/why-did-starbucks-fail-in-australia-is-it-the-
coffee-or-the-marketing-strategy-2/
https://www.vice.com/en_us/article/4xb9gd/this-is-why-australians-hate-starbucks
https://www.cnbc.com/2018/07/20/starbucks-australia-coffee-failure.html
https://huntsman.usu.edu/learntwice/articles/why-starbucks-failed-in-australia \
http://www.businessstudiesqa.com/2017/12/starbucks-failure-in-australian-market.html