23 June 2003

global coffee goes flat
The excellent Oligopoly Watch reports:

But the anti-globalists may have less to worry about than they thought. A recent story in Business Week (June 9, 2003, ?For Starbucks, There?s No Place Like Home?) reveals that Starbuck?s international move is turning out to be a bust. There are over 1,500 international stores now, but they are net money losers. Japan, the largest overseas Starbucks presence, has reached a capacity, and is now losing money. Starbucks has closed its stores in Israel, and exiting joint ventures in Switzerland and Austria.� In Britain and Germany, growth is stalled.

The big reason, according to Business Week, is local competition. In all of these countries, once the concept of a coffee bar catches on, there spring up local versions with lower prices that take business away from the costly Starbucks. There?s no indication that this is fueled mostly by anti-Americanism (though Starbucks stores, like MacDonald?s, have been targets of anti-war protests). It seems to be a rare case of real-world limits on multinational growth, and the interesting thing is that it?s based not on protectionism, but on local preferences.

About a year ago my favourite cousin came back from a trip muttering, with an expression of genuine shock, that you cannot get decent coffee in New York. Some months later Starbucks outlets began sprouting all over Sydney like bad mushrooms after rain. It would be interesting to see how well they're doing in Oz against more traditional coffee bars. I did find one mention in The Age:

Despite the money being spent at the moment by these US giants and Hudson and the brand and marketing power they bring, Melbourne's traditional coffee retailers remain unperturbed.

Sisto Malaspina, a partner of one of Melbourne's most famous coffee establishments, Pellegrini's, on Bourke Street, said he was all for them as he believed they were good for coffee drinking in Australia generally.

"It's a good thing for everyone because it introduces coffee to a lot of people who wouldn't otherwise go into a coffee shop like us, and it also gets the young people into coffee too.

"Their coffee is good - our coffee is excellent," he said.

Mr Malaspina reports that Pellegrini's business has been unaffected by the emergence of these chains in the CBD - Pellegrini's is selling more than 500 cups of coffee a day - with caffe latte the most popular drink and espresso (short black) also showing a bit of a revival at the moment.

He has no plans to introduce a Caramel Rooitea Ice Blended at any stage soon

Serious conflict-of-interest disclosure. Some in my suburb are quite proud that Macdonalds had to close their outlet here for want of business.

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