Down Under fails to deliver for Starbucks
Starbucks, the world’s largest coffee-shop chain, will close three-fourths of its stores in Australia within the next five days, backing away from a market it entered eight years ago.
By Iain Wilson & Daniel Petrie, Bloomberg |
SYDNEY/SINGAPORE : Starbucks, the world���s largest coffee-shop chain, will close three-fourths of its stores in Australia within the next five days, backing away from a market it entered eight years ago.
Chief executive officer Howard Schultz cited ���challenges unique to the Australian market.��� The Seattle-based company���s business in other international markets remains strong, he said in a statement e-mailed on Tuesday.
The decision to shut 61 of Australia���s 84 Starbucks cafes by August 3 is the first mass closure outside the US since the July 1 announcement that the company would close 600 US outlets, eliminating as many as 12,000 jobs.
The chain faces a European-style coffee culture dominated by neighbourhood cafes often selling stronger brews at lower prices.
���The coffee culture was reasonably developed when they came into the country,��� said John Roberts, a professor at the Australian Graduate School of Management at the University of New South Wales. ���Quality coffee and a coffee culture were what Starbucks had to compete against in Australia.���
The 23 Australian stores spared are in Brisbane, Melbourne and Sydney, the nation���s three largest cities. Starbucks said Jason Ball, its store development manager, will be made managing director on September 1.
���We believe that this difficult, yet necessary, decision to close stores in Australia will help support the continued growth of our international business,��� Schultz said in Monday���s statement. ���There are no other international markets that need to be addressed in this manner.���
The chain opened its first Australian store in July 2000 in Sydney���s central business district, eventually expanding to the states of Queensland, Victoria, South Australia and Tasmania.
Schultz, the 54-year-old founder and chairman, resumed the position of chief executive officer in January to revitalise Starbucks��� cafes. He has slowed the pace at which stores are opened, introduced a loyaltycard program, and altered sandwich recipes as he tries to recapture the charm he says Starbucks lost amid a rapid expansion.
The company���s earnings have declined as cash-strapped consumers facing record gasoline prices pull back on gourmet coffee and other luxuries.
���Mortgage pressure from higher interest rates and the petrol price at the pump have taken the edge off the consumer,��� said Rob Patterson, managing director of Adelaide-based Argo Investments, which looks after $3.8 billion in stocks. ���It wouldn���t be surprising to hear coffee shops are under pressure.���
Australia���s taste for coffee is a byproduct of the waves of immigrants arriving on the country���s shores following World War II. European migrants - predominantly Greeks and Italians - were first to establish the culture, which was later embraced more widely beginning in the 1980s.
���Australia, in the more metropolitan areas, has quite a sophisticated coffee culture,��� said Paul Bassett, the Sydney-based winner of the World Barista championships in 2003. ���There are some places making really good coffee and doing it better than Starbucks.���
Coffee in Australia has developed an almost cult-like following, particularly in Melbourne - a city of trams, sidewalk cafes and European-style architecture.
���Specialty coffee is growing at a far greater rate than regular coffee,��� said Bassett, a judge and board member of the technical standards committee for the World Barista championship. ���Consumers are developing a more discerning taste.���
Chief executive officer Howard Schultz cited ���challenges unique to the Australian market.��� The Seattle-based company���s business in other international markets remains strong, he said in a statement e-mailed on Tuesday.
The decision to shut 61 of Australia���s 84 Starbucks cafes by August 3 is the first mass closure outside the US since the July 1 announcement that the company would close 600 US outlets, eliminating as many as 12,000 jobs.
The chain faces a European-style coffee culture dominated by neighbourhood cafes often selling stronger brews at lower prices.
���The coffee culture was reasonably developed when they came into the country,��� said John Roberts, a professor at the Australian Graduate School of Management at the University of New South Wales. ���Quality coffee and a coffee culture were what Starbucks had to compete against in Australia.���
The 23 Australian stores spared are in Brisbane, Melbourne and Sydney, the nation���s three largest cities. Starbucks said Jason Ball, its store development manager, will be made managing director on September 1.
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���We believe that this difficult, yet necessary, decision to close stores in Australia will help support the continued growth of our international business,��� Schultz said in Monday���s statement. ���There are no other international markets that need to be addressed in this manner.���
The chain opened its first Australian store in July 2000 in Sydney���s central business district, eventually expanding to the states of Queensland, Victoria, South Australia and Tasmania.
Schultz, the 54-year-old founder and chairman, resumed the position of chief executive officer in January to revitalise Starbucks��� cafes. He has slowed the pace at which stores are opened, introduced a loyaltycard program, and altered sandwich recipes as he tries to recapture the charm he says Starbucks lost amid a rapid expansion.
The company���s earnings have declined as cash-strapped consumers facing record gasoline prices pull back on gourmet coffee and other luxuries.
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���Mortgage pressure from higher interest rates and the petrol price at the pump have taken the edge off the consumer,��� said Rob Patterson, managing director of Adelaide-based Argo Investments, which looks after $3.8 billion in stocks. ���It wouldn���t be surprising to hear coffee shops are under pressure.���
Australia���s taste for coffee is a byproduct of the waves of immigrants arriving on the country���s shores following World War II. European migrants - predominantly Greeks and Italians - were first to establish the culture, which was later embraced more widely beginning in the 1980s.
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���Australia, in the more metropolitan areas, has quite a sophisticated coffee culture,��� said Paul Bassett, the Sydney-based winner of the World Barista championships in 2003. ���There are some places making really good coffee and doing it better than Starbucks.���
Coffee in Australia has developed an almost cult-like following, particularly in Melbourne - a city of trams, sidewalk cafes and European-style architecture.
���Specialty coffee is growing at a far greater rate than regular coffee,��� said Bassett, a judge and board member of the technical standards committee for the World Barista championship. ���Consumers are developing a more discerning taste.���
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