Will Europe Warm to Starbucks?

Starbuck's certainly qualifies in some ways as a category killer, but there's an interesting side to Starbuck's that also makes them a category creator. As Robert points out:

In the early 1990's, there were about 200 coffeehouses in the United States; today, there are some fourteen thousand, according to the Specialty Coffee Association. About 25% of these are Starbuck's; the overwhelming majority are mom-and-pop operators brewing lattes and cappuccinos with heft profit margins.

But, as Robert also discusses in his book, the big challenge to US categories is expansion. I mean, seriously, how many more Starbuck's can they build in the US! But, overseas, that's a different story. There's more opportunity to expand there, but more risks. The current BusinessWeek has an interesting article about Starbuck's expansion challenges:

"Starbucks is great when I'm late for work, have my car, and want my coffee American-style," he says. But most mornings, Grollemund still gets his caffeine fix at a well-worn Parisian café like le Saint André, where he was sipping an "express" at the bar on a recent weekday. "Culturally, this is just an environment that I feel more comfortable in," he says, puffing away on a cigarette.

Heating up European growth is one of Starbucks' main goals, and converting French coffee drinkers such as Grollemund is a key test. The Seattle-based chain's international operations finally turned profitable last year. But it's not clear whether its European business alone is making money. And overseas operations for fiscal year 2004, ending last Oct. 3, generated a mere $53.3 million in operating profit -- only about 6% of Starbucks' total for the year, excluding special items.

It will certainly be interesting to see how companies like Starbuck's can maintain their identity, while being able to expand to the new overseas markets.

Link: Will Europe Warm to Starbucks?.

Comments

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Starbucks will cut out a niche with non-smoking, active, Parisians who’d rather be out jogging or working than sitting in a bleary unkempt cafe for hours at a time.