Company Background
With the introduction of pub culture that offered coffee, coffee became a classy drink, and the coffee pub culture was started by Starbucks which operated as a coffee café and as a retailer who served out of USA (Bhasin, 2018). Starbucks began its operations as a roaster and seller of coffee beans and since then has gone in becoming one of the largest chain stores harboring coffee pubs that have operations around the globe. As of today, Starbucks has more than 24000 outlets in 70 countries that it operates around the world.
Starbuck’s menu entails freshly brewed kinds of coffee that include flavored coffees, different types of tea, snacks that are baked or non-baked and yogurt. In 2017, Starbucks recorded revenue of more than 23 billion dollars, and Starbucks has become a leader in the market with regards to this segment and not only in the US but also in the US.
The co-founders of Starbucks are Jerry Baldwin, Gordon Bowker, and Siegel who saw it being opened in 1971 in the Pike Place Market in Seattle. The founders of Starbuck had some common traits in that they all originated from academia and thus they all loved coffee and tea. They borrowed and invested some of their finances in running the first store that they named Starbucks after Moby Dick. An entrepreneur in the coffee entrepreneur by the name Alfred Peet inspired and motivated Starbucks founders.
Starbucks in Australia has operations in more than 60 diversified markets. However, Starbuck’s entry into the Australian market was one unsuccessful mission as the company has struggled to compete against the robust Australian café customaries.
Australia is classified as one of the primary coffee consuming nations of the oceanic territory. Also, it is one of the few countries where immediate coffee consumption outweighs the freshly brewed coffee. It is approximated that more than 75% of Australia’s coffee that is consumed is instant (Pratap, 2017). As of 2016, Nestle Australia was ranked as the leading in the sales volume as it commanded a market share of more than 55% (Euromonitor International, 2018). Nestle has continued dominating the segment of fresh ground coffee and claims an 82% value of the shares with the Nespresso brand commanding more than 70% value of the shares. The café culture in Australia is projected to continue experiencing robust growth. Also, in the past five years, the café and coffee shops have seen tremendous growth due to the love for quality coffee by the Australians.
Situation Analysis
Starbuck is bound to adhere to the many Australian laws and regulations that impact all components of the company. For instance, the food and health safety, fair trade and carbon emissions among others.
The industry heavily relies on the disposable income where the minimum wage was increased by more than 3% which led to the increase in disposable income and expenditure. Also, the Australian cafes and coffee retail shops are projected to continue to expand solidly in the next five years.
Aspects such as fair trade, sustainability, and green consciousness are gaining vital importance among consumers. The suburban coffee culture can be said to be growing exponentially with many coffee houses that offer takeaway and dine-in choice for customers being established. As such, they are culturally and socially accepted and thus suited to customers who are inclined to have a conscience that aligns with health and fitness.
There is a growing concern over the issue of carbon emissions and climate variations which impacts negatively on the production of coffee beans in Australia with regards to flavor, quantity, and costs not forgetting the use of pesticides and preservatives.
The introduction of regulations and policies by health agents about the production of caffeine, consumption and serving proportions.
The assumptions made that Australians would prefer and enjoy sipping the American coffee was misguided. Starbuck’s used the Australian business model in a different country such as Australia and thus failed. The success of Starbuck in Australia in the US was not attributed to the sales made by the company with regards to coffee but was due to Starbuck selling coffee culture. The company is struggling to fight the prevailing local coffee culture.
The cafes and shops offering coffee have proliferated over the past five years, and the vibrant coffee culture in Australia supports the coffee industry. The revenue from the sector is expected to rise to 5% annually in the next five years partly boosted by consumer sentiments and the increased consumer incomes that encourage consumers to frequent cafes and coffee shops (IBIS World, 2018). The revenue from the coffee industry is expected to rise by 2.7% in 2018 totaling more than $8 billion (IBIS World, 2018). Though the industry has witnessed robust performance over the past few years, the existence of persistence pressures has ensured that profitability has been pushed downwards over the same period. The coffee culture in Australia and an increasing number of specialty cafes and coffee shops have led to increased industry competition and low barriers to entry.
Market Analysis
The robust coffee culture in Australia has led to the success of industry with regards to cafes and coffee for the past five years. The operators of such coffee shops and cafes have benefited from the love of quality coffee by Australians. The revenue from this industry is expected to grow at an average of 5% per annum over the next five years and reach $ 8 billion (Eule, 2018). The robust and healthy performance in this industry is due to more than 10% increase in 2014 facilitated by a rise in consumer expenditure in both the cafes and coffee shops over the same period (Euromonitor International, 2018). The revenue from the coffee industry is expected to rise by more than 2.5% in 2018 as people continue finding high-quality coffee (IBIS World, 2018). The existence of consumer demand that is resilient in pursuit for high quality and convenient food and drinks has propelled the success of the industry.
The demand for fresh coffee pods that have been grounded continued to experience robust growth in 2017. The relevance of the pods, as well as the availability of pod products on offer and, has continued to demonstrate growth. The culture associated with café remains to infiltrate Australian homes, and in 2017, consumers continued showing a preference for coffee products of high quality (Mordor Intelligence, 2017). The consumers are also looking forward to replicating the café experiences in their homes where they use coffee beans that are fresh and grounded. Consumers that are eco-conscious continue demanding coffee that is sustainable. Thus, consumers continue raising eyebrows on understanding where coffee products come from. This entails having a clue about the processes involved in processing coffee and whether such ingredients were extracted sustainably (Bly, n.d.).
Gloria Jean’s coffee is one of the main competitors of Starbucks. Gloria Jean’s coffee targets a small market niche the young adults’ segment that is composed of individuals with age between 18 to 25 years in comparison to Starbucks that has people of age between 15 to 64. Also, Gloria Jean’s targets female clients as half of the sales come from the females. Other coffee competitors in the industry include coffee club and Hudson coffee.
Starbucks’ ability to effectuate immediate steps in implementing its strategies has been significant in establishing its position in the market. Also, Starbucks was sound financially making it a well-established coffee retail chain across the world that has positive goodwill.
Macro Environment Analysis
The Australian government supported the market for fast food in Australia. Australia also boasts of a large number of youths who enjoy taking coffee and account for the most significant number of spenders of the fast food industry (Seaford, Culp, & Bradley, 2012). Starbucks had some strategies that it could use in venturing the Australian market, and one strategic one was the use of wholly owned subsidiary. The youth in Australia account for the largest number of consumers of coffee in the world.
Before Starbucks sought to venture into the Australian market, there were local coffee shops that had matured with regards to an established presence in Australia. As a matter of concern, Australia hosts more than 600 coffee shops enterprises that Starbucks has to contest with (Salehi, 2010). The Australian culture with regards to coffee shops required a high level of experience and expertise, and this was very difficult and even as of today for Starbucks to replicate.
Starbucks in a bid to overcome internal hurdles only put in place a basic awareness for scheduling and implementing a viable expansion plan. However, Starbucks lacked the required experience needed in operating in the Australian market before its expansion.
Maintain an image of instant coffee provider that will translate to an increase in the brand awareness by more than 20% among the youths of age between 15 to 35 years in one year. Establishing a promotional pricing strategy that excludes 5% of the retail price over the next six months (Berman, 2014). Such objectives reveal that Australians are seeking to develop a coffee experience that is out-of-home right at the comfort in their homes. Thus, it is imperative to create and establish a lasting impression of instant coffee as a premium in taste with regards to fresh coffee. Young people of 15-35 years will be the targets as they may be a blend of new and ancient coffee consumers. Since such a group is price sensitive due to lack of high disposable income, a competitive pricing technique will be employed through the use of promotional pricing to lure such a market to pick Starbucks over its rivals.
References
Berman, C. (2014). Starbucks marketing Strategy. Retrieved from ehow: https://www.ehow.com/info_7753520_starbucks-marketing-strategy.html
Bhasin, H. (2018, March 1). SWOT analysis of starbucks. Retrieved from Marjeting91: https://www.marketing91.com/swot-analysis-starbucks/
Bly, R. W. (n.d.). The 7 key differences between business-to-business and consumer marketing. Retrieved from nmoa: https://www.nmoa.org/articles/dmnews/7differencesofbtobandconsumermarketing.htm
Eule, A. (2018, January 25). Starbucks Earnings: Mobile Efforts Key to Successful Report. Retrieved from Barrons: https://www.barrons.com/articles/starbucks-earnings-mobile-efforts-key-to-successful-report-1516903165
Euromonitor International. (2018, February). Coffee in Australia. Retrieved from Country Repeort: https://www.euromonitor.com/coffee-in-australia/report
IBIS World. (2018, January). Cafes and Coffee Shops – Australia Market Research Report. Retrieved from IBIS World: https://www.ibisworld.com.au/industry-trends/market-research-reports/accommodation-food-services/cafes-coffee-shops.html
Mordor Intelligence. (2017, December). Australia Coffee Market – Growth,Trends and Forecasts (2017 – 2022). Retrieved from Industry Reports: https://www.mordorintelligence.com/industry-reports/australia-coffee-market
Pratap, A. (2017, January 23). Marketing Strategy of Starbucks. Retrieved from cheshnotes: https://www.cheshnotes.com/2017/01/marketing-strategy-of-starbucks/
Salehi, M. (2010, May 5). Starbucks Marketing Plan. Retrieved from linktranslation: https://www.linktranslation.com.au/starbucks-marketing-plan/
Seaford, B. C., Culp, R. C., & Bradley, B. W. (2012). Starbucks: Maintaining a Clear Position. Journal of the International Academy for Case Studies, 2(1), 21-30.
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