Starbucks
CEO Howard Schultz's vision for the chain was largely inspired by the coffee
bars he saw on his first trip to Milan more than three decades ago. But it took
the company that has about 26,000 stores in 75 countries, 35 years to win the
credibility he felt necessary to make the leap into the country that gave
espresso to the world.
Located
in an old post office building just steps from Milan's cathedral, the store
will be the largest to date at 25,500 square feet, or about 2,400 square meters
— compared with 200 square feet for the average Starbucks location.
Although
Starbucks has garnered repute and immense
popularity in the US, Asia and some
parts of Europe, will it be able to invade the most fortified Old World coffee
stronghold?
Italians
are certainly passionate about coffee -consuming 4.6% of the world's supply -
but they don't enjoy it the way Starbucks typically serves
it: from drip percolators, and in elaborate preparations like the Frappuccino.
They also favour making coffee at home, and when they do go out for it, they drink espresso shots and inexpensive
cappuccinos while standing at the bar.
The
Italian cafe market is the biggest in the world, with over $10 billion of
retail sales in 2014.
As
of 2011, 75% of the coffee consumed by Italians was drunk at home, a number not
atypical for European countries. Out-of-home
consumption has in fact been decreasing, falling from 30.3% in 1997 to 23.4% in
2011.
Traditional
espresso is deeply rooted in Italian culture. Starbucks' fancy drinks may
appeal to foreigners and curious Italians, but it will never displace authentic
Italian coffee. As a result, a cafe in Italy is always an espresso. A
cappuccino is seen as something completely different - a breakfast drink no
normal person would want after about 11 A.M.
Also, baristas in Italy
generally make the coffee in full sight of the consumer, and hand brioche and
other pastries across a glass case, often with a quip. It is not uncommon to
see waiters with silver trays delivering coffee in porcelain cups covered with
foil to neighbouring business, a practice that underlies the rarity of the
takeout coffee cup.
Starbucks’ strongest point
is to take away, to buy and take away. However, the culture and strong point of
Italian cafes is service, they serve coffee of very high quality, with a very
refined blend and a great service.
To
overcome this challenge, Starbucks will have to adapt its offerings for Italian
tastes, as it has successfully done in China. The company serves red bean Frappuccinos and mooncakes in 2,000 Chinese stores, and plans to open 2,500 more in the next five
years.
For Italy, Starbucks plans
to come up with a Roastery in
Milan.
The Roastery is Starbucks’ premium offering, designed to cater to well-heeled
consumers that are driving sales of niche, artisan goods. It serves small batch
“Reserve” coffees in a variety of brewing methods.
The
average customer at the Roastery spends four
times more than the average
customer at a traditional Starbucks store.
After
the Roastery, Starbucks plans to open other locations in Milan, a combination
of traditional stores and Reserve stores, which are essentially smaller
Roasteries, before it looks at other Italian cities. As of now, it is not known
how many stores are planned for Milan, but as noted in the past, 10 to 12 have
opened within the first year of entering a market.
To
help capture the local markets, Starbucks will work with Italian licensee and
business partner Percassi.
Together they will also open "a small number" of regular coffeehouses
in Milan for the balance of 2018, the company said. They are also expected to
create around 350 jobs in Italy.
Percassi, the licensee, is a renowned Italian
company with a proven track record of operating highly successful major brand
partnerships across Italy. This venture will be instrumental in helping
Starbucks combine local expertise with demonstrated business success to make
every single store a favourable experience for Italian customers.
However
Starbucks must be ready to face fierce competition-
1. There are some 149,300 bars in Italy and a network of 3, 00,000
companies in the catering, restaurant, tourism and entertainment industry.
2. Considering the conventional coffee
practices, initially only younger and brand-aware Italians and tourists in Italy may be
disposed toward embracing Starbucks as a place to hang out.
3. The
notion of the “third place”—Starbucks
as a kind of home away from home, or office away from the office—is not the
usual concept for Italian cafes, that value customer-attention and service
more.
4. Italians don't pay Starbucks prices. A cappuccino at an average Italian cafe costs
1.40 euros, about $1.52. That's less than half the price of a
small Starbucks cappuccino, which costs $4.01. They also don't favour large
drinks like Starbucks' 24
oz. Venti, which commands an even higher price.
5. Also, customers who order a pastry and a cappuccino
while standing in an Italian bar in the
Piazza Cordusio area (where the first Starbucks in Milan will open) can expect
to pay around $3. By contrast, a Starbucks Grande Cappuccino alone can cost
$3.95 before tax.
6. Pumpkin
Spice Lattes and Peppermint Mochas are a no-no: The various flavoured coffees popular in the
United States are considered children’s drinks and are not favoured in the
Italian market.
Starbucks is set
out to make an ambitious venture. Only successful catering to domestic
practices, coupled with its marvellous brand name can help it make space for
itself in the competitive market.
