Why Did Starbucks Fail In Australia? (9 Reasons Why)

Starbucks is the second largest coffee store in the world, and Australia’s market is relatively small.
The company realized that it needed to find a way to get the attention of its Australian customers–and it found it in a surprising place.

Starbucks tried to make a comeback in Australia. They opened 61 stores, but they failed. They opened a lot of stores, but the business environment in Australia was not welcoming.

Why Did Starbucks Fail In Australia?

Starbucks failed because it didn’t research the Australian market and didn’t take into account the current culture of coffee shops in Australia. It opened a lot of stores quickly without researching the Australian market.

The Australian dollar is higher than the American dollar, which means that a cup of coffee from a McDonalds in Australia is about 25% more expensive than if you purchased it in America.

The average price of a cup of coffee in Australia is significantly higher than in the U.S. (even after adjusting for the difference in currency).

Most Australian coffee shops do not accept credit card payments, and even if they do, it can take days to process a credit card payment for your coffee.

1. Starbucks Didn’t Research The Australian Market For Coffee

Starbucks didn’t research Australia’s markets for coffee before opening up the stores in Australia.

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Australia’s coffee market is small and diverse unlike the US. Australia has more than 100 different types of coffee, in addition to strong specialty brands. There are large amounts of small coffee bean lots, which are less processed, so the taste is very different. Additionally, people are used to the taste from many different sources, such as French press, espresso, and drip coffee.

Starbucks started marketing their products in Australia, but didn’t have the cultural awareness to realize that Australians are very different people and didn’t drink much coffee.

The problem was that the French coffee chain had overstayed its welcome in France.

2. Starbucks Opened Too Many Stores Too Fast In Australia

The rapid boom of Starbucks came after 2000-2001 when the company began opening stores rapidly across Australia. They opened stores in both urban centers as well as regional locations and suburbs.

Starbucks had a problem with this rapid expansion. It didn’t give them enough time to establish themselves within the market and connect with the customers.

Â The growth of Starbucks in Australia was not natural and has not created a large customer base to sustain stores.

3. Starbucks Couldn’t Compete With The Existing Coffee Culture In Australia

Because Starbucks failed to research the Australian coffee culture before launching its stores, it failed to consider that Australian coffee culture is already well established.

The Great War made the world a more dangerous place. There were increased tensions between the United States and the rest of the world, and immigrants wanted to flee to somewhere safe and stable.

In the US, coffee shops came to fill a need for a space where you could be alone with your thoughts.

With that, coffee houses in Paris and London were filled with Germans, Austrians and the British (and I remember one in particular on Shaftsbury Avenue, near Victoria Station, with a large sign outside: “German coffee and cake”).

4. Australians Didn’t Warm Up To The Starbucks Culture

Australia has its own coffee culture, and people are not interested in Starbucks’s coffee culture. They’d rather pay $4 a coffee than make it at home.

So, they got really annoyed at me, being a coffee snob, and took away my rights to buy coffee and even coffee pods.

5. Starbucks Coffee Was Priced Too High

It’s more expensive than the coffee from the shop because of all the things you have to pay for.

What a disaster for coffee chain Starbucks!
But in all seriousness, this does make a pretty solid point about Australia’s coffee culture.
The average coffee price in Australia is $3.30.
So the cost of coffee doesn’t really seem like a large deterrent to people drinking coffee.

6. Starbucks Drinks Were Too Sugary For Australian Tastes

Australians already have a lot of choice for good coffee, because they love sophisticated drinks like cappuccinos and lattes.

7. The Starbucks “Fast Coffee” Model Was Too Impersonal For Australian Tastes

Starbucks introduced the “fast coffee” model where the espresso shot takes less than 5 seconds and the customer has to wait for 30-60 seconds before being able to have their latte. If this is not fast or fresh enough for you, then you simply have to wait longer.

Not only does Australia have a highly developed coffee culture, but they also are able to make a more personalized experience for their coffee drinkers.

Therefore, Australians are loyal to their local coffee shops, where the staff and clientele are friendly.

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Local coffee shops are a place to spend time with friends, chat, play pool, and relax. People can spend anywhere from 30 minutes to three hours at a local coffee shop.

8. Starbucks Tried To Import Its Business Model Directly From The US To Australia

The Australian government was also in a hurry to get the new tax implemented before the election.

Australia does not have many coffee shops as compared to the USA. As a result, Starbucks does not have the same effect in Australia as it does in the USA.

Additionally, the Starbucks people didn’t take into account the cultural preference of Australians to side with the little guy.

We decided to support local coffee companies instead of the giant world company.

9. Starbucks Coffees Did Not Appeal To Australian Taste Buds

Australian people like to drink coffee. They like it served in a glass or mug with a teaspoon of coffee grounds in it. They also like it served in a brown paper bag.

While Starbucks had its share of problems, like how its beverages were different from others and how expensive it was, its biggest problem was the fact that its coffee was not good.

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What Has Starbucks Learned From Its Mistakes In The Australian Market?

Starbucks decided to close down most of its outlets in Australia. It shut down 61 of its 87 stores.

Starbucks never stopped selling their coffee in Australia. They didn’t give up on the Australian market, they just found ways to save money, such as cutting out the coffee chain stores and relying more on the drive thru.

Starbucks is planning to move their new stores to mall locations where they will be able to get an eye-catching, more accessible atmosphere.

Starbucks wants to get ahold of a good amount of tourists, and one way it’s doing that is by being more visible. They might even be planning to have a few locations a little closer to the popular backpacker areas and tourist-heavy parts of Australia. The company also wants to be close to universities and places where people are likely to go when they’re looking for a place to study or work.

When it comes to coffee, Starbucks is the favorite brand of many people from around the world.

We also have a separate post on whether or not Starbucks is a franchise, why is Starbucks really expensive, and if Starbucks has boba.

Conclusion

In our article “Why Starbucks’ Coffee Will Never Be Australia’s Favorite Drink”, we talked about the key lessons Starbucks learned from failing to make coffee an Australian favorite drink.
This quote was from our article “Why Starbucks’ Coffee Will Never Be Australia’s Favorite Drink”.

Instead, Starbucks made the critical mistake of assuming that just because they know how to sell coffee in the US, they could apply the same formula in Australia.

Starbucks is not going to give up on the Australian market just yet and is positioning their stores carefully to avoid competing directly with existing neighborhood coffee shops.