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

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Starbucks is the largest coffee chain in the world, and Australia has a large market for coffee. So when Starbucks started opening stores in Australia, it should have been the perfect match.

Starbucks opened its first store in Australia in 2000, but was forced to close 61 of its 87 stores by 2008. Why did the coffee giant fail in a coffee-loving country? I did the research and found several reasons why!

Why Did Starbucks Fail In Australia?

There are several reasons why Starbucks failed in Australia. For example, the coffee brand failed to research the Australian market, incorrectly assumed its US business model would transfer to Australia, and didn’t take Australia’s current coffee culture into account before opening too many stores too fast.

If you want to learn more reasons Starbucks was unable to survive in Australia, keep on reading!

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

Starbucks made the mistake of not researching the Australian market for coffee before opening its stores there.

Although Australia is a coffee-drinking nation with a large coffee market, it is different from the US market in significant ways.

Unfortunately, Starbucks made the mistake of assuming that because Australia is an English-speaking, coffee-drinking nation, it was the same as the US market.

However, this mistake had a chain of consequences that led to the ultimate failure of Starbucks stores in Australia.

2. Starbucks Opened Too Many Stores Too Fast In Australia

Starting in 2000, Starbucks began opening stores rapidly across Australia, in both urban centers as well as regional locations and suburbs.

However, this rapid expansion didn’t give Starbucks time to establish its brand and connect with consumers.

Business analyst Tom O’Connor said that Starbucks’ rapid growth in Australia was “not organic” and could not create a sizable customer base to sustain the stores.

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

Because Starbucks didn’t research the Australian market before launching its stores, it failed to consider the existing vibrant coffee culture.

After the Second World War, Italian and Greek immigrants who traveled to Australia brought with them their love of coffee.

Then, they developed a cafe culture with neighborhood coffee shops to meet friends, relax and enjoy a good cup of espresso.

With that, Italian and Greek immigrants introduced espresso machines and good coffee to Australians well before Starbucks opened its first store in the US.

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

With their own existing coffee culture, Australians never really got on board with the Starbucks culture of customizing drinks, earning rewards, and experimenting with various flavors and beverages.

So, seasonal promotions and, above all, the idea of coffee as a fast-food item never really caught on in Australia.

5. Starbucks Coffee Was Priced Too High

5. Starbucks Coffee Was Priced Too High

A cup of Starbucks coffee costs much more than coffee from the neighborhood coffee shop.

So, it seems Australians collectively decided not to pay around $5 for a cup of coffee that didn’t taste as good as the coffee made by their local barista.

6. Starbucks Drinks Were Too Sugary For Australian Tastes

Many analysts feel that Australians were already spoiled for choice for good coffee, as they had sophisticated tastes and didn’t go for the large, sugary Starbucks drinks.

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

When Starbucks introduced its model of what came to be called “fast coffee,” it failed to consider that Australians actually prefer “slow coffee.”

Not only does Australia have a highly developed coffee culture, but it is also a very personalized experience.

Therefore, Australians have a strong loyalty to their local coffee shops, where the owners and clientele are friends.

The local coffee shop is a place to spend time with friends, chat, play pool and relax, and people can spend as long as two to three hours at their favorite coffee shop.

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

Also, Starbucks made the mistake of assuming that its business model would work as well in Australia as it had in the US and elsewhere.

As a result, it did not adapt to the Australian market, particularly in taste and cafe culture.

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

So, the Australians chose to patronize their local coffee shops instead of the giant global company.

9. Starbucks Coffees Did Not Appeal To Australian Taste Buds

Australians have sophisticated tastes in coffee, and they prefer to go to a store where the barista can make a flat white or an Australian macchiato.

With that, Starbucks coffees were too different from these varieties and did not appeal to a nation of hardcore coffee drinkers.

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

By 2007, Starbucks had incurred losses of $105 million in its Australian stores. In 2008, it closed down 61 of its 87 stores in Australia.

The Starbucks store closings in 2008 may also have been due in part to the worldwide recession. However, Starbucks has not given up on the Australian market.

Now, Starbucks is locating its Australian stores in shopping malls where customers will appreciate the convenience of getting a cup of coffee quickly.

Also, Starbucks is positioning its stores in Australia in locations frequented by tourists, especially tourists from the US and China.

For these tourists, Starbucks is a familiar brand that stands for quality and reliability.

To find out more, you can also see our related posts on whether or not Starbucks is a franchise, why is Starbucks so expensive, and if Starbucks has boba.

Conclusion

There are some important lessons to be learned from Starbucks’ failure in the Australian market. 

For example, Starbucks made the mistake of assuming that just because Australia and the US are both English-speaking, coffee-drinking nations, its US model could be transferred to Australia.

However, Starbucks is not giving up on the Australian market yet and is positioning its stores carefully to avoid competing directly with existing neighborhood coffee shops.

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Marques Thomas

Marques Thomas graduated with an MBA in 2011. Since then, Marques has worked in the retail and consumer service industry as a manager, advisor, and marketer. Marques is also the head writer and founder of QuerySprout.com.

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