End February, Starbucks announced that it will open its first-ever store in Italy early 2017. In the birthplace of espresso and cappuccino, where coffee is at the intersection of culture, heritage and community; the news that an American retail chain would come and sell coffee had the potential to cause derision and criticisms. So Mr Schultz, the Chairman and CEO of Starbucks, travelled to Milan to bolster the announcement with some compelling context: “we are going to come here with great humility” he said.
Similarly, when mid 2015 Starbucks announced the 2016 opening of its first store in South Africa (and first-ever in sub-Saharan Africa), the news was put against the ongoing narrative about the shape of the South African economy – the shrinking growth, the weak rand, the high unemployment. So Taste Holdings, Starbucks chosen partner in South Africa, not only repeatedly offered reassuring arguments report after report but also opened the first store in the trendy suburb of Rosebank, Johannesburg, with grand fanfare end April 2016.
Early press reviews have been relatively positive, with commentators stressing the long queues of coffee aficionados in front of the store despite chilly temperatures, the wide online circulation of customers’ enthusiastic impressions, the pride collectively shared among South Africans that yet another international brand entered the country, seeing a sign that it is still relevant on the global stage.
But at the same time a fair number of reviewers were perplex, bringing back the struggling SA economy argument and pointing out that consumers lining up en masse on day one doesn’t necessarily mean that success is guaranteed for Starbucks, particularly in a market considered well packed with coffee shops.
So what are the key success factors for Starbucks in South Africa?
Price: various reviewers have noted that Starbucks prices are the highest in the Johannesburg market. 27 rand for a latte is still cheaper than prices elsewhere in the world, but it could prove problematic compared to what South Africans usually pay. At this price point, the obvious target is the upper-middle and affluent classes. But even with these targets, attracting them will not suffice. Starbucks will need to earn see their strong, sustained loyalty in the form of both a critical number of visits and critical level of spending.
Product: At most coffee shops across Johannesburg, there are latte’s, cappuccino’s, espresso’s, herbal tea’s, and a few other things. The menus are relatively conservative in terms of ingredients, flavours and recipes. Noticeably, specific consumer groups – students, young professionals – have showed a great receptiveness to change in their preferences and attitudes towards coffee. There is subsequently a huge opportunity for Starbucks to win a sizeable market share if it can bring in the elements forming the pillars of its valued reputation: the variety of its product offering and the innovation in the flavours, recipes and labels.
Customer Experience: “Our brand equity is built on our customers’ experience and that depends on the quality of our people” Mr Schultz said to the New York Times in March. In South Africa, where poor customer service is notoriously rife, Starbucks has a serious chance to make a difference as it is expected that Taste be the recipient of a skills transfer and invest heavily in employee development programmes.
I enjoyed a latte at two different stores in Casablanca, the Morocco Mall on one hand, the Franklin Roosevelt Villa on the other: the latter – thanks to its emblematic location, its modernist design combining Moroccan identity and European influences, its luscious landscaping – seriously edged up my experience. Iconic store locations, generous rewards schemes, innovative payment solutions have proved to be game changers or competitive advantages for Starbucks in competitive markets. While it is too soon to say whether Taste will develop these initiatives in South Africa, for the company to carry out its ambitious rollout – opening twelve to fifteen Starbucks outlets in two years, it would need to leverage the diverse range of Starbucks customer experience management tactics.