Starbucks launched in Australia in 2000. Unlike Gloria Jeans, which located its stores mainly in shopping centres, Starbucks’ preference was for stand-alone locations with street frontage. Perhaps overestimating the similarities between the Australian and American markets, they proceeded to roll out stores across the country.
It did not go well. Perhaps this was because they underestimated the strength of our existing coffee culture. One estimate suggests there are more than 6500 independent cafes in Australia, pulling in about $4 billion a year in coffee sales, most of it in lattes, flat whites and long blacks.
Whereas smart operators like McDonald’s initially adapted their product offering for local tastes (they even had fish and chips on their early menu), Starbucks had faith that Aussies would embrace the frappuccino and other sweeter offerings.
Over their first seven years in Australia Starbucks lost around $105 million. It seems there just weren’t enough American (or perhaps Japanese) tourists in enough places to keep them going. The chain didn’t disappear completely, however. Although Starbucks closed around 70 per cent of their stores, they continued to operate, reduced to 23 stores.
In 2014, Starbucks sold the remaining stores to the Australian Withers Group, owners of 7-Eleven stores in Australia. The group indicated that the coffee stores would remain independent from 7-Eleven stores. Under the new ownership, Starbucks began a more measured expansion program and as of 2018 had 39 stores in the Brisbane, Melbourne, Gold Coast and Sydney areas, notably where the tourist trade is strongest.
There’s plenty of competition. As well as the independent cafés, Gloria Jean’s has more than 450 branches in Australia while Coffee Club has 350 outlets. Starbucks has begun to imitate its rivals, opening a store at Westfield in Parramatta in 2016.