Starbucks in Spain

Cup In my last review, I made a reference to Starbucks being a source of expansion for competitors in different countries around the world.

But is it the same in Spain? Has a concept of “quality coffee to go” proved to be on demand? What can local businesses learn from Starbucks?

To begin with, it’s worth making a short review of what Starbucks is.
The history of the company goes back to 1971 when there was a single store specialized in roasting and retailing whole bean and ground coffee, tea and spices.
By 19.10.2012 the company had 17652 stores in 61 countries all over the world with a wide range of products: coffee, tea, RTDs, fresh food, and ice-cream.

The first store in Spain was opened in April, 2002 in Madrid. Nowadays there are 76 stores all over Spain. 20 of them are in Barcelona. (http://www.starbucks.es/about-us, https://www.facebook.com/StarbucksEspana?ref=ts&fref=ts, https://twitter.com/starbucks_es)

To proceed, it is necessary to compare the coffee culture of Spain and the concept of Starbucks.

Spain has a long history of coffee consumption.
For centuries it was importing coffee from its colonies to sell quality grain to other countries while retaining lower quality product for its people.
In order to protect grain while stored or transported, coffee was roasted with sugar. To compensate its bitterness, it was served with a drop of milk.

Thus, traditionally, the majority of people in Spain are resistant to espresso and the coffee culture, in general, lacks variety.
Besides, due to limited coffee experience, price sensitivity is relatively high.

Whereas, the initial objective of Starbucks was to introduce Italian style beverages based on quality coffee grain to the market.

Back in 1980s, the advantage of being a flag company permitted Starbucks to set prices higher than the average to stand out on the market.
The rest of the story is known: success in the coffee segment, expansion to other areas, introduction to the international market.

Now it’s time to consider introduction of Starbucks to the Spanish market with the national background that was described here above, its strategy, its target group and the concept of stores. To conclude, we’ll make a short SWOT analysis.

Starbucks came to Spain being an international coffee shop chain with a well-defined mission, vision, stores’ concept and an international marketing support.
It immediately differentiated itself from the national competition through its stores’ environment and relatively high prices.

The target group includes tourists who wish to go to the place they know what to expect from; foreigners who live or work in Spain and who look for a comfortable place to work or spend time in; and locals who basically wish to stand out and be different.

With the time, comfort turned to be the key strength of Starbucks.

Whichever store you go to, you are sure to find sofas and armchairs, soft background music, polite service and wifi. So that you can stay connected as long as you wish.
The majority of stores have big tables to share.

Besides, self-service, clearly defined standards, and options to customize your order, and predictability of what you receive make you feel comfortable even if you don’t speak the language.

Local specialties are introduced as a part of the menu.

An intention to address everyone by name turns random customers into friends.

Accessibility of complementing products makes one feel like home.

However, given all these advantages, Starbucks can definitely not consider Spain to be a promising and successful market.
Why is that? What hinders Starbucks from gaining a more solid ground and expand more intensively to reach a store-by-manzana density?

We are currently not considering tourists that make the major customers flow of stores and define their location. (There are only stores in areas with a dense flow of tourists)

First of all, the Spanish have a high price sensitivity. A price of coffee in Starbucks is on the average 70% higher than that of a local store.

Moreover, many people complain that Starbucks serves more milk than coffee.

Besides that, the culture of coffee-to-go is still not thoroughly developed. You can see many people who meet for a coffee and spend a couple of hours talking. And even if there is not so much time available, it´s more of a short coffee stop in a bar.

Furthermore, it is obvious that people prefer to have a coffee in a cup than in a plastic glass with a tap, to be able to enjoy the beverage itself and not just to take it as fuel.

Thus, for the majority of Spanish people, Starbucks is a “guiris” place, a place where foreigners go. Even though every time more local people decide to pass by, especially among younger generation, it is still not the core of the company’s business and it leaves a niche for local enterprises to grow.

Probably Starbucks is happy with revenues gained from tourists, but what can local entrepreneurs learn from it?

Let´s consider a short SWOT analysis:

Strengths:
1.Well-defined, internationally recognized concept
2.Production and service quality control
3.Short, yet customizable menu
4.Profound experience in personnel training
5.Best locations
6.International marketing support
7.Active online positioning: Foursquare, Twitter and Facebook used to announce promotions
8.Online interaction with customers: Facebook
9.Personification of experience through name references
10.WiFi

Weaknesses:
1.Significant incoherence with local culture
2.Lack of “soul” of each store
3.Low flexibility in meeting local demand
4.Many people with laptops

Opportunities:
1.Promotion of interaction with local customers
2.More activity on Foursquare and Facebook.
3.Participation in local events
4.Promotion of ceramics as a way to serve drinks to stay

Threats:
1.Successful competition
2.Deterioration in quality
3.Dependence on international positioning

To sum it up, Starbucks represents a great development platform for local businesses in terms of its specific qualities and interaction with customers: menu, customization options, promotions, online interaction, personification, wifi.

However, probably it won’t be a great source of expansion for nearby locations, unless with an international focus, as tourists who go to Starbucks are not willing to risk while giving a try to something local, and those people who are willing to, are open to explore other locations.

To finish this entry, just some curious observations from my trip and visits to Starbucks in other countries:

Germany, Berlin: coffee about 10% cheaper, pastry 10% more expensive
France, Paris; Greece, Athens; Italy, Rome; Turkey, Istanbul; Russia, Moscow: coffee and pastry about 40% more expensive

On the overall, pastry varies depending on the cultural background.

There is a lot to talk about in reference to Starbucks and obviously I am very passionate about it.

However, the idea of the blog is to consider different concepts existing on the market.

Thus, next time a new concept.

Happy New Year! Let it be sparkling and bright!

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