Why Did Starbucks Fail in Australia?

While you might expect to find a Starbucks on every corner in big US cities, in Australia, you won’t be so lucky – though you will have plenty of other coffee options to choose from.

Starbucks is the world’s largest coffeehouse chain, but the company's initial attempt to expand into the Australian market failed miserably. In July 2000, the first Starbucks opened in Sydney. Starbucks Australia grew rapidly, with 87 locations at its height. However, by 2008, only 23 remained. This swift failure resulted in millions of dollars of losses. Around 685 staff lost their jobs. So what went wrong?

The demise of Starbucks in Australia seems to have been caused by a few crucial business errors. Australia already had a flourishing coffee culture before Starbucks touched down, and the heavily sweetened menu didn’t appeal to the Aussie palette. Their downfall came from attempting to fast-track success and push their brand in the nation that invented the flat white (although New Zealand would dispute that claim).

While Starbucks has been very successful in other countries, such as China, where Starbucks recently opened its 6,000th store, it never managed to make a splash in the Australian market. According to research analyst Thomas O’Conner, “they launched too rapidly and didn’t give the Australian consumer an opportunity to really develop an appetite for the Starbucks brand.”

Despite this major misfire, Starbucks hasn't given up on Australia entirely. In 2014, the remaining stores were sold to the Withers Group, a family business that owns Australia's 7-Eleven stores and is one of the country's wealthiest families. Rather than trying to appeal to locals, Starbucks Australia largely caters to tourists and now has around 40 stores in the Brisbane, Melbourne, Gold Coast, and Sydney areas.

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