“I never go into Starbucks; it’s impersonal, the
coffee
is mediocre, and it’s expensive,” Ms. Bayod, a 35-year-old masseuse,
said as a waiter greeted her by name and quickly brought her usual
espresso. “For us, it’s like another planet.”
Nearly a decade after venturing into Europe, Starbucks is still laboring
to lure people like her. Despite engineering a strong turnaround in the
United States and growing steadily in Asia, where Starbucks is still a
novelty, the company has struggled here on the Continent that gave birth
to cafe and coffeehouse culture.
Now, Starbucks is embarking on a multimillion-dollar campaign to win
over more of Europe’s coffee aficionados — with an upscale makeover of
hundreds of stores to cater to an ingrained cafe culture, and adjusting
beverages and blends to suit fickle regional palates.
France may prove a particular challenge. Promenade on a Parisian boulevard with a paper coffee cup?
Ça ne se fait pas! It just isn’t done.
After eight years spent setting up 63 French Starbucks stores, the
company has never turned a profit in France. And even in the parts of
Europe where the company does make money, sales and profit growth lag
far behind results in the Americas and Asia.
Europe’s debt crisis
and sluggish economy are a factor. So are high European rents and labor
costs, which impinge on profits more than in any other region in which
Starbucks operates. But the biggest challenge may lie in tailoring the
Starbucks experience to appeal to a variety of European tastes.
“Europe is critically important for our future,” said Troy Alstead, the
company’s chief financial officer. “We have not always put our best foot
forward,” he added, but “we know we can have a bigger impact.”
To be sure, Starbucks has plenty of European fans. Whether in Amsterdam,
Berlin or London, or even among subsets of Parisians, Starbucks stores
are often packed with urbanites, tourists and laptop-wielding young
people who embrace the coffee chain as an avatar of American popular
culture.
“We see stars like Kim Kardashian in all the magazines walking around
with a Starbucks,” Daphka Monteiro, a 19-year-old Parisian and aspiring
fashion designer, as she licked the cream off a 5-euro ($6.50)
Frappuccino, across from Ms. Bayod’s preferred cafe. “My friends and I
come because it’s hip.”
That may be. But Starbucks struggles to make money from people like her.
While a New Yorker might grab a coffee to go — carry-out orders are one
of the company’s biggest money makers — French friends tend to sit when
they sip. So Starbucks is having to invest huge amounts to give its
stores in France additional seating space, along with other renovations.
Michelle Gass, who last fall became the chief of Starbucks operations
for Europe, the Middle East and Africa, recently took an anthropological
tour to try to better understand the varying wants and needs of coffee
lovers at the company’s European locales.
“In markets where there is an entrenched coffeehouse culture, like Paris
or Vienna, I was expecting to hear more requests to be like them,” Ms.
Gass said. “But I heard the opposite — people want the true Starbucks
experience.”
Because that can mean different things to different Europeans, though,
the company has devoted hundreds of hours to studying the variations.
The British, for example, are quite happy to drink takeaway coffee, so
Starbucks is planning hundreds of drive-through locations in Britain.
And Britons like lattes, although many consider the Starbucks version
too watery. So baristas in Britain recently began adding a free extra
shot of espresso.
Across the channel, however, 60 percent of French people prefer
espresso, while only 20 percent can stomach an “Americano.” And yet,
many find that Starbucks espresso tastes too charred, even by French
cafe standards. So just two weeks ago in Paris, the company introduced a
lighter “blonde” espresso roast.
And then there is the issue of service. To humanize its chain-store
reputation, earlier this month Starbucks had its baristas throughout
Europe start wearing nametags.
In London, an experiment is under way to take customers’ names with
their orders and then address them by name when filling it.
Participating patrons get a free coffee, but many others have lit up
Twitter with complaints about bogus, American-style chumminess.
Other changes in the way baristas operate — they now keep milk within
arms’ reach of the steamer, for instance — are meant to overcome the
Continental curse of slow service.
The most visible innovations, though, involve “concept” stores designed
to make a Starbucks feel more like a trendy neighborhood shop. Last
month in Amsterdam, the company’s chief executive, Howard Schultz, cut
the ribbon on a striking space with local woods and avant-garde
architecture, including a stage for poetry readings.
In Paris, the company recently gave a rustic facelift to the Starbucks
near the Paris Opera. A vast store near the Louvre got a modern
makeover, featuring a sleek, wood coffee bar. And the Starbucks on the
high-rent Boulevard des Capucines is a sumptuous hall adorned with
velvet chairs, chandeliers and a gilt-leaf ceiling depicting cherubs
aloft in a blue sky.
As it adjusts, Starbucks can consult the history of two other big
American food chains. Burger King was forced to shutter its 39 stores in
France in 1997 after its strategy of directly transplanting its
American model, without local adaption, failed.
McDonald’s, by contrast, has grown rapidly in France and in Europe over
the years by fine-tuning as needed, like using French cheeses, mustards
and meats; preserving local architecture in some of its showcase stores;
and more recently, creating a cafe area in some locations to
accommodate coffee-sipping patrons.
It is too soon to know how well Starbucks’s new strategy might buoy its European financial results.
The company posted record earnings of $3.4 billion worldwide in its most
recent quarter, and its stock has rocketed to $53, up from $8 in 2008.
But in Europe, the weak economy continues to stunt sales.
In the quarter that ended in December, sales in European Starbucks that
had been open at least 13 months rose by only 2 percent. That was well
below the 9 percent growth in the Americas and 20 percent in Asia.
Starbucks’s profit margins are also much thinner in Europe, as a result
of high real estate costs and labor laws that require relatively high
employee wages and benefits.
But executives are so confident in their strategy that they are planning
hundreds of new stores in Europe, from Paris to Moscow, beyond the
1,700 already in place. To corral “captive audiences,” Ms. Gass said,
Starbucks plans to put many of the new sites in airports and railway
stations on the Continent.
Some analysts see a danger of overexpansion, noting that the global
recession in 2008 and 2009 forced Mr. Schultz to close more than 900
locations worldwide and cut $580 million in costs.
In Europe, “it’s possible the business could become more profitable and
focused through the closure of stores,” or by leaving some markets
altogether, said John Ivankoe, an equity research analyst at J. P.
Morgan in New York.
Ms. Gass rebuts the doubters.
“In Europe, there’s no concern about us being oversaturated — quite the
opposite,” she said. “It sounds like a lot. But when you’re walking the
streets of Paris, compared with Manhattan, you have to go find them.
It’s not like you can turn a corner and a Starbucks will be two blocks
away.”
My Comments: I thought this article was interesting. I never realized how different European coffee culture was and how difficult this is for Starbucks to combat. Starbucks definitely has a foot in the door with American coffee but Europe has different views on coffee and how people socialize with it. It was interesting that in most European countries people usually will sit down with friends to enjoy their cup of coffee every time whereas in America it is seen as "cool" to be carrying around your paper or plastic coffee cup, showing you are "on the go"
David Chapman, founder and CEO, 
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