Last week, Radio Four ran a story on Starbucks, the world’s leading coffee shop chain, finally deciding to enter the Italian market.
The article discussed the reasons why Starbucks had premises in virtually every country in the world, from Moscow to Madrid, Seattle to Swansea, but did not have any presence in Italy.
Radio Four then interviewed the owner of a café in Rome. She thought Starbucks may struggle to attract the serious Italian coffee drinker. Starbucks may attract teenagers due to the novelty value of the brand, like Macdonald’s and other American chains but most Italians would not be attracted by the ambiance of Starbucks stores or their coffee.
She explained that coffee drinking in Italy was almost a religion and that there were deep cultural traditions in how coffee was taken. Most Italians wouldn’t drink Cappuccino, certainly not after breakfast and the traditional way of getting your caffeine hit in Italy was the strong, bitter shot that is Expresso. The café owner seriously doubted that the majority of Italian consumers would find favour with Starbuck’s brand message.
The world of retail is filled with retailers who have attempted to enter new geographic markets and who have failed spectacularly. One thinks of Tesco Stores and Marks and Spencer’s attempts to open stores in the United States. Both business ventures which failed spectacularly.
When you are looking to develop your brand in a new market you have to consider the wider aspects of that society. A useful mnemonic is VESTREL.
Firstly what are the cultural VALUES of a particular state? As Starbuck’s may find out in Italy, trying to sell an American idea of coffee drinking may be extremely difficult. They may find they are not the only food retailer to have come up a cropper there. Food is deeply embedded in the Italian psyche. Regional dishes are held in esteem and often protected by law. Often Italians almost come to blows over the correct recipes of dishes. Trying to impose a different food culture on the Italians may be very, very difficult.
The ECONOMY of a state may play an important role. In Italy, coffee is cheap, Starbuck’s isn’t. Italy has suffered greatly in recent years and the population have faced economic strife. Italians may find Starbuck’s too expensive for their tastes.
Then there are SOCIETAL factors. Starbuck’s allow people to remain in their stores for a long time. They provide newspapers, comfy chairs and a relaxed atmosphere. It is often joked that many a novel and many a small business has been run from a Starbuck’s coffee shops. Italians like their coffee on the go. Most drink their expresso standing at a bar counter. It is a dash in/dash out affair which fits the frenzied nature of Italian city life. It has often amazed economists that in a country so seemingly busy as Italy, productivity figures are so low!
Then there is the state of local TECHNOLOGY. There would not be much sense in trying to sell 4G mobile phones or high speed internet in much of Africa. I am aware of one company in Shropshire which does a roaring trade in mobile twin tub washing machines in Africa. They can be run off a car battery and filled with water from the local well.
RELIGION must be accounted for. You would never try to sell non-Kosher products to Israel or Alcohol-based products to Saudi Arabia. Until recently, it was illegal in Saudi Arabia for a woman to ride a bicycle. That law has changed, women can now cycle in Riyad but they cannot do so if it involves a journey. So women can ride around a track but not down the road to visit a neighbour.
Then you must examine the ENVIRONMENT. In the 17th century, Scotland attempted a bit of empire building. An expedition was sent to the Darian Gap in Panama to set up a trading colony. Panama was a tropical jungle, hot, humid and mosquito ridden. Amongst the trade goods the Scottish expedition loaded onto its ships were woollen wigs and heavy tweed cloth. The attempt at colonisation failed and bankrupted Scotland, forcing the union of the Westminster and Edinburgh parliaments creating the United Kingdom.
Then there is the LAW in a particular country. London’s G.A.Y. nightclub would never look to open a venue in Uganda, where homosexuality is illegal and there have been attempts to introduce the death penalty.
Some of these examples are extreme. Often it is failing to spot far subtler differences that causes an attempt at geographic expansion to fail. Years ago, I dealt with an Iranian client who had imported a range of foodstuffs from his former home country. Several of the items were allowed into the UK with no issues however the Port Health Authority in Liverpool detained several container loads of honey. This puzzled my client until I explained that the UK had strict rules on honey imports as a disease control measure. Similarly Australia has strict controls on foodstuffs crossing their borders.
Another client I had was a rocking horse manufacturer. A particularly expensive rocking horse had been detained by New Zealand customs. The reason was that its tail was made from real horse hair and breached New Zealand law on the importation of animal by-products
Some companies have successfully entered foreign markets but to do so they have had to alter their offer. In the film Pulp Fiction, there is a famous scene where two hit men, John Travolta and Samuel L. Jackson discuss the fact that a McDonald’s quarter pounder is known as a Royale with Cheese in France due to “the metric system”.
In fact McDonald’s significantly alter their offer in continental Europe. In Italy most outlets have a self service salad bar, in Germany and France, their restaurants are licensed and you can order a glass of wine or a beer with your burger and fries. They also offer different menus in these states.
It is impossible to tell what the motive is for Starbuck’s belated market entry in Italy. It may be simply a toe in the water exercise to see if such a move is possible. It may be they feel the rest of Europe is swamped with coffee shops and there is little opportunity for further expansion. They may feel there are true gains to be made or it could simply be PR. Time will tell. What is true is that if Starbuck’s really have ambitions to have a successful enterprise in Italy, they are going to have to alter their market offer substantially.