On alligators and coffee

Written by

Andrew Millar


August 11, 2008

The first time we went to the USA, we discovered Starbucks.

On that mid-winter trip it was cold; it was close to freezing, even in the ‘gator infested glades of Florida. (We’d gone to see a Shuttle launch…) And we needed hot coffee. And there were Starbucks everywhere we went.

Now when we arrived in New York we found it was not a place that tolerates strangers. It’s not xenophobic. Just fast paced and it has no time to stop and chat and tell you how business is done. For example: if you want a 90 cent newspaper, you can hand the guy a $1 bill, but don’t expect change. The seller doesn’t have time to fish about for change. He has 8 million other people who want newspapers, so if you want to pay 90 cents for a paper, give him 90 cents in coins.

It’s like Seinfeld’s Soup Nazi. It is not that he is bad tempered. He just has his share of 8 million bowls of soup to sell every day, so don’t get in the way.

Friends of ours who live in New York said: ‘The best advice we can give about living in New York is to say, “if you see a dime on the pavement, don’t stop to pick it up. People will just walk right over the top of you.””’.

In short New York is a fast flowing stream that does not easily accommodate anyone trying to swim against the current.

So when we arrived there, we bought coffee in Starbucks because we knew the drill. We’d practiced in smaller towns. We knew a ‘Grande Columbian with half and half’ from an ‘Arabian Mocha Sanani Chino’ and could order with confidence. And so we did, throughout American, Canada and Japan.

However when we returned to Australia to the news that Starbucks was opening here we were skeptical. There are too many good places in Australia where you can enjoy very, very good barista-crafted expresso to bother with thin American filtered coffee. In my eyes, Starbucks was doomed to fail here in Australia.

So it comes as no surprise that they have pulled out of Australia. However, their partial retreat from other markets confused me until I started to look at the way the original proposition had changed over the years.

Starbucks used to offer very personalised service but to grow, they chased the ‘drink on the run customers’. They lost their coffee club appeal.

Their second big mistake was to confuse people with too much choice and too many combinations. These customisable drinks also became expensive when compared to McDonalds and other budget outlets.

Eventually growth became too strong and they began to cannibalise their own markets. While the jokes about ‘a Starbucks on every corner’ are good for brand perception, individual managers didn’t see it that way when it came to making a profit. Brand strength won over manager’s morale….

In short, rapid growth killed Starbucks. They lost their ‘core thought’. It often happens when the initiators take a back seat to a board.

What is that old expression about alligators and draining swamps?