ENTRY MODE(GREENFIELD VENTURE)

The entry of Starbucks in Australia began in July 2000. The Starbucks Australia is a wholly
owned subsidiary as a joint venture between Markus Hofer and Starbucks Coffee International,
subsequently licensed its local chain to the Withers Group, which operates 7-Eleven in Australia.
Began selling espressos, frappuccino, and filtered coffee from its first store in Sydney’s Central
Business District (CBD). The company was facing difficulties in the Australian café market.
However, the company aggressively expanded their store as blanketing strategy, establish a
presence and recognition in the minds of Australian customer although was not earning huge
revenues and operating beyond capacity. Progressively deteriorates, Starbucks Australia
announces its plans to close down 61 of 84 stores in Australia on July 29th, 2008.

Target Market
Market Demographics

Half of the revenue generated by Starbucks comes from customers within the 25-40 age range.
40% of the said annual revenue comes from young adults in the 18-24 age group (Gaille 2016).
The core demographic grows economically at an average of 3% per year. Interestingly enough,
Starbucks is popular with underage consumers: teenagers under the age of 18 generate up to 2%
of the yearly revenue of the coffee company. More than half (52%) of Starbucks are not parents
or grandparents yet. Every fifth (18%) Starbucks customer still lives with their parents, another
one-third rents an apartment or a house.

Market Need

To say that coffee is a popular product in Australia is an understatement. While the country does
not have a long history of coffee production and consumption, nowadays, it has become an
indispensable part of everyday life and even cultural identity for many Australians. As Statista
(2019) reports, the Australian coffee market is among the largest in the world, generating a
revenue of more than 1.4 billion annually. An average Australian consumes 1.9 kilograms of
coffee per year: 1.4 kilograms of roasted coffee and 0.5 kilograms of instant coffee (Granwal
2019). Based on the per capita consumption metrics, Australians fall behind Finland,
Scandinavian, and Western European countries. However, globally, the continent ranks among
the top-30 countries with the highest coffee consumption. Two facts mainly justify the market
need for coffee companies: the popularity of the product explained above and low domestic
coffee bean production.

Market Trends

It appears that Australian coffee market trends are consistent with global trends. Square (2018)
presents a report that reveals that Australians show a strong preference for milk substitutes: oat,
soy, and almond milk. The trend may be explained by consumers’ growing awareness of animal
cruelty and the desire to cut on animal products. Another possible explanation is consumers’
openness to the new alternatives as well as health concerns. Aside from their own health,
Australians are worried about the environment: coffee companies, are looking for sustainable,
environment-friendly solutions. Some examples of initiatives that Australians support are
recyclable cups, swap programs, reusable straws, and coffee bag recycling.

One more trend that shows a significant potential is iced coffee: 7.3% growth as compared to
4.6% growth for regular coffee. The cold brewing method is on the rise with unsweetened
variants taking the front stage. In the context of the Australian market, the trend may be
explained by the hot climate that pushes many people to buy iced drinks. Lastly, the Australian
market demonstrates the need for more precision when it comes to coffee grinding. The
consistency of grinding machines has long been a problem for baristas. Still, with the
introduction of new technology, the dosing will become more comfortable and account for better
taste and quality.

Market Growth

Research and Markets (2019) reports that the Australian coffee market is projected to grow at
5% annually during the forecast period from 2019 through 2024. The factors that fuel the market
are its steady growth and sophistication, customers’ willingness to pay more for quality goods
and services, and the affordability of home-grown production. However, there are also
significant counterforces playing against the observable positive tendencies. The Australian
market faces certain limitations due to the high degree of market fragmentation and low
production volumes.