Starbucks in France

Starbucks in France

International Marketing

08/02/2010 INSEEC Business School Laure Brumont

A _ Cultural analysis

1) Introduction : a short profile of the company, the products, the foreign countries...

"Wake up and smell the coffee -- Starbucks is everywhere. The world's #1 specialty coffee retailer, Starbucks has more than 16,600 coffee shops in about 60 countries."1 Now really well integrate in the beverage industry, Starbucks Company is specialized in coffee based beverage, drip brewed coffee, coffee beans, others cold and hot drinks as smoothies, hot chocolate or special teas, snacks and others items as mugs, coffee makers and thermos2. Because of its permanent expansion and growth will, the company intend to develop an horizontal diversification strategy through Starbucks entertainment division and Hear Music. This strategy permits to the company to develop its portfolio with CDs, books and films. This horizontal diversification is completed by a vertical one; the company starts to develop its own production and in parallel Starbucks-brands are now available in grocery store as Monoprix in France.

The differentiation strategy of Starbucks is based on a strong company culture and the corporate communication is principally based on fair trade policies, environmental consideration and sustainable business3.

The Starbucks growth the last 20 years was spectacular4. Indeed, in this short time period, the company create 16 635 shops in 69 countries all around the world5. Particularly present in United

1 Hoovers , 2010. Starbucks Corporation, Company description. Starbucks corporation. Available at:

[Acc?d? Janvier 29, 2010]. 2 Starbucks Coffee Company, 2008. Company Fact Sheet, Available at:

[Acc?d? Janvier 29, 2010] 3 Starbucks Coffee Company, 2008. Company Fact Sheet, Available at:

[Acc?d? Janvier 29, 2010]

INSEEC Paris, IBS 1, International Marketing, Starbucks in France

Laure Brumont, Master 2, Tripartites, 8 February, 2010

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States with more or less 11 000 shops there, Starbucks pains to integrate the French Market since the start of its implementation attempt. "Too expensive", " bad atmosphere" "symbol of globalization": Frenchies are skeptic in front the Worldwide Giant6. For our cultural analyze, lest try first to understand more about this company before to analyze the French behavior.

2) Brief discussion of the company's relevant history

The Starbucks history is punctuate by expansion phases, diversification attempts and communication crisis. Create in 1971 in Seattle to sell high quality beans coffee and equipment, Starbucks has been influenced by Italian coffee culture and start completing its initial offer proposing in 1987 expresso to drink in situ . This change wasn't possible until the first honors sold Starbucks to their partner Schultz, because of their risk avoidance. Indeed, the mix between beverage business and beans/coffee equipment sale wasn't viewed as a rational idea and it could lost the customer. When Schultz's bought Starbucks in 1987, he quickly began to expand the concept and in 1992 the Starbuck company became a public one. After its first geographical expansions in Japan, UK and all around the world, Starbucks started to purchase competitors companies as Torrefazione Italia or Coffee people developing at the same time partnership with Barnes & Noble in US or Fnac in Brazil for example.

In 2007, the expansion took another dimension and accelerates considerably. Russia, Argentina, Bulgaria, Portugal, Algeria and a lot of others countries had seen Starbucks intrusion on their territory. However, the first signs of resistance appear in China where Starbucks shop closed in

4 Appendix n?1: Starbuck growth until 2007 5Appendix n?2: Starbucks world presence 6 Cypher22, 2005. Starbucks m'a tu? - Think different. Ciao, pour les gens qui ont un avis ? donner. Available

at: [Acc?d? Janvier 29, 2010].

INSEEC Paris, IBS 1, International Marketing, Starbucks in France

Laure Brumont, Master 2, Tripartites, 8 February, 2010

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2007. The Starbucks profits decrease considerably in 20077 because of the massive investment but benefices appears to be constant. Even if this financial statement appears to be positives, Starbucks is now in a difficult situation as much because of its strategic changes, often non understood by customer than for its brand image crisis. Indeed, victim of its own contradiction in regards to values, the brand image start to decrease. The financial crisis contributed to increase the difficulties because of the decrease of buying power of customer. The high price level of the products, the lack of confidence in the brand communicated values and the strategy radical changes which loose everyone, push customer to avoid more and more Starbucks and the long terms results of this attitude could be really dangerous for the company as the fall of Starbucks securities in Stock Exchange Market reveals it8.

3) Brief discussion on cultural elements & Executive summary of the major points to have a Glance at the critical points

The Coffee is part of the France cultural symbol and coffee is the most consumed hot beverage in France with a coverage rate of 87%9 which represent around 1700 millions turn over just in French Market. In comparison to the Mondial market, France is an huge market and is on rank 5 for coffee consumption10.

This mass consumption product, loose 40 000 tons of consumption during the last 5 years, since 2006 it start de growth up again (+3,26%) and the average French consumption per year is now

7 Appendix n?3: Profit and revenue evolution for Starbucks 8 Appendix n?4 : Recession indicator for Starbucks' products

Appendix n?5: Stock Market Chart Starbucks Securities over 10 years 9 2000. France: Coffe market. homepage. Available at:

international/FRANCE-COFFEE-MARKET-FRANCE-TF1-VIDEO-IS-N1-A-REVIEW-OF-VIDEO-MARKET.html

[Acc?d? Janvier 30, 2010]. 10 Caf?ologie. Tout sur le caf?. Available at: [Acc?d? Janvier 30,

2010].

INSEEC Paris, IBS 1, International Marketing, Starbucks in France

Laure Brumont, Master 2, Tripartites, 8 February, 2010

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around 5kg of coffee per year. This consumption increasing came because of the fast reactivity of professional who proposed innovative products as coffee in caps, completed with an aggressive communication around the link between quality, test and origin.11

The French "caf? noir" drunk in terrace is a symbol of French cultures as much as the baguette, the wine or the cheese. French peoples generally drink it "black" without any additive as milk, chocolate or additional syrup. Indeed, our customer habits analysis in part B, will develop more about this point but to introduce Starbucks difficulties to penetrate French market this consideration was necessary.

One of the main difficulties in French coffee market for Starbucks come first because of the "caf? noir" tradition. Moreover, people prefer to drink it sit somewhere than "on the way". Finally, the bad price appreciation and the non perceive advantage of the products by French peoples limit the Starbucks power of market entrance .If we try to analyze the French Coffee market in general, it know some difficulties because of important societal changes:

- "New style of life entailing meal disintegration and in particular breakfast which remains the privileged moment of consumption

- Competition the other products over this privileged moment (fruit juice, chocolate milk) but also over the other moments of break (tea and infusions).

- Evolution of the tastes of the young towards sweeter and easy to use. - Negative ideas generally accepted on the coffee effects on the health."12

11 Caf?ologie. Tout sur le caf?. Available at: [Acc?d? Janvier 30,

2010]. 12 Caf?ologie. Tout sur le caf?. Available at: [Acc?d? Janvier 30,

2010].

INSEEC Paris, IBS 1, International Marketing, Starbucks in France

Laure Brumont, Master 2, Tripartites, 8 February, 2010

5

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