CASE STUDY 10
Go online to to find more case studies.

Starbucks’ failure in Australia
Paul G. Patterson, Jane Scott and Mark D. Uncles
All authors are from the School of Marketing,
Australian School of Business, University of NSW

In mid-2008 when Starbucks management announced that they would be closing nearly three-quarters of its 84
Australian stores there was a mixed reaction. Some people were shocked, others triumphant. Journalists used every pun in the book to create a sensational headline, and it seemed everyone had a theory as to what went wrong. This case outlines the astounding growth and expansion of the
Starbucks brand worldwide, including in Australia. It then shifts focus to describe the extent of the store closures in
Australia, before offering several reasons for the failure and lessons that others might learn from the case.

History of Starbucks

While Starbucks may be responsible for ‘growing’ the premium in-store and takeaway coffee market in various parts of the world, competing brands are emerging in many parts of the world.

Starbucks’ first store opened in 1971 in Seattle’s Pike Place Market. By the time the company was publicly listed in 1992, it had 140 stores and was expanding at a breakneck pace, with a growing store count of an extra
40%–60% a year. While former CEO Jim Donald claimed that ‘we don’t want to take over the world’, during the
1990s and early 2000s, Starbucks was opening on average at least one store a day (Palmer 2008). In 2008 it was claimed to be opening seven stores a day worldwide. Not surprisingly, Starbucks is now the largest coffee chain operator in the world, with more than 15 000 stores in 44 countries and, in 2007, accounted for 39% of the world’s total specialist coffee house sales (Euromonitor 2008a). In North America alone, it serves 50 million people a week, and is now an