Dominic Walsh
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The air of invincibility that has followed Starbucks on its path to global success may have taken a beating after the first quarterly loss in its history, but its development plans remain intact for the British market.
Undaunted by the closure last week of 61 of its 84 Australian stores and the start of a 600-store closure programme in the United States, the company said this weekend that it saw Britain as a solid growth market with untapped potential.
Phil Broad, Starbucks' managing director, UK and Ireland, said that despite a “slight decline in traffic” in the three months to June 29, the group's third quarter, it was on track to meet its target of 100 new stores by the end of the financial year. It had opened 78 so far, taking its total to 679.
“We have seen steady consumer-led growth in the UK market and we remain excited by the opportunities presented by [it],” Mr Broad said. “International markets as a whole continue to be a growth engine for the company.”
He admitted that the 78 openings this year had been partially offset by ten closures. Although some had closed because of poor performance, others had closed because of expired leases or the availability of better sites.
Analysts suggested that, like Whitbread's Costa coffee chain, the recent slowdown in like-for-like sales growth at Starbucks had been largely down to the strong comparatives from last year, when, for much of the summer, dire weather sent people running for cover into the nearest coffee shop.
Mr Broad, who has sought to boost business by introducing free freshly brewed coffee refills for anyone buying a hot drink, said that despite the consumer crunch, customers “still want to treat themselves to ... [what is] an affordable luxury”.
Recent developments include the opening of the company's first roadside drive-to outlets, in Surrey, and Europe's first drive-through store, in Cardiff. It is also expanding its franchised business, having signed deals with Center Parcs, Village Hotels and the University of Surrey.
In June it announced a deal with SSP, the caterer, to open more than 150 shops in airports and rail stations over three years.
Yet experts believe that the woes that have afflicted Starbucks in America and Australia could come to roost in Britain. Charles Holland, of QualPro, an American business quality improvement firm, said: “Their stores are the same as they were five years ago. Resting on your laurels is a sure way to allowing someone else to get a slice of your pie.”
Mr Holland said that Starbucks needed to reassess all parts of the business, from signage to the flow of customers, store design and product range and mix. “If they can stop the bleeding, they could get healthy in a hurry.”
Nick Tolley, an Australian who has opened a small chain of coffee shops in London, Taylor St Baristas, said: “When Starbucks, Caffè Nero and Costa launched here, people were just happy to get a cappuccino.
Now the average punter can tell the difference between a Starbucks coffee and a Nero coffee. Their palates have become more sophisticated.” He said that the quality of its coffee was also an issue, although not, as many observers believe, because of the blandness of its flavour compared with the stronger, European-style coffee served by Costa and Nero.
“Coffee doesn't have to be strong to be good. It must be crisp and clean, not bittery. The skill of the barista is also in providing a properly textured milk. There's an art to it.”
The message is clear: if Starbucks does not adapt, its aspirations outside America, including Britain, could soon run out steam.
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How can they continue to expand in these times and where do they find new customers to drink their weak overpriced coffee.
I will never set foot in a SB again and much prefer their competitors coffee.
Peter, Livingstone, Zambia
I must keep this article for the scrap book to look back on and laugh. There are more coffee shops on the hgh street than you can shake a stick at, all selling coffee and cakes and silly prices. If the credit crunch gets anywhere as bad as 1929 then these places will be the first to go.
Chris, Banbury,