Irony of the Starbucks’ Success

Reinvent Coffee Experience or Invent Coffee Experience


Starbucks’ success is that it has created a new market for current coffee drinkers, but the other side of this success is that it is unable to enlarge coffee share in beverage market and unable to attract non-coffee drinkers to coffee.

In twenty years, Starbucks Coffee has become the biggest coffee retail giant in the world with presence in 55 countries.  Thanks to Howard Schultz, the ingenious creator and Chairman of today’s Starbucks Coffee, Starbucks has reinvented coffee experience by providing better quality of coffee, adding espresso drinks and offering comfortable environment in the US.  No doubt, Starbucks has changed the mentality toward coffee and coffee house among many American traditional coffee-drinkers and has turned coffee house into popular and fashionable place.  However, for the amount of publicity it has generated, Starbucks Coffee has little impact on overall rate of coffee consumption in both America and other regions.  Despite Starbucks has gained shares in existing coffee market from the competitors especially from food retails and created new coffee drinking patterns (buying from coffee house), it cannot expand coffee market as a whole and cannot create coffee habits to new consumers, which, unlike Coca Cola, McDonald’s and KFC, will render its difficulties to expand in emerging markets where there is no existing coffee consumer base.

For America, though still the biggest coffee importer of the world, the per capita coffee consumption had been constantly declining over last several decades since its glory era in 1960’s, partly attributed to the bad coffee quality.  By providing better quality of both coffee and coffee house, Starbucks swiftly increases its shares by winning more and more consumers from others.  Nevertheless, we can hardly overlook the fact that the continuing decrease in coffee per capita consumption is in parallel with Starbuck’s growth in the last two decades.  Somehow, Starbucks’ business formula cannot transform its brand popularity and phenomenal growth into coffee consumption growth.

Japan is Starbucks’ second largest market and also has the highest per capita consumption in East Asia.  As happened in America, Starbucks immediately gained popularity in Japan since it’s opening in 1996.  However, also as happened in America, Starbucks’ instant success in Japan gained itself a lot of current coffee drinkers, expanded a great deal of the share in Japan’s coffee market, but is incapable to accelerate the growth rate of coffee consumption there.  When majority of people perceive going Starbucks Coffee as a lifestyle, coffee becomes secondary. 

China is another good example to illustrate Starbucks’ pattern. China’s coffee house market had evolved from coffee-drinking foreigners living in China.  When the coffee was a rare commodity with a considerably wealthy consumer group, the prices at coffee house were expensive and have been kept high ever since.  The coffee prices at coffee house are so high that basically alienated 95% of Chinese from considering coffee house as a place for coffee.  High coffee price is the major hurdle in China’s coffee consumption growth, and someone has to challenge that if to expect any significant growth of new coffee consumers.  Nevertheless, Starbucks inherits China’s pricing mentality since the essence of its business formula is to gain the existing consumer base not developing one.  Starbucks has again successfully accomplished this goal and easily established its supremacy just in five years in China when China’s per capita coffee consumption grows at a turtle-moving speed.

Starbucks’ magic is that it is able to gain more customers from existing coffee drinkers’ pool than to expand coffee market as a whole.  In traditional coffee consuming countries without a strong coffee house tradition, Starbucks benefits consumers for better coffee and environment.  In non-traditional coffee consuming regions, when local coffee business eyed Starbucks for guidance, its business formula may point to a wrong direction in long run although it makes sense for short-term.


For a consumer product in an emerging market with vast potential customer base, the whole point is about how to build new customers.  It requires a different strategy to Starbucks' current business formula.  Among all coffee shop chains, Starbucks belongs to such a very few companies who has the will, brand name, financials and management to establish such a new customer base just like what it had done twenty years ago to the American market.  It is no longer 'reinvent coffee experience', but invent coffee experience in the new land.