Oh my Gawd this video is terrible, but please start by watching it and I’ll go over what the yanks just don’t get:

Okay, where do I begin? Well I guess with the reason why Starbucks failed in Australia – they made TERRIBLE coffee. It tasted like shit. And they were run like a generic fast food outlet, not like a café. They had sweetened products on the menu that didn’t belong, and didn’t even get the basics like the humble flat white right.

That’s it. This is going to be a short post.

There are two points to make – we Aussies love our coffee and any time someone has a bad coffee in Australia, they will never re-order with the same barista. And after you order a few times you expect the barista to remember your order. The first time you order with a good barista they will often ask you how strong you like your coffee and let you know you can add an extra shot of coffee if you want it stronger.

That’s why Starbucks failed here. To break it down:

1. Their coffee was god awful.
2. They made the same mistake as Masters – they treated Australians as if they were Americans.
3. We have a choice – plenty of choice. Where there is 1 café there are usually 3 or 4 at a minimum all within a 3 minute walking distance. And that’s not even counting fast food outlets like McDonald’s that also know how to make decent coffee.
4. They overcharged. If there are two cafés next to each other and one charges 50c extra (or more) and both make good coffee, the more expensive café will only get people that want to sit down and enjoy their coffee in the café with their food, not those who just want coffee or want takeaway coffees.
5. They relied on brand. Brand means nothing when it comes to coffee – any café is treated as an individual outlet by the consumer even if it’s part of a franchise. However, by being so brand-focused they were informing the consumer that if you had a bad coffee experience in one of their franchised cafés you could expect the same experience elsewhere. In short, franchises build consumer expectation of a consistent experience – McDonald’s, KFC, Dominos, etc should all taste the same no matter which outlet you attend.

So here are a few points where the CNBC video goes wrong:

1. A flat white is not a “speciality item”, it’s a basic coffee!
2. The video claims that Gloria Jean’s services 35 million Australian consumers per year. Well our population is 25 million, and even accounting for tourism that number can’t possibly right. I’ve never had a coffee from Gloria Jean’s in my life.
3. Slowly “integrating” the Starbucks cafés would have made no difference.
4. Starbucks had no business being in Australia in the first place.

Coffee should be delicious. It shouldn’t taste burnt. It shouldn’t be weak. Now I will admit that the very best coffee is made by freshly roasting the coffee beans yourself the same day as brewing, and that for me has been a rare luxury. Every family member I know that has gone to the US has told me the same thing about Starbucks – their coffee is fucking terrible. One family member said they used to go to Starbucks and drink their disgusting coffee (their words) because they could sit in the café and use their free wifi which was the best wifi available in the area. The reason they failed here is because their coffee was terrible.