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Business

Starbucks Opens First German Outlet

In the centre of Berlin's café culture, the US coffee giant takes on the competitive market in the first salvo of its newest beverage struggle.

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Starbucks signs will soon be all over Germany

Europe is the last frontier for one of America's biggest commercial icons, Starbucks Coffee Co. But can the international pioneer of the quick cup-of-joe on the go make it in the home of the leisurely street cafe? Is it even possible to sell the Germans espressos and frappes with inventive names or make them drink skim milk cafe au lait out of a paper cup?

After absorbing the British coffee chain Costa into its thriving pavement society, Berliners face yet another international challenge to their traditional German coffee culture when Starbucks opens the first of 200 planned cafes across the country in Berlin this Saturday.

Within just a few days, the ubiquitous white and green star logo will start popping up on paper cups throughout the city. And caffeine thirsty city dwellers will flock to the coffee giant's outlet on Rosenthaler Strasse.

Expanding an empire

Last October Starbucks signed a joint venture agreement with the KarstadtQuelle Group, Europe's largest department store and mail order company. Together they agreed to bring the coffee company's full range of beverages to Germany over the course of the next few years.

"Germany represents one of the major strategic continental European markets for Starbucks," said Peter Maslen, president of Starbucks Coffee International. "We are extremely pleased with this significant development in our expansion plans for the region. Our continued strong performance in continental Europe has been a key influence in driving our plans for Germany."

European coffee drinkers are the latest challenge

Until recently, Starbucks has made its money across the globe by bringing Seattle-style coffee culture to countries where coffee houses were seen as exotic, even European, imports. The company found markets for its approach at home in the United States as well as Japan, Britain and even Thailand and Saudi Arabia.

Euro-Tassen

European tastes will be a test for Starbucks

The European challenge has proved to be new territory for the company. Even chairman Howard Schultz admits that tackling the continental market is not easy. Starbucks is expected to come up against opposition from Europe's proud coffee heritage, fussy tastes and aversion to US commercialism.

"Before we came to the continent, we had to understand how the brand would coexist with the very strong coffee culture," Schultz said. "The Europeans, in particular, are quite pleasantly surprised when they taste Starbucks for the first time, because American coffee has had a bad reputation for so long."

Initial reactions elsewhere in Europe show that the gamble may have paid off. Cracking the Swiss market was seen as an even harder proposition for Starbucks when the company opened its first store on the continent in Zurich in 2001.

Today, Starbucks has several stores in Zurich, Basle and Bern. And the coffee is a success. Queues start forming outside the branches at 6.30 a.m. most days. For the company's marketing strategy, Swiss outlets are regarded as a good testing ground for Europe because Switzerland mixes German, French and Italian culture. Further Swiss stores are planned for the near future.

Is the German market a tougher nut to crack?

So why will the Germans be any harder to convince? Price is one hurdle. Coffee drinkers pay as little as 30 cents for a wake-up shot of espresso at their corner cafe. That compares with €1.90 ($1.75) at a place like Frazer Coffee, a chain of Starbucks-inspired coffee shops in Frankfurt.

Europeans on the whole are also unsure about Starbucks' global identity, much like the blanket marketing pioneered by Coca Cola and McDonald's. From the frappuccino on the overhanging menu boards to the logo-heavy napkins at the condiment stands, Starbucks promotes the same image world wide. For European consumers, the US coffee label could be seen as competing with the more traditional coffee house image of individualism.

Kaffeebohnen

The coffee market is anything but small beans

"The people who come into traditional coffee houses want a different atmosphere, an atmosphere of coziness and quiet," said Ron Puttendorfer, manager of Cafe Moehring in Berlin's trendy Mitte district, the only remaining location for the local chain established 103 years ago.

Wilhelm Andraschko, chief executive of Einstein Kaffee, a small, Berlin-based chain of coffee shops said, "Germany is an old coffee-drinking country. Starbucks will find it a very complicated market."

Competition is never a bad thing

In Starbucks defence, Wolfgang Urban, chairman of the management board of KarstadtQuelle, said that German customers tempted by Starbucks will receive "premium-quality, localised products in a unique and sophisticated environment". Urban added that Starbucks' inclusion in the German market would add a potential for growth and would create many new jobs. Entrepreneurs are already trying to tap into what they see as the next big trend.

A recent study in Britain showed that some 7,000 independent coffee shops did better with Starbucks on the scene. Whether the same will be said for Germany in the future remains to be seen. Perhaps where coffee — arguably the last socially acceptable addiction — is concerned, there's room for everyone.

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