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Starbucks in FranceInternational Marketing08/02/2010INSEEC Business SchoolLaure Brumont

A Cultural analysis1) Introduction : a short profile of the company, the products, theforeign countries “Wake up and smell the coffee -- Starbucks is everywhere. The world's #1 specialty coffee retailer,Starbucks has more than 16,600 coffee shops in about 60 countries.”1 Now really well integrate inthe beverage industry, Starbucks Company is specialized in coffee based beverage, drip brewedcoffee, coffee beans, others cold and hot drinks as smoothies, hot chocolate or special teas,snacks and others items as mugs, coffee makers and thermos2. Because of its permanentexpansion and growth will, the company intend to develop an horizontal diversification strategythrough Starbucks entertainment division and Hear Music. This strategy permits to the companyto develop its portfolio with CDs, books and films. This horizontal diversification is completed by avertical one; the company starts to develop its own production and in parallel Starbucks-brandsare now available in grocery store as Monoprix in France.The differentiation strategy of Starbucks is based on a strong company culture and thecorporate communication is principally based on fair trade policies, environmental considerationand sustainable business3.The Starbucks growth the last 20 years was spectacular4. Indeed, in this short time period, thecompany create 16 635 shops in 69 countries all around the world5. Particularly present in United1Hoovers , 2010. Starbucks Corporation, Company description. Starbucks corporation. Available at:http://www.hoovers.com/company/Starbucks Corporation/rhkchi-1.html [Accédé Janvier 29, 2010].2Starbucks Coffee Company, 2008. Company Fact Sheet, Available at:http://www.starbucks.com/aboutus/Company Factsheet.pdf [Accédé Janvier 29, 2010]3Starbucks Coffee Company, 2008. Company Fact Sheet, Available at:http://www.starbucks.com/aboutus/Company Factsheet.pdf [Accédé Janvier 29, 2010]INSEEC Paris, IBS 1, International Marketing, Starbucks in FranceLaure Brumont, Master 2, Tripartites, 8 February, 20102

States with more or less 11 000 shops there, Starbucks pains to integrate the French Market sincethe start of its implementation attempt. “Too expensive”, “ bad atmosphere” “symbol ofglobalization”: Frenchies are skeptic in front the Worldwide Giant6. For our cultural analyze, lesttry first to understand more about this company before to analyze the French behavior.2) Brief discussion of the company’s relevant historyThe Starbucks history is punctuate by expansion phases, diversification attempts andcommunication crisis. Create in 1971 in Seattle to sell high quality beans coffee and equipment,Starbucks has been influenced by Italian coffee culture and start completing its initial offerproposing in 1987 expresso to drink in situ . This change wasn’t possible until the first honors soldStarbucks to their partner Schultz, because of their risk avoidance. Indeed, the mix betweenbeverage business and beans/coffee equipment sale wasn’t viewed as a rational idea and it couldlost the customer. When Schultz’s bought Starbucks in 1987, he quickly began to expand theconcept and in 1992 the Starbuck company became a public one. After its first geographicalexpansions in Japan, UK and all around the world, Starbucks started to purchase competitorscompanies as Torrefazione Italia or Coffee people developing at the same time partnership withBarnes & Noble in US or Fnac in Brazil for example.In 2007, the expansion took another dimension and accelerates considerably. Russia, Argentina,Bulgaria, Portugal, Algeria and a lot of others countries had seen Starbucks intrusion on theirterritory. However, the first signs of resistance appear in China where Starbucks shop closed in4Appendix n 1: Starbuck growth until 2007Appendix n 2: Starbucks world presence6Cypher22, 2005. Starbucks m'a tué - Think different. Ciao, pour les gens qui ont un avis à donner. Availableat: http://www.ciao.fr/Starbucks Paris Avis 880640 [Accédé Janvier 29, 2010].5INSEEC Paris, IBS 1, International Marketing, Starbucks in FranceLaure Brumont, Master 2, Tripartites, 8 February, 20103

2007. The Starbucks profits decrease considerably in 20077 because of the massive investment butbenefices appears to be constant. Even if this financial statement appears to be positives,Starbucks is now in a difficult situation as much because of its strategic changes, often nonunderstood by customer than for its brand image crisis. Indeed, victim of its own contradiction inregards to values, the brand image start to decrease. The financial crisis contributed to increasethe difficulties because of the decrease of buying power of customer. The high price level of theproducts, the lack of confidence in the brand communicated values and the strategy radicalchanges which loose everyone, push customer to avoid more and more Starbucks and the longterms results of this attitude could be really dangerous for the company as the fall of Starbuckssecurities in Stock Exchange Market reveals it8.3) Brief discussion on cultural elements & Executive summary of themajor points to have a Glance at the critical pointsThe Coffee is part of the France cultural symbol and coffee is the most consumed hot beverage inFrance with a coverage rate of 87%9 which represent around 1700 millions turn over just inFrench Market. In comparison to the Mondial market, France is an huge market and is on rank 5for coffee consumption10.This mass consumption product, loose 40 000 tons of consumption during the last 5 years, since2006 it start de growth up again ( 3,26%) and the average French consumption per year is now7Appendix n 3: Profit and revenue evolution for StarbucksAppendix n 4 : Recession indicator for Starbucks’ productsAppendix n 5: Stock Market Chart Starbucks Securities over 10 years92000. France: Coffe market. Faqs.org homepage. Available at: VIEW-OF-VIDEO-MARKET.html[Accédé Janvier 30, 2010].10Caféologie. Tout sur le café. Available at: http://www.toutsurlecafe.fr/index.htm [Accédé Janvier 30,2010].8INSEEC Paris, IBS 1, International Marketing, Starbucks in FranceLaure Brumont, Master 2, Tripartites, 8 February, 20104

around 5kg of coffee per year. This consumption increasing came because of the fast reactivity ofprofessional who proposed innovative products as coffee in caps, completed with an aggressivecommunication around the link between quality, test and origin.11The French “café noir” drunk in terrace is a symbol of French cultures as much as the baguette, thewine or the cheese. French peoples generally drink it “black” without any additive as milk,chocolate or additional syrup. Indeed, our customer habits analysis in part B, will develop moreabout this point but to introduce Starbucks difficulties to penetrate French market thisconsideration was necessary.One of the main difficulties in French coffee market for Starbucks come first because of the “cafénoir” tradition. Moreover, people prefer to drink it sit somewhere than “on the way”. Finally, thebad price appreciation and the non perceive advantage of the products by French peoples limitthe Starbucks power of market entrance .If we try to analyze the French Coffee market in general,it know some difficulties because of important societal changes:- “New style of life entailing meal disintegration and in particular breakfast which remains theprivileged moment of consumption- Competition the other products over this privileged moment (fruit juice, chocolate milk) but alsoover the other moments of break (tea and infusions).- Evolution of the tastes of the young towards sweeter and easy to use.- Negative ideas generally accepted on the coffee effects on the health.”1211Caféologie. Tout sur le café. Available at: http://www.toutsurlecafe.fr/index.htm [Accédé Janvier 30,2010].12Caféologie. Tout sur le café. Available at: http://www.toutsurlecafe.fr/index.htm [Accédé Janvier 30,2010].INSEEC Paris, IBS 1, International Marketing, Starbucks in FranceLaure Brumont, Master 2, Tripartites, 8 February, 20105

AppendixesAppendix n 1: Starbuck growth until 2007Appendix n 2: Starbucks world presenceAppendix n 3: Profit and revenue evolution for StarbucksINSEEC Paris, IBS 1, International Marketing, Starbucks in FranceLaure Brumont, Master 2, Tripartites, 8 February, 20106

Appendix n 4 : Recession indicator for Starbucks’ productsAppendix n 5: Stock Market Chart Starbucks Securities over 10 yearsINSEEC Paris, IBS 1, International Marketing, Starbucks in FranceLaure Brumont, Master 2, Tripartites, 8 February, 20107

B Market AuditAs we introduce it before, the French market is a difficult one to penetrate for Starbucks forvarious reasons. We will now go more in depth in our French market analyze presenting moreprecisely the product before to analyze more precisely the French market itself.1) The product:a. Evaluate the product as an innovation as it is perceived in the marketThe six principles of Starbucks are stated as 13: “Provide a great work environment and treat each other with respect and dignity. Embrace diversity as an essential component in the way we do business. Apply the highest standards of excellence to the purchasing, roasting and fresh delivery ofour coffee. Develop enthusiastically satisfied customers all of the time. Contribute positively to our communities and our environment. Recognize that profitability is essential to our future success.”This corporate communication reveals that Starbucks tries to develop high quality product,ecologically friendly and with a good service quality. Starbucks product communication is focus onperfection14 and it appears to be a daily challenge for the company.13Starbucks Corporation, 2010. Starbucks official Website. Starbucks Coffee Company. Available at:http://www.starbucks.com/aboutus/ [Accédé Février 1, 2010].14Appendix n 1: Perfect product advertising by Starbucks CompanyINSEEC Paris, IBS 1, International Marketing, Starbucks in FranceLaure Brumont, Master 2, Tripartites, 8 February, 20108

More honey in USA, less sugar in France, more cinnamon and muscade in South America, moresoya milk and tea varieties in Asia, the Starbucks offer can change in order to satisfy countriestastes but recipes stays more or less the same with a large common base. 15The Starbucks last product innovation concerns the distribution channels. Indeed, Starbucks startto open its market accepting to create derivate products under its brand name for partner’s shops.The company develop hermetic bags for grounded coffee et coffee bottles 16 to permit the finesupermarket Starbucks coffee sale for example. In France, Monoprix is one of the distributor’spartners17.This new offer permits to Starbucks to be closer to its customer extending its target and itsvisibility on the market.b. Major problems and resistance to product acceptanceOne of the major problems of Starbucks products in France stays the price and in comparison toothers brands the distribution products stays expensive. As an example you can pay 4,36 for 1kgof Monoprix coffee and more than 9 for the Starbucks one.More over, the strong tradition of the “café noir” in situ, pushes French persons to avoid coffeewith additives as syrup, honey, cinnamon or anything else. Coffee sold in bottles are generallymixed with milk and perfumed and made to be drink on the way which is not really common in theFrench consumption.15Starbucks Odessa, 2009. Starbucks Menu . Available df [Accédé Février 1, 2010].16Appendix n 2 : New Starbucks products is coffee in glass bottle17Nicolas et Arnaud, 2009. Le café Starbucks débarque chez Monoprix. Starbucks Blog. Available starbcuks-debarque-chez.html [Accédé Février 1, 2010].INSEEC Paris, IBS 1, International Marketing, Starbucks in FranceLaure Brumont, Master 2, Tripartites, 8 February, 20109