The worldwide coffee giants have recently announced locations for their first stores in South Africa. I’m curious to see the impact that the Seattle-based company will have on South African markets.
Anyone that has travelled to America or England will know that Starbucks is pretty much a way of life for the working middle class. It is so popular that things like Macchiatos and other exotic sounding beverages have been very prominent in movies and series. It is no doubt that the company has a proven business model and has been successful in expanding across Europe and Asia. Will it work in Africa?
I was in Seoul in 2012, when I first understood the beast that is Starbucks. Daniel Jong Schwekendiek, a professor at Sungkyunkwan University in South Korea said “A paper cup from Starbucks and other franchises has become a status symbol when walking down the street – similar to carrying a famous brand handbag” (Passy, 2014). South Korea is coffee mad and its strong affiliation to American brands, since the Korean War, only spurs on the relationship between the people and Starbucks. The problem is, as most Koreans will tell you, when Starbucks came into the country they set the bar for coffee prices and competitor prices went up, basically, overnight.
Keeping that in mind, will it be the same thing in SA. Let’s look at a few facts.
- South African middle class is price sensitive and will not fork out unnecessarily, unless it comes to Woolies. Gosh they are good.
- Starbucks targets commuters on the way to work or on a lunch break. South Africans don’t operate in a commuter environment.
- South Africans are becoming more coffee focused. Sales of coffee machines and coffee pod machines have sky rocketed in the last few years.
- SA is hot, especially in the summer. I fail to think that coffee will boom in summer months.
With another American brand setting its sights on African shores, it is clear that a real scouting mission is needed to understand the environment. A very conservative market and weak currency performance might just be the undoing of Starbucks in South Africa, but time will tell.
Passy, J. (2014, June 27). Starbucks in Seoul: How the Seattle Chain Flooded South Korea. Retrieved from NBC News: http://www.nbcnews.com/news/asian-america/starbucks-seoul-how-seattle-chain-flooded-south-korea-n141856