Starbucks to arrive in Italy despite initial reluctance

It was 1983 when Howard Schultz, then Director of Retail Operations and Marketing for Starbucks, came in contact with the Italian culture of coffee. It was during a business trip to Milan that he was left mesmerized not only by the great quality of the coffee, but also by how coffee shops assumed the connotations of a typical Italian “Piazza,” an authentic social meeting place. Coffee bars at every corner of the city became a principal trait of Italian society.

A typical Starbucks branch (Source:  Wikimedia Commons )

A typical Starbucks branch (Source: Wikimedia Commons)

After this precious revelation, Schultz returned to the States and proposed a complete restructuring of the company, with the aim of recreating the atmosphere and experience of the Italian caffetteria. His vision raised many controversies and encountered strong oppositions to that point that, when his bosses didn’t go for the idea, he founded his own coffee chain and later reinvested the profits in buying Starbucks Corporation.

Twenty-two years, 22,000 openings and billions of dollars later, the Fortune 500 corporation came to consider extending its brand to the Italian market. The first shop will open its doors in 2016 in Milan, the fashion capital situated in the northern part of the Italian peninsula.

To many, this came by surprise especially since Howard Schultz himself has always publicly admitted that he has no intentions of establishing Starbucks on Italian soil. The reason why is fairly simple. The average Italian, citing Schultz, “would never even consider buying a coffee outside of a coffee shop, drinking it while walking or driving,” especially if the prices are similar to their American counterparts.

In Italy, in fact, the average price of an espresso is one euro and that of a cappuccino varies around €1.20 and €1.50. In the United States, depending on the location, these products cost at least 2 and 4 dollars respectively.
The CEO has always acknowledged the impossibility of his brand to compete with the Italian coffee tradition, but why is the company ready to sign contracts all of a sudden?

First of all, it is important to say that there are two factors that typically lead to the successful establishment of a foreign company in Italy’s most competitive markets, cuisine and fashion: product differentiation or lower prices accompanied by discrete quality.  

For what concerns the first, McDonald’s is a good example. The company opened its first Italian store exactly 30 years ago and has come to be recognized as a symbol in the food and beverage industry despite operating in a country with solid and radicated culinary traditions. This is because McDonald’s introduced a novelty, a real alternative in the eye of the consumer, who since its arrival, was granted the possibility to enjoy a cheap burger with fries. A dish that up until 1985 was something nobody had really heard of. But in the case of Starbucks, how can the company bring novelty to Italy, if Italy is the place that inspired it in the first place?

Starbucks CEO Howard Schultz (Source:  Flickr / Richard Eriksson )

Starbucks CEO Howard Schultz (Source: Flickr/Richard Eriksson)

As for lower prices, we can consider Zara and H&M as a good example. They managed to penetrate the Italian fashion industry by offering products that are less luxurious but that still guarantee good value for the money paid. As the old latin saying goes De gustibus non est disputandum, nonetheless we can realistically confirm that the coffee and confectionary produced by Starbucks cannot possibly compete with the Italian coffee tradition neither in price nor in quality. So compared to the above-mentioned examples, customers purchasing at Starbucks would presumably be paying more money for less quality.

In this line of reasoning, we can conclude that if Starbucks’ offering doesn’t present a competitive advantage in either product differentiation or value for money, the company’s strategy underpinning this endeavor encompasses the strong belief that Italian customers wouldn’t be paying extra for a better product but rather for the cooler atmosphere and emotions related to the experience.

In more succinct words, customers would opt for their stores because drinking coffee at Starbucks is cooler than at a typical Italian store. And to some extent this is exactly why this story is sad. If this business endeavor turns out to be successful it would simply be because Italians want to pay more for a bad imitation of their own products and culture.

For centuries, the caffetteria experience in Italy has assumed the dimension of a ritual, a cult. And it is not hazardous to say that coffee in Italy is one of the last sacred icons of our time.

Will the future generations allow this to change?

Cover photo credit: Wikimedia Commons (Starbucks logo)

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