Will South African’s Pay Big Bucks for Starbucks?

Will South African’s Pay Big Bucks for Starbucks?

Perhaps that is not the real question; perhaps the real question is “Will South African’s Pay Big Bucks for Starbucks TWICE?” No one is under any illusion that South Africans will be hurrying along to try out the new Starbucks, due to open in Rosebank on the 21st of April; the struggle may just be to keep them coming back.

Brand02I am not a Starbucks fan but then I am not a fan of ANY coffee, I drank my last coffee (not even a very good one) back in 1989 and haven’t touched the beverage since. Since then I have sold a LOT of coffee, gallons and gallons of it. As marketing manager for Mugg & Bean between 2002 and 2006, it was my job to have you all seated in a Mugg gulping down copious amounts of the strong black liquid in the hope that you would add a slice of cake, a muffin or a meal to your order.

We made it bottomless; we made it cheap, I even gave it away as fast as I could! You see we would rather have had you sitting in a Mugg drinking free coffee than sitting in the competition paying for it. That way you never experienced their friendly service, glanced at their menu or sampled their food. You see there was a lot of method in our madness.

I seemed to have strayed somewhat from my original brief but the background is important. Let’s get back to Starbucks and their upcoming opening. No wait, before we do that. Let’s see how other American brands have fared in the South African market.

Kentucky Fried Chicken (Now affectionately known as KFC) has been a part of the South African landscape for so long it is often thought of as home grown. Having opened its first store in SA in 1971, it quickly grew to over a hundred and in 1987 the US Congress passed a law forbidding American companies from owning South African assets, forcing the sale of the company owned stores to Devco. In 1994 the parent company reacquired its stake and subsequently KFC have grown to over 800 stores country wide. Very few locals even think of them as an American brand and they continue to go from strength to strength.

In 1994 and with the lifting of sanctions, a number of US based brands began to enter the South African market. Cinnabon, Pizza Hut, Dominoes, Burger King and of course McDonald’s all entered the market with very mixed success. McDonald’s entered the market with a boom, took some pretty serious early hits but seems to have found its space. One thing we really have to credit McD’s with is the improvement in “drive through” across the country and across all brands.

In my (sometimes not so humble) opinion, the biggest challenge McDonald’s faced was that they were entering a very established burger market and unlike in so many other markets they had entered and thrived in, South African’s had a “real taste for life” and good burgers long before they came along.

US love - heart shape with set of vector icons

Burger King followed a few years later and South Africans found their “flame grilled” burgers a little closer to what we had been used to but also found that came at a higher price. Speaking of higher prices, hats off to the guys who brought us RocoMamas, GBC and Brooklyn Brothers all of whom have seen a gap between fast food and restaurants and have us building burgers that end up costing a lot more than we banked on, but that’s a compliment to a great concept and great marketing.

Last year was a possible turning point for American brands when Krispy Kreme took Rosebank and the market by storm. Yes, they gave away thousands upon thousands of donuts, but by the time the sprinkles had settled, Joburgers had a serious taste for Krispy Kreme and the lines continue. A taste of American marketing and brand power in action!

So roll on April 21st and the newest kids on the block… will there be lines around the block? Will the television cameras be standing by to capture the first unshaven student, having camped outside for a few days just to capture that one Instagram picture? Time will tell.

No doubt there will be challenges; the anti-establishment brigade, the price conscious, the brand loyal, the sceptics, the “buy local” brigade and others. Watch the twitter feed that day, it is sure to be trending. Will Starbucks win the hearts, minds and wallets of the South African public or will this be a repeat of their adventures “Down Under”?

What adventures down under, you ask. Well it turns out they have had a pretty rough time of it, kinda like South African Super Rugby teams touring. It’s a long way from home, we don’t quite get the culture and foreigners are not quite as welcome as they once were. I won’t bore you with too many details but there are plenty of articles on the net, each giving their take on what went wrong. We can only hope that the SA operation has studied this too and not just spent the winter in Seattle.

(Read This Is Why Australians Hate Starbucks)

So what will it take to ensure they do not repeat the same mistakes or the same trend here? Firstly I believe the only mistake they made was not understanding the Australian coffee culture and just how fiercely competitive it was. They were up against over 10 000 independent operators and well established brands (Gloria Jean’s), baristas who know their customers, owners who welcome you personally and strong “buy local” culture.

In order to succeed in South Africa, Starbucks will need to go back to basics and tackle each of the five P’s in a South African way

Product: With billions invested, markets tested and recipes perfected, we can only imagine that they will be producing an outstanding product. You may not be taken with their blend of coffee and you may have your personal preferences but when it comes to innovation and variety I would expect them to lead the field and set the bar. This may result in some great home grown innovations popping up.
Price: Nobody is exactly sure what Starbucks SA will be charging but the perception, rightly or wrongly is that we are going to have to fork out BIG BUCKS for the pleasure. Now price influences target audience and the size of the market able to afford your offering. South Africans are price conscious but we do understand quality and I have no doubt we will shell out the extra bucks IF the product and the experience warrant it. (Current approximate price of a Latte in SA stores… Seattle R24, Mugg R26, Fego R27, Vida R24, Wimpy R24, Europa R23)
Place: Rosebank was obviously carefully selected and I am pretty sure that Sandton, Midrand (Mall Of Africa) and other high LSM locations are on the radar. It would be interesting to learn what the agreement is with the parent company regarding how many stores have been promised and what time frame. The pressure will be on Taste Holdings to deliver and the landlords will be licking their lips at the prospect of high rent paying tenants. (“Starbucks will open its first store in South Africa next month in the upmarket Johannesburg suburb of Rosebank, the coffee giant’s local licensee Taste Holdings said on Thursday. Starbucks announced in July last year it would enter African markets for the first time in 2016. Its second store is due to be opened late-April in the Mall of Africa, around 25 km north of downtown Johannesburg.”)
People: As the Bard said “Therein lies the rub” Will Starbucks find, train and keep enough good people to keep South Africans coming back. We will be paying premium bucks for a premium product and we are going to expect premium attitude. Please note, I never said premium service, service you get from an ATM machine, hospitality and attitude you get from people. The public are going to be critical, they are going to be unforgiving, I can only hope they have a great social media team on standby to handle the stream of comments (hopefully all positive) and a plan to handle the occasional negative post that comes their way.
Promotion: No doubt the Starbucks card will become a sort after accessory in Gucci, Fendi and Prada purses and hopefully they have learned a thing or two about creating hype from the 23,768 (and counting) stores they have opened worldwide and this writer for one will be watching this with great interest. (Follow my updates on @mike_said_what)

Brands03Will they make it? There are three types of people… Those that have drunk the Kool Aide and will swear by Starbucks the world over, there are the haters and the doubters that simply won’t set foot in one regardless of what they see or hear and fortunately for Starbucks SA there are the undecideds, millions of people who are waiting to form their own opinion and it is how these people are welcomed, treated and made to feel that will determine the success or failure of the brand in South Africa.

I for one welcome any investment in the industry, we can certainly use the job creation and hopefully the skills training they will bring with them and competition is always good for everyone especially the customer. So welcome to South Africa Starbucks and have a nice day stay.

The Price Of A Starbucks Latte Around The World

At the current exchange rate, that varies from R102 in Zurich to R22 in Rio

Starbucks Around

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