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Starbucks struggles to compete in European market

Starbucks will adjust its American ways to fit the tastes of Europeans. Will the transition from Americano to espresso be a smooth one?
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Written by Sarah Korones on

Starbucks may have rebounded from less-than-stellar sales in the United States, but the chain’s grab-and-go philosophy still isn’t gelling with European customers. Now, the company is beginning to rethink its strategies across the pond.

Following lagging sales and a failure to meet targets in Europe, Starbucks is embarking on a multi-million dollar campaign that will involve making over hundreds of stores and adjusting drink recipes to suit regional differences.

Getting Europeans on board won’t be easy for the mega-chain. Most of the continent has a firmly entrenched café culture of its own—and it’s one that doesn’t include disposable cups or watered down “Americanos.”

The New York Times reports on the economic and cultural challenges Starbucks faces:

After eight years spent setting up 63 French Starbucks stores, the company has never turned a profit in France. And even in the parts of Europe where the company does make money, sales and profit growth lag far behind results in the Americas and Asia. Europe’s debt crisis and sluggish economy are a factor. So are high European rents and labor costs, which impinge on profits more than in any other region in which Starbucks operates. But the biggest challenge may lie in tailoring the Starbucks experience to appeal to a variety of European tastes

This means remodeling stores to achieve trendier, more lounge-worthy atmospheres and replacing typical American drinks with those catered to European palates.

"Europe is espresso territory,” Michelle Gass, a Starbucks executive who led the company’s US turnaround, told Reuters. “To compete, we must absolutely deliver the best latte on the High Street.”

Localizing products has worked for multinational corporations in the past. McDonald’s increased sales by 15% after revamping interiors in Europe five years ago. The chain also pays plenty of attention to regional differences: At a McDonald’s in Britain, patrons can enjoy porridge for breakfast. In Italy, customers will see Caprese salad on the menu.

What do you think? Can Starbucks achieve success in Europe by catering to regional differences?

[via New York Times]

Image: Dimitri N/Flickr

This post was originally published on Smartplanet.com

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