Starbucks in Italy

European nations, which introduced the coffeehouse to the world more than 400 years ago, now face an American challenge to this treasured, and once unique, institution. Starbucks opened its first store outside of North America in Tokyo in 1996. Starbucks now boasts 21,000 stores in over 65 countries. Just three years ago, the first Starbucks was opened at Britain’s Manchester Airport. There are now 200 stores in this country alone, with plans for an additional 140 outlets to open in the next two years.

Starbucks, the world’s biggest coffee chain, is in talks with an Italian partner to open branches in Italy, one of the few major markets where it has yet to make an entrance. If Starbucks were to enter the market with a retail presence, it would finally dip its toes into one of Europe’s largest coffee markets. Italians prefer dark-roasted coffee and back home-grown brands like Lavazza, Segafredo and Illy. It may be a difficult market to crack, as it is highly competitive and local brands have significant market share. Italians are also well versed in coffee, thus having high expectations. The move would herald an epic clash of cultures – Italians typically drink a tiny, strong cup of espresso, or a larger, creamier cappuccino, while standing at the bar on their way to work in the morning.

Italy is the 7th largest coffee consumer in Europe. Milan, nexus of the fashion world, has some 600 coffee stores alone. For Italians, drinking their coffee is as routine as breathing, a recent survey found that 70 million cups of espresso are drunk in Italy each year. That’s 600 cups of coffee per capita per year, consumed in any of Italy’s 110,000 coffee stores. For comparison, the average American consumes an estimated 441 cups yearly, while the Finns and Norwegians both consume over 1,000 cups annually. According to the International Coffee Organization, in 2009, Italy imported 7.6 million bags of green coffee to be processed, an increase from the previous year. While a lot of the final product was exported, many go to the ubiquitous coffee bars on the streets of Italy.

Domino‘s brand-new store in Italy, a gutsy first for any pizza chain, made a point of entirely un-Americanizing the menu. Starbucks also custom-tailors drinks to suit regional tastes. Starbucks’s strategy for colonizing Italy is mostly to play up coffee stores as high-tech meetup spots where middle-aged bankers, lawyers, and businesspeople can sit in comfy chairs and use the free Wi-Fi. For Starbucks, a potential move into Italy could also help the company’s growing Europe, Middle East and Africa segment, which posted 12% revenue growth to $1.3 billion in the latest fiscal year, bolstered by 5% same-store sales growth. The company also opened 180 net new licensed stores that year and sees continued expansion in the region.

Coffee is already currently the second largest traded commodity in the world, just after oil. With Starbucks pushing into newer territories faster than it can come up with new coffee variations, this trend looks set to continue.