Starbucks Tries Local Touch to Lift Growth in Europe

March 7, 2012 3:18 PM EST | By Tjibbe Hoekstra
Starbucks logo
Starbucks logo (Photo: Flickr)

AMSTERDAM (Reuters) - Starbucks Corp, the world's biggest coffee chain, is hoping to boost growth in Europe, the Middle East and Africa by opening so-called concept stores that tailor products and cafe interiors to local tastes, a senior manager told Reuters.

Starbucks will open between five and 10 such stores in the region this year, Rich Nelsen, senior vice president for Starbucks' Europe, the Middle East and Africa (EMEA) business, said in an interview.

Those cafes will test new products, such as fresh-baked pastries, as well as exclusive coffees from small-scale farms,

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"If these new products and the other concepts we test here work, we will expand these to other countries," he said.

On Friday, Starbucks will open its first European concept store in Amsterdam, followed by one in Kuwait later this year.

Concept stores test new Starbucks products and sales ideas while their design and interior are inspired by the particular city and country where they are located.

The store in Amsterdam will be its biggest in Europe at 430 square meters. Apart from its larger size and assortment with 16 new food products that are only sold here, the new concept store stands out because of its design.

Located in a former bank building, it will have locally sourced secondhand furniture and feature typical Dutch touches, such as stools resembling bike saddles and traditional Dutch blue and white tiles.

"After opening this store our other stores in Amsterdam will get busier too because it creates conversation and makes more people learn about us," Nelsen said.

Starbucks chose Amsterdam as the location for its concept store because it is where both its EMEA regional office and its roasting plant for the European market are located.

"The easy access to the city, its large international community and its important coffee heritage also plays a role," Nelsen added.

Dutch traders started bringing coffee to Europe in the 18th century, using Amsterdam as a distribution centre. The region has remained an important centre for coffee roasting ever since.

During the latest quarter, Starbucks reported 17 percent revenue growth for the EMEA region, which accounts for a little less than 10 percent of overall revenue.

But operating margin contracted, due to higher distribution costs related to moving to a consolidated distribution centre in its UK market.

Starbucks said it was not meeting internal targets in Europe - where debt worries and high unemployment weigh heavily on consumers - and promised to improve results there.

Starbucks hopes to reap benefits from retraining staff - an effort that helped reinvigorate the company's U.S. operations - as well as tailoring products to local needs, Nelsen said.

"In the UK we decided to make our latte coffee stronger to adjust to local taste, while we started offering two different espresso coffees in France for the same reason," he added.

Unlike in the United States, it is not planning to shut down underperforming stores in EMEA to improve performance, he said.

Starbucks plans to open 100 new stores in EMEA this year and will put a special focus on Scandinavia, where it has a relatively weak presence, Nelsen said.

Starbucks currently operates roughly 1,700 stores in the EMEA region.



 

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