Article

Starbucks takes localization approach to Europe

March 8, 2012 by Valerie Killifer — senior editor, NetWorld Alliance

In 2009, Starbucks Corp. renovated several Seattle locations to better reflect the neighborhoods in which the coffeehouses were settled. The company is now taking that approach to the international market, by opening 'concept stores' in Europe, Africa and the Middle East.

The first such location is opening in Amsterdam this week, followed by a second opening in Kuwait later this year.

According to Reuters, the Amsterdam location will be the company's largest in Europe and will feature 16 new food products to only be sold there. The products will come from the location's in-house bakery, which will tweet when items have come fresh from the oven.

The location is housed in a former bank vault in Amsterdam's Rembrandt square and features locally sourced, secondhand furniture, similar to the locations in Seattle. Furniture includes stools that resemble bike saddles and traditional Dutch blue and white tiles. Thirty-five local artists helped create design touches such as coating one wall with recycled bicycle tubes.

"After opening this store our other stores in Amsterdam will get busier too because it creates conversation and makes more people learn about us," Rich Nelsen, senior vice president for Starbucks' Europe, the Middle East and Africa (EMEA) business, said in an interview with Reuters.

Amsterdam was selected for the first European concept store because the company’s EMEA regional office and roasting plants are located there. Starbucks operates an estimated 1,700 stores in the EMEA region and has plans to open an additional 100 locations there this year.

In the U.S.

Starbucks also has announced its plans to take on single-cup coffee competitor Keurig with the launch of its 'Verismo system by Starbucks.' Verismo offers the ability to create both brewed and espresso beverages and will be sold at a higher price point than the Keurig machines.

Keurig is owned by Green Mountain Coffee Roasters and Starbucks is a supplier for those machines. The company said it will continue to create and supply coffee the Keurig machines. Starbucks signed a deal last year to sell K-Cup capsules for the Keurig brewer. In September, Green Mountain will lose its main patents on the K-Cups, opening the door for increased competition in the single-cup brew space.

According to a story in the San Francisco Chronicle:

The Verismo is focused on high-pressure, espresso drinks and will compete primarily with Nestle SA's machines, Starbucks Chief Executive Officer Howard Schultz said yesterday on a conference call.

"This is definitely a brewer that's going after a different consumer," Scott Van Winkle, an analyst at Canaccord Genuity in Boston, said in an interview. He advises buying Green Mountain shares.

The competitive risk to Green Mountain is "relatively modest," said Van Winkle, who estimates the Verismo will be priced at about $300.

Starbucks also said it will advertise and sell their Verismo machine through a strategic partnership with Krueger GmbH.

Read more about coffee/specialty beverage trends.