Positioning Strategy For Starbucks In The Netherlands
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INTRODUCTION
As exports and imports of goods and services both account for over 60% of nominal GDP, the life-blood of Dutch prosperity is foreign trade. Because of its internally-oriented characteristics, Netherlands has the embedded culture that welcomes diversified products or services from the world, while in some other countries in the EU, for instance, France or Italy, have ultimate pride for their own culture, especially for the product that I am planning to introduce—coffee. Being an everyday coffee-drinker, it is particularly interesting for me to analyze whether the coffee company that represents the U.S. will be successful when entering the Dutch market.
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NEW MARKET BACKGROUND
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Economic Background
The openness of the Dutch economy is reflected in attracting foreign companies. Favorable tax treatment for profits earned by multinationals has boosted Netherlands’ attraction as a location for foreign direct investment (FDI). Moreover, international comparisons of the major economies have consistently ranked the Netherlands as one of the most attractive destinations for FDI. Investment initiatives have attracted a wide variety of foreign firms in recent years, including Polaroid, Fuji, Nissan, Amsco, and Rank Xerox…etc. With the openness and advancement of the Dutch economy, I believe Starbucks has strong incentives to enter the Dutch market.
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Geographic / Demographic Background
Geographically, the Netherlands is the gateway to Europe, with a well-established and mature logistics infrastructure ideal for shipping and distributing products. Rotterdam is Europe’s largest port, handling twice as much as its nearest European rival, Antwerp. The port’s industrial and distribution activities generate annual added value to around 10% of Dutch GDP. Historically, the Dutch have a strong tradition of dealing in coffee; they have been supplying coffee to Europe for centuries, and introduced coffee to America in 1660.
With 484 inhabitants per sq km of land area (2007 data), Netherlands is one of the most densely populated countries in the world; 90% of Dutch population live in towns and cities. With the high population density in the Dutch land, it is likely to generate high sales in major cities once successfully penetrate the market.
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Culture Background
In Netherlands, on a minimum average, a Dutch person consumes 4 cups of coffee in a day. Many of our company’s Dutch customers I know drink around 8 cups and more. The Dutchman drinks 6 cups including 1 cup after dinner at home. Coffee indeed is a staple item in the country. Tea still may be the beverage of choice at breakfast, but coffee is making inroads early in the morning. Coffee in mid-morning is a given and part of a Dutch tradition. Going for coffee and enjoying a pastry at a cafĩ restaurant also remains very popular, often as a well-deserved break from shopping or as a purely social event. Ordering coffee with a meal, such as at dinner time still is not part of Dutch ways, although having coffee after a meal is very common. The Dutch may rank fifth on the list of highest per capita coffee consumption in the world, but unlike Americans like coffee on-the-go, they drink it at home.
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OVERLOOK OF NETHERLANDS’ COFFEE MARKET
There is increased enthusiasm for coffee in the Netherlands, which can for the most part be attributed to the new way of making coffee. The Netherlands is the birthplace of the Senseo coffee pod machine and the Senseo coffee pods, which are a joint initiative from Sara Lee/DE and Philips. It is therefore not surprising that this particular system is very successful in the Netherlands. With the arrival of the Senseo machine, which requires coffee pods instead of filter coffee, Dutch’s traditional way of using regular filter machines has changed. The Dutch responded enthusiastically to the new way of making coffee and Philips and Sara Lee/DE achieved striking sales for Senseo machines and the accompanying coffee pods.
Coffee consumption occasions are increasing also because of the increased variety of coffee offered in both the on- and off-trade. The growing chained coffee shops culture in the on-trade has inspired manufacturers to launch specialty coffees in the off-trade. This has led to an increase in both volume and value sales of coffee in the Netherlands. Dutch consumers are becoming more adventurous when it comes to coffee, as is illustrated by the growing popularity of espresso, cappuccino, single origin coffee and flavored coffee.
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CURRENT SITUATION OF STARBUCKS
Because of the Netherlands’ geographic advantage, Starbucks has set up a brewing plant and distribution center in Amsterdam in 2002 distributing coffee beans in the region of Europe. A headquarter is also set up is Amsterdam to take in charge of its European market. Interestingly enough, no single Starbucks store was opened in the Netherlands until mid 2007. From the 3rd quarter of 2007, finally two Starbucks stores opened—the first one is in Hilversum inside the Nike HQ, and the second one is in Terminal 1 at Amsterdam Schiphol Airport (European departures). However, only a Nike employee can buy a drink in Hilversum, and in order to buy a drink at Schiphol Airport, customers would need to have a flight ticket to a destination in Europe. In the year-end of 2007, Starbucks again opened two more stores at Schiphol Airport but were before the customs, so that customers would not have to buy an airplane ticket to taste the Starbucks coffee.
Starbucks’ expansion in Europe has been successful in Spain, Switzerland, and Germany…etc; however, while the European headquarters are set up in Amsterdam, Starbucks have been hesitated to enter the Dutch market. Online petitions and Starbucks’ European fan clubs have pushed for years for Starbucks’