Starbucks, the American “coffee” company, has decided to open a coffee shop in Milan. Starbucks revolutionized the American coffee market.

 

I first traveled to Italy 40 years ago (as a very young college student!) and remember that the espresso that I enjoyed in Rome (often with a bignè, a delicious chocolate cream puff) was almost impossible to find in the US.

 

American coffee was typically made in a large pot and would sit on the burner in a restaurant for hours (good customers would be rewarded with the offer of brewing a fresh pot).

 

Espresso was available in Little Italy or at fancy restaurants.If you wanted Italian style coffee you could buy Medaglia d’oro ground coffee in a can and brew your own.

 

Howard Schultz at the historic Duomo cathedral in Milan, Italy (credits: Sturbucks)

Howard Schultz at the historic Duomo cathedral in Milan, Italy (credits: Starbucks)

Starbucks offered a version of American coffee to what they perceived as American tastes (often beans that are heavily roasted and that experienced coffee drinkers think is a bit burned).

 

But the real innovation at Starbucks was to offer a (1) new coffee language (one orders a “grande” and not a large), (2) many sweet coffee drinks (frappucino, a drink with over 400 calories) and (3) a place to spend an hour or two with your laptop on a comfortable chair.

 

The success of Starbucks in the US follows a classic model. A retail business develops a better model than the existing (much smaller) existing businesses. In the case of Starbucks there were a few mediocre coffee shops in different cities; some of them made good coffee but were not good businesses while others were just not good businesses.

 

Starbucks rapidly expanded into cities across the country and then around the world. Starbucks had to reinvent itself several times during their expansion, and ended up focussing more on being a “third place” to spend time (the first two places are home and the office).

 

Starbucks in Italy is unlikely to take coffee drinkers away from their favorite coffee bars. While Starbucks will change their stores in Italy to have a real bar (in American Starbucks there is no bar and you are expected to either take your coffee away or drink it sitting down), I would expect most sales will either be to non-Italians or to those who want a sweet drink.

 

As an American who drinks coffee (usually espresso macchiato) in Italy quite often I believe there may be a market opportunity for an Italian coffee franchise.

 

Sturbuks Little Cups (credits: Joshua Trujillo, Starbucks)

Starbuks Little Cups (credits: Joshua Trujillo, Starbucks)

In recent years in Italy there has been a trend for coffee shops to be sold to immigrant entrepreneurs and it would appear that there are many coffee bars that are not especially well run.

 

While the best coffee bars are really quite good, there appear to be many generic coffee bars that could benefit from a national or regional company that offered a better quality product.

 

There are a number of other retail food sectors where this has already happened. Grom has opened ice cream shops across Italy (and around the world) and Eataly appears to be in the process of revolutionizing the supermarket business.

 

Italian coffee companies Illy and Lavazza are expanding around the world (there is an Illy bar nor far from where I work in Washington), but I believe that there is still an opportunity for a new Grom-like chain to expand across Italy.

 

But that chain is not likely to be Starbucks.

Coleman Kendall

Coleman Kendall

Coleman was born in New York City. He worked at the Federal Reserve Bank of San Francisco and taught at several US universities. Today he is Chief Economist for Marshfield Associates and consults to clients in Italy.
Coleman Kendall

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