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The Coffee Brand People Love To Hate, Starbucks Coming To SA

The Coffee Brand People Love To Hate, Starbucks Coming To SA

U.S.-based Starbucks coffee is coming to South Africa with plans to open the first store in Johannesburg by mid-2016 in an exclusive deal with Johannesburg Stock Exchange-listed Taste Holdings.

Starbucks already has stores in Morocco and Egypt. It sources coffee beans for its 22,000 outlets around the world from nine African countries including a network of farmer support and agronomy centers in Ethiopia, Rwanda and Tanzania, IndependentOnline reports. Its entry into South Africa marks its first foray into the sub-Saharan Africa retail market.

“For the first time in sub-Saharan Africa, Starbucks will open full-format stores bringing the entire range of its food and beverages, including its ethically-sourced Arabica coffee, to South African consumers,” Taste said in a statement July 14.

Starbucks is just the latest U.S. brand to be coming to South Africa. Taste Holdings licensed Dominos, the world’s largest pizza delivery company, in South Africa in 2014 and has opened several branches. Its goal is to have 100 Dominos branches by 2016, BusinessTech reports. To that end Taste will be converting all its Scooters Pizza and St Elmo’s Pizza outlets into Domino’s stores. It is licensed to open Dominos in seven African countries, IOL reports.

Local South African consortium KK Doughnuts SA announced inMay it would be bringing Krispy Kream doughnuts to South Africa. KK plans to open  31 shops in South Africa over the next five years, according to FinancialTimes. Other western brands already in South Africa include Burger King, KFC and McDonald’s.

Kris Engskov, the president of Starbucks Europe, the Middle East and Africa, said the Starbucks workforce is one of young people. “Young people are the key to our success,” he told IndependentOnline. “The majority of our workforce is aged between 17 and 25, so talented youth has always been a priority and we will equip our new partners with the skills necessary to succeed in today’s economy.”

Starbucks is counting on South Africans to already know its name through TV, movies and other media, ChicagoTribune reports. The green-and-white Starbucks siren logo could be a familiar draw for people visiting South Africa from other parts of the world. South Africans who attended the 2010 Soccer World Cup may have tasted the coffee, which was made available through a food service deal.

South Africa is an “aspirational country” with a growing economy and there is now a “much larger group of people that can access our brand,” Engskov said, according to ChicagoTribune.

But Starbucks is entering an increasingly crowded market of chains and independently owned shops that have mushroomed up in South Africa.

The Seattle Coffee Company has about 90 stores in South Africa, according to Chicago Tribune. Barry Parker, a company director, said he’s excited about Starbucks’ arrival, but that independent shops might not be so excited.

David Donde, owner of Cape Town-based Truth Coffee, doesn’t seem worried. Starbucks’ coffee is expensive and he told ChicagoTribune he welcomes the competition.

“They’re going to benchmark South African pricing with world pricing,” Donde said. “We’ve been selling our coffee too cheap here.” Donde said he thinks South African coffee drinkers are becoming more picky about quality, favoring “flavor over bitterness.”

More competition will benefit coffee drinkers, said Karabo Kgole, a Johannesburg-based media analyst. “Coffee lovers will benefit from having another brand to explore.”

In the U.S. where Starbucks started, the brand has a polarizing effect on people that is partly what’s responsible for its massive success, reporter Bruce Horovitz wrote in USA Today.

Horovitz gave four reasons why people love to hate Starbucks: the coffee is too expensive, it’s too successful, it’s everywhere and people are jealous. South Africans will have to decide for themselves.

Taste CEO Carlo Gonzaga said Starbucks will do well in South Africa because consumers there like international brands, which have been relatively scarce in the country, ChicagoTribune reported.

Taste plans to send its employees to Starbucks headquarters in Seattle for training. Starbucks team in London will be designing the stores. The Starbucks menu in South Africa will include local favorites such as rooibos tea, along with the entire range of Starbucks food and beverages, including its Arabica coffee. And there will be free Wi-Fi, according to IndependentOnline.

Following news of the Taste Holdings-Starbucks partnership, share prices surged as much as 26 percent on the Johannesburg Stock Exchange to 5.25 rand ($0.43) Tuesday. By the close of trading, Taste’s share price was up 19.66 percent at 4.99 rand.

Getting the first few Starbucks stores “right” in South Africa will be critical, Taste CEO Gonzaga told FinancialTimes. “There are always expansion opportunities, but we’ve first got to get these first few stores right. The African continent is one of the very few untapped parts of the world . . . to say it’s a market of the future is a safe bet. How far in the future is something I don’t think we are going to get much consensus on.”

Started in 1971, Starbucks is the largest specialty coffee roaster and retailer in the world with coffee shops in more than 66 countries. The Starbucks name was inspired by the story of “Moby Dick,” and the seafaring tradition of early coffee traders, according to IOL. Starbuck was the name of the chief mate aboard the whaling ship Pequod, whose Captain Ahab set out to get revenge against the whale Moby Dick.