Assessment of the Attractiveness of the Swedish, Bulgarian and Nigerian Markets for Starbucks

Assessment of the Attractiveness of the Swedish, Bulgarian and Nigerian Markets for Starbucks

Starbucks already has an existing connection to Sweden: CEO Howard Schultz previously worked with Hammarplast, “a Swedish housewares company which marketed coffee makers” (Subhadra and Dutta, 2003). It was whilst working for this company that Schultz first became aware of Starbucks, who was a major customer of Hammarplast at the time. A relationship like this could be useful for marketing and branding purposes if Starbucks decided to enter the Swedish market. Sweden is also quite an affluent country, and long term member of the EU, making it likely that the residents will have disposable income to spend on coffees and other beverages. However, as the country has been attractive to foreign investment for a long period of time, the coffee market may be highly competitive, with existing companies having significant levels of market power.

Indeed, Durevall (2007) investigated whether the major multinational coffee exporters were exploiting their market power in national coffee markets by limiting the demand for imports of coffee beans by keeping consumer prices too high to enable mass market penetration. Durevall found that the Swedish market structure was “typical of many consumer markets for coffee, with four very large roasting companies, two of which are multinationals, plus many small ones.” (Durevall, 2007) As a result of this study, Durevall found that there was evidence of some market power in the short run, but none in the long run. This implies that better management of operations and branding could give a company long term market power.

The market for coffee and other beverages is also increasing in Sweden, as reported by Dairy Industries International (2001). This study measured the consumption of milk, and found that it had risen significantly over the previous few years. The study found that this was largely driven by consumption of coffee drinks, such as latte and cappuccino, and meant that milk drunk with coffee stood at 140 million litres per year in 2001, which is 10% of Sweden’s national milk consumption.

Bulgaria is considered for entry largely because of the strong economic growth it has experienced as a result of entry into the EU, with strong growth being experienced in the years prior to entry (Emerging Europe Monitor, 2007). However, the coffee market in Bulgaria has been developing long before this, with Business Eastern Europe (1999) reporting on the Israeli company Elite’s launch of coffee into the Croatian market in November 1999, following successful operations in other Eastern European countries including Bulgaria.