Starbucks opened 85 stores in Australia, then closed 61 — it misread the café culture

Starbucks opened its first Australian store in Sydney in July 2000 and expanded aggressively, reaching about 85 locations. It expected its familiar formula — consistent branded coffee, a 'third place' to linger, sweet espresso drinks — to win over Australian customers the way it had elsewhere. But Australia already had one of the world's most developed café cultures, shaped by decades of Italian and Greek immigration, with independent cafés on nearly every corner and customers who knew exactly what they liked.

Australians largely didn't want what Starbucks was selling. They preferred the stronger, espresso-based flat whites and long blacks served by skilled local baristas, in independent cafés that felt personal rather than corporate. Starbucks's sweeter, milk-heavy menu and its premium prices for a standardized product struck many as inferior and overpriced. As one strategy expert put it, Starbucks simply 'failed to truly understand Australia's café culture.'

The losses mounted for years. In July 2008, amid the global financial crisis, Starbucks announced it would close 61 of its roughly 85 Australian stores. The remaining locations kept bleeding money, and in 2014 Starbucks sold them all to the Withers Group, retreating to a much smaller, more cautious footprint. The world's largest coffee chain had been out-coffeed in a country that took its coffee seriously.