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Wednesday, May 21, 2008

Starbucks in Prague - Meet the competition...

I wasn't really planning on posting anymore about Starbucks, but finding out that Starbucks will soon be opening it's fifth store already made me change my mind. I only know of four stores - the original on Malostranska namesti, the second in the Palladium Mall (which opened a day before the fateful fire there), the third in Terminal 1 at Prague airport (which opened on March 20), and a new fifth store to be opened at the Avion mall at Zlicin. I don't know yet where the fourth store opened.[Note: I know Zlicin but didn't know the name "Avion Mall". When I googled it I found a mall by that name in Bratislava. So it's possible that the name of the mall is wrong in the article.]

Anyway, the Prague Monitor today has an article on Starbucks and its Czech and other European competitors. I feel that, just like in the States, while there is room for several premium coffee chain, Starbucks will become the "big dog" in the Prague market.

Coffee chains gearing up for tough rivalry in Czech marketBy Jiří Fencl / E15 / Published 21 May 2008
Translated and adapted with permission by the Prague Daily Monitor

The world's largest coffee chain Starbucks, which entered the Czech market only in January this year, is growing fast in the country. A mere four months after it opened the first cafe in Prague's Malostranské náměstí, it is now opening its fifth branch in the Avion Shopping Park in Prague-Zličín.

But for now, local coffee chains can cope with the fierce competition of US chains, including Starbucks' sister KFC and the McDonald's network. For instance, Czech coffee chain Café Emporio more than doubled operating profits year-on-year in 2007, said Emporio chief executive Vladimír Staněk. The company is reluctant to disclose precise data for now.

"Theoretically, it is not a problem to open one shop after another. But every new cafe is a bit of a lottery, particularly as regards the choice of the location. Our chain underwent considerable restructuring in 2007, including the windup of several regional branches which failed to meet the investor's demands," Staněk said.

"Owing to this, we are able to improve our business results relatively fast this year. I think a number of rivals are still facing a similar slimming therapy," he added.

Emporio is getting ready to start another expansion wave, just like the Polish chain Coffee Heaven. The Czech market is the second most important one for this chain, whose chief executive Nikolaos Balamotis says it will not hesitate to open new cafes either.

Coffee&Co is opening new shops at the Tesco store in Karlovy Vary and at Zlaté jablko in Zlín as of May. "We are also planning to open a new cafe in the centre of Prague soon," said Miroslava Vatajová, marketing director at Coffee&Co. "Our goal is to open a new branch roughly every month," said Vatajová.

The strong McDonald's chain is aware of the new rivals, but it is planning to open its own chain, McCafé, all the same. "I think Starbucks will also attract a slightly different segment of customers," McDonald's ČR communications director Drahomíra Jiráková said in January, when Starbucks opened the first branch.

German chain Cup&Cino is allegedly also on its way to the Czech market. Incoma advisers say this is the ideal time for coffee chains to expand.

As a side note, we actually tried a McCafe when we drove to Berchtesgaden last fall. Apart from a language problem, I found the concept and experience to be intriguing. The McCafe was in the store, but its counter was completely separate from the food counter. McDonalds has so many stores that expanding into upscale coffee will cost very little and offer the opportunity of significant increases for revenue and profit. Many people go to Starbucks for not only the coffee but also the laid back atmosphere and wi-fi, but for those who are accustomed to premium coffee may start buying it at McDonalds if it's fast (and maybe a little cheaper).

1 comment:

Coffee Maker said...

McDonald's is smart for adapting high-end coffee to a slow economy, but still, their McCafe coffees aren't a whole lot less than Starbucks