Starbucks’ Entry into Eastern Europe
Lithuania, Latvia, and Estonia
April 23, 2008
Starbucks Corporation is known throughout the world for its exceptional coffee products, and is generally considered to have revolutionized the coffee business. With origins in Seattle, Washington, it eventually became the most widely patronized coffee chain throughout the country. And it has expanded its business across national borders. It currently operates on five continents, in nearly thirty countries.
Starbucks has so far limited its European expansion to Western European countries. Its stores can currently be found in Turkey, Spain, Greece, France, Germany, the United Kingdom, and Switzerland. While these have most likely been safe countries for Starbucks to operate in, they have failed to tap into another area of Europe that has great potential for the coffee market, namely, Eastern Europe.
Although it has recently opened locations in the Czech Republic, Starbucks has thus far avoided the Baltic States, perhaps preferring to remain in more “western” nations. However, in so doing, Starbucks has neglected a region that is rapidly becoming increasingly westernized. It would be in Starbucks best interest to explore the markets of Lithuania, Latvia, and Estonia.
Lithuania, Latvia, and Estonia were all forcibly annexed by the USSR in 1940. All three endured Soviet rule for over 60 years. Once they achieved independence in 1991, after the fall of the Soviet Union, they all seemed eager to form alliances with western countries. For example, Lithuania, Latvia, and Estonia are all now members of both NATO and the European Union. It is not surprising, therefore, that the coffee chain trend would become popular in these countries. Furthermore, citizens of all three companies have enjoyed a stable market economy in recent years, and have disposable income that would allow them to purchase Starbucks products.
It is true that Starbucks has technically missed out on the first mover advantage, primarily to a company called Double Coffee, in Eastern Europe. However, the differences between the two companies are vast, and give Starbucks the opportunity to offer something new to the region. While Double Coffee has more of a restaurant-feel to it, providing full menus complete with breakfast, lunch, dinner, snacks, and dessert, Starbucks is far more focused on its coffee. After all, the name Starbucks is almost synonymous with the word coffee, at least in the United States.
It is our opinion that Starbucks’ entrance in Lithuania, Latvia, and Estonia, using existing networks in other parts of Europe. Starbucks can offer a new coffee-drinking experience that the Baltic States will be able to appreciate. They will open large, cozy, bohemian-like establishments where Eastern Europeans and tourists can come to relax, enjoy an excellent cup of coffee or tea, listen to music, and maybe even do a little reading.
Overview of Lithuania
Lithuania is one of the most developed Eastern European countries located next to the Baltic Sea and bordering Belarus (502 km), Latvia (453 km), Poland (91 km), and Kalingrad, Russia (227 km). The total country’s population is estimated to be 3,607,899 of which 553,904 are living in the capital, Vilnius. Other major cities are Kaunas with the estimated population of 361,274, and Klaipeda at187,316. Lithuania has two major resort cities located next to the Baltic Sea called Nida and Palanga with a current population over 35,000 which doubles over the summer due to tourist inflow. Lithuania is comprised of four main ethnic groups; Lithuanians (80.6%), Russian (8.7%), Polish (7%), Belarusian (1.6%) and other groups (2.1%). The country’s official language, since 1991, is Lithuanian which is closely related to Latvian. More than 80% of the population speaks Lithuanian as...