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The Seattle-based coffee chain may be pulling back in the US, but it's all over Central Europe.
PRAGUE, Czech Republic — In a country where people are used to drinking their unfiltered “Turkish coffees” in small ceramic cups, Starbucks’ first 18 months have made something of a splash.
The Seattle-based chain has announced plans to double its stores in the former Eastern Europe over the next five years, according to a Starbucks representative.
The figures, to be sure, are modest. The joint venture has nine shops in the Czech capital and two more in Poland — one in Warsaw and another in the southern city of Wroclaw, where Starbucks’ partner, the restaurant operator AmRest, is based. The expansion plans include spreading out to other Czech cities and into Hungary, according to Tereza Prochazkova, a spokeswoman for the regional venture. Starbucks already has several outlets in Romania.
“The Central Europe region is definitely seen as a very good opportunity, a very healthy market that can provide great opportunities,” she said. “The Czech, Polish and Hungarian markets are still very new. The coffee culture is on a very good level but can still be increased.”
Independent research by the British based firm Euromonitor appears to substantiate those lofty claims. “Czechs are falling in love with coffee shops,” according to Euromonitor's 2008 report. “In terms of value, sales at specialist coffee shops saw 24 percent growth in 2007.” Prochazkova declined to comment on Starbucks' sales growth, but Euromonitor calculates that the chain generated $2.7 million in sales in 2008, ranking it sixth in the local specialty coffee market.
Truth be told, there has always been something of a cafe culture in the Czech Republic. Coffee houses were common gathering spots of the urban bourgeoisie before communist leaders systematically closed them or converted them into state-run facilities after 1948.
But while Starbucks first entered the European market in Britain in 1998, according to the company’s official website, it held off on Prague for another decade. Now the Czech Republic’s per capita GDP is on the up and up — having more than doubled from 1997 to 2007, according to World Bank figures. With more money to spend, Czechs are splurging on premium brands at high-end coffee boutiques. Prochazkova said that prices in the Czech Republic Starbucks start at 50 koruna (almost $3) for the smallest coffee, and more than double depending on the drink.
“About the prices, we think there's space for a premium product,” she said. “And actually we have the evidence because Starbucks has nine stores — they are successful and they are going to open more stores. The feedback from the customers for the demand is very high.”
The expansion announcements in Central Europe follow on the heels of a pull back in the U.S. In July 2008, Starbucks announced it would be closing 600 “underperforming” stores in the U.S. over the next 18 months.