Putting the coffee into Europe By Rebecca Wright in London Over a cup of steaming Ethiopian blend Mark Mckeon, president of Starbucks Europe, says: "It's what we call a BHAG. That's a Big Hairy Audacious Goal, of course," he quickly adds, sensing the confusion. The BHAG Mckeon is referring to is the company's stated objective - 'to establish Starbucks as the most recognised and respected brand in the world'. That's easier said than done, and for all the projects that succeed, an equal number fail - even super brands like Starbucks. But it does look like Starbucks is well on the way to achieving its objective. Currently opening coffee shops at an average of three per day across the globe, 90 every month and well over 1,000 annually, it is an international phenomenon that stretches way beyond selling cups of coffee. Founded in Seattle in 197 1, the company remained a local coffee roaster and retailer of no particular distinction for a decade. That was until an entrepreneur called Howard Schultz joined in the early 1980s as director of retail operations and marketing. The company would never be the same again - and Schultzs life would be transformed. A trip to Italy opened his eyes to the business of espresso bars and he bought the company in 1987. Now, 14 years later, it has sales of E2.6 billion and profits of E 110 million. Its shares are listed on Nasdaq and it is an American institution on a par with Mcdonalds and Coca-cola. Starbucks attracts 15 million customers each week and this figure is growing at 30 per cent a year. The business is valued at 19.7 billion. Three years ago it made its first foray outside of the United States by buying a small chain in England called The Seattle Coffee Company. SCC had been modelled on Starbucks and an instant chain was created simply by replacing signs over the shops. It was an experiment to see if the Starbucks chainwould work outside America. It did work - but a host of imitators were spawned before Starbucks could get going. So last year Englishman Mark Mckeon was recruited to set up the EMEA regional office and take coffee shops into Europe and, most importantly, into Italy, the country which ironically inspired the whole idea. Forty-three-year-old Mckeon has an infectious giggle and likes to talk. He is no stranger to building up brands and constantly refers to other global retailing giants as case studies for Starbucks' invasion of mainland Europe. Having started his career as a life insurance salesman in South Africa, Mckeon then moved into the fashion industry where he stayed for 20 years. For the first 10 of these he was sales director for British high street retailer Next. Working with colourful founder George Davies he saw the chain develop from 30 stores in the UK to more dm 500. He then moved to Episode, a women's apparel retailer, where he stayed for another 10 years and again witnessed an impressive growth story. When he started with Episode, there was one shop in the upmarket Knightsbridge region of London and when he left there were 220 stores in 17 countries. Surprisingly, Mckeon says the only thing he found difficult about the switch to coffee after 20 years in fashion was that, ironically, he wasn't a coffee drinker before joining Starbucks. Happily that doesn't seem to be a problem, however, as he believes coffee, as a lifestyle brand is probably even more fashionable than anything else. He explains: "Is it different? Not really. You're managing people, you're managing relationships across a pan-European scale and it is about marketing the brand management. To a certain extent, go much of what was relevant to fashion is relevant to this, the difference being that coffee as a product is simpler. The complexity of fashion is that trends change so rapidly between buying it and selling it, whereas coffee doesn't run that risk." Turning the conversation back to BHAG, Mckeoli is confident it is realistic. He notes how acknowledged branding expert Interbrand recently said Starbucks was the 72nd most recognisably brand in the world and ahead of Benetton, which is in approximately 75 countries in the world compared to Starbucks' 23. Comparison as a bond with MeDonald's'28,000 stores worldwide shows the power as Starbucks still has fewer than 5,000 sites. Mckeon says: "I think if you look at where we are today, if you consider the company really commenced developing in 1982 when Howard Schultz joined and that we're not even in Europe yet other than Britain plus three newly opened stores in Switzerland that's incredible. How can we be the 72nd most recognised brand in the world already."Mckeon says it's down to the international model of development: "Our model effectively allows us to partner with businesses and individuals who have similar values of cultural fit, of hedonistic leadership, of believing in people and of knowing how to manage people and customers with a positive spirit." He continues: "Everybody has a different way of developing. Mcdonald's has its franchising system, Ours is a joint venture partnership model and that model is allowing us to develop the brand more rapidly than we would have done had we taken the Gap situation, for example. Gap has been in Europe for 13 or 14 years and is in three countries - Germany, France and Britain. I'm not saying that it hasn't done a very good job, but it's a very slow process if you have to own it all." Mckeon says the first mover advantage theory is vital: "Our experience has shown that where we haven't been first in the market as a branded coffee house, it is much more difficult to catch up when we're behind. If the brand is to fulfill its long-term ambition it needs to be in the markets, represented, established and growing. Of course the pace of growth will always depend on consumer demand and the receptivity of the brand." Starbucks has so far reaped the advantages of being the first movers in the branded coffee house market in Switzerland, with the company being overwhelmed by the success of its first three sites in Zurich: "There were a lot of people, both outside and within the organisation, who were really very negative about taking coffee back to the heart of Europe. The Swiss have got a strong coffee culture and there were real question marks about Starbucks' acceptability. We have been unbelievably successful so far, though, and the results have been far beyond our expectations. We've had 30 per cent more customers than we expected, and the Swiss consumer has chosen our most luxurious beverages, like our caramel macchiato and Cappuccino, both of which are high revenue drinks." Switzerland was chosen as Starbucks' first mainland assault for two reasons. Firstly, it was hoped that the multi-cultural aspect of the country would be an excellent testing bed - indeed, Mckeon says it has provided a tremendous learning ground for the company. The other factor that took Starbucks to Switzerland is the Bon Appetit group, with whom Starbucks is partnered in Switzerland and Beat Curti, Bon Appetit's founder and chairman. Mckeon explains: "It is an exceptional advocate of sustainability and of environmental and community values. Curti pursued Starbucks relentlessly for four or five years, saying, please give me the opportunity to illustrate how. in partnership, we can help your brand develop'. So where next in Europe? Mckeon says: "Because of the joint venture model, we are setting up a number of companies which will develop strategies for their own countries. We have announced that we intend to open up six new European,Middle Eastern and African markets over the next 12 to 24 months. We plan to focus in particular on the big five population-wise - Spain, Germany, France and Italy, having already conquered Britain." He continues: "The European Union offers a number of benefits to Starbucks, not least the ability to move goods freely and easily, so we are very committed to establishing ourselves there. Switzerland isn't in the Union of course, and it isn't in the big five population wise, but where strong opportunities present themselves, with the right partners, we will consider supplementing our strategy with other markets. Likewise, markets such as Holland and Ireland are also very attractive and they will be coming into our strategy very soon." Italy, with around 200,000 coffee bars nation wide, will without a doubt be the toughest market of all for Starbucks to break into. Mckeon says: "Italians have the highest consumption of espresso coffee in Europe, although the Scandinavians have the highest consumption of coffee overall. So people drink coffee in different ways around Europe. With regards to Italians, my opinion is that they are pretty good at food as well. I think most people would list either French or Italian at the top of their preferred foods. But McDonald's does incredibly well in Italy, among people with the most sophisticated food taste palette. Starbucks isn't fast food though. We are much more about quality, premium Arabica coffee, an experience which is at the top end of the coffee experience. We do Italian styles of espressos, cappuccinos and lattes but then we have an enormous range of other types of coffees, from flavoured coffees to the blended coffee drinks Mckeon says that in terms of timing, an entry into Italy will more than likely come after the other European countries. He points out: "Initially we were not going to push Starbucks into Europe, but we were registering a demand there from the consumer and we want to try and satisfy that demand in any country where the consumer wants the goods. We have had an incredible response from companies in Italy wanting to partner with us. If we hadn't had that response 1, like a lot of other people, would probably have reservations about Starbucks making it in Italy." He does acknowledge that there will be opposition to the brand though and admits: "Of course you will never change the traditionalists of Italy and the traditionalists will not be as receptive to the Starbucks experience. If there are more traditionalists, then yes, we may have fewer Starbucks stores in Italy than we have elsewhere. However our research shows us that the Italians, like any nation in Europe, are combining towards revitalisation and pan-European products. People do want the comfort and consistency of brands and they do want the involvement with something that is truly international. Nowadays there is a whole generation of people who are coming closer together throughout the world and Starbucks epitomises the way people want to connect with international brands. That is what we can offer."Starbucks is renowned for having a strict no smoking and no alcohol policy in its coffee shops throughout the world although it has been suggested the company will do better in Europe if it is prepared to drop that. Mckeon says: "Starbucks is not against smoking per se, we do not have any moral reasons against it. But the fact is that coffee is an absorbent of aromas, so smoking in our coffee houses actually gets in to the coffee beans and obviously detracts from the flavour. So in the store we don't like smoking, but you Will find that outside of our coffee houses, even in the United States which is probably the most anti-smoking country in the world in terms of legislation, smoking in external places is allowed in all outlets." Mckeon also points out that each market is addressed individually. When the company went into Japan for example, a country for notorious for having some of The highest smoking levels in the world, it was advised that the ban should be lifted. Starbucks received so many complaints - even from locals, allegedly - that it quickly reverted to its old policies. He says that the company is equally open-minded with regards to alcohol and while Starbucks would never want to create a bar type environment there is every possibility that the policy could be adapted to suit a particular market. For example, Italians like their aperitifs, just as the French are partial to a glass of red wine with their baguettes. We shall just have to see." Mckeon is practical in his vision: "We recognise the importance of flexibility. It's all well and good having a very core and focused brand, which is rigid in its policies, but that brand is also probably extremely but of touch. The same thing can be said for our BRAG. I think it mill take 10 years before Starbucks is in the top five of the world's most recognised and enduring brands, but that isn't important to us. Our real goal is to make sure we serve our coffee one cup at a time."