So long, Starbucks, as Americans’ tastes finally catch up to Australia

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Sydney: Hello from – well, Sydney, actually, where I’m having my first decent coffee in months, on a quick trip home.

Back in Washington, DC, where I now live, the US government isn’t the only thing to have shut down this week. On Saturday, the Starbucks on my street in Dupont Circle closed.

It was one of hundreds of Starbucks locations that shuttered across the United States last weekend, including nine in the District of Columbia alone, according to USA Today, and more in the surrounding metropolitan area, as part of a $US1 billion ($1.5 billion) restructure.

Starbucks has been cagey about the exact number of stores to close. According to a note from chief executive Brian Niccol, Starbucks will still have nearly 18,300 stores across the US and Canada after the cuts, including company-operated outlets and licensed franchises.

Most estimates put the number of closures in this round at about 400. Niccol says that once recent openings are accounted for, Starbucks will end up with 1 per cent fewer company-operated stores in North America in 2025. It expects to open more locations next year.

Still, for now, Starbucks is shrinking. The coffee juggernaut is also shedding 900 jobs – on top of the 1100 that were cut earlier this year. Staff were told to work from home late last week, if they could, while the purge was under way.

So, is this standard cost-cutting, a canary in the coal mine for a weakening US economy, or something else?

Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University in Canada, also known as “the Food Professor”, says the economy is likely a factor, but the biggest reason is probably changing consumer habits and Starbucks’ failure to adapt to them.

For many years, the ubiquitous coffee chain marketed itself as a “third place” – somewhere that isn’t your home or your workplace, where you could meet, socialise, relax, use your laptop, read, whatever it might be.

‘A lot more coffee shops have emerged offering better service at a cheaper price.’

Sylvain Charlebois, director of the Agri-Food Analytics Lab at Dalhousie University in Canada

But the third-place market got “way more competitive”, says Charlebois. “A lot more coffee shops have emerged offering better service at a cheaper price. Starbucks is seen as extremely expensive. Facilities aren’t necessarily well-maintained.”

The increased competition is evident around my office in downtown Washington, where there is a Starbucks on the ground floor of the building (it survived the cuts), Gregorys a few doors down, Joe & the Juice across the road, and Blue Bottle Coffee on the next block. Of the four, only the Blue Bottle is reliably close to Australian standards.

But Starbucks remains omnipresent in the US in a way it never was in Australia, where the chain famously failed to penetrate a well-established coffee culture. Even if American consumers’ coffee tastes are maturing, they are still a fair way off the pace.

And Charlebois points out Starbucks is not just competing against other coffee purveyors, as young people in particular are seeking out matcha drinks, chai, bubble tea and any number of other trends. “Starbucks has adapted, but the link is not necessarily that natural,” he says.

Starbucks declined an interview. But Niccol, the CEO, says in his note to “partners” that many of the stores that are closing were “unable to create the physical environment our customers and partners expect”.

Early results from a recent pilot program in New York and southern California to “uplift” the interior of stores showed customers visited more often and stayed longer, according to Niccol.

And what of the “Trump factor”? Charlebois suggests it could play a role in the company’s store closures in Canada, where buying local and avoiding American brands has become a national pastime since US President Donald Trump hit his northern neighbour with tariffs earlier this year.

It might be too early to assess the impact of Trump’s 50 per cent tariff on imports from Brazil – the source of more than a third of America’s coffee – but that can only apply upward pressure on consumer prices. My local independent cafe in Washington recently jacked up the price of a cup by US50¢.

But therein lies the problem for Starbucks. Despite both stores being equidistant from my apartment, I have never once entered the Starbucks in eight months living there. And judging by the crowds at the local independent compared to the Starbucks, I was not alone.

So, is this trend terminal for the mega-chain? “I think we’re looking at a right-sizing phenomena rather than seeing a complete decline of a company,” says Charlebois. “But I do think that Starbucks’ heydays are behind it. We’re going to see more competition.”

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