Pandora and the love of good coffee

Comment from Peter Saxon

Like many Australians, I love good coffee. 

So, in a very modest way I felt a bit proud to be Australian when it became clear that we had fought off a major MacDonald’s-like invasion from Starbucks, the coffee chain ubiquitous in North America and other parts of the world. 

Starbucks, whose website boasts “the finest coffee sourced from across the globe,” today is reduced to just 27 stores in Australia, all on the eastern seaboard and mostly in areas where tourists, familiar with the brand, congregate. MacDonald’s by comparison has around 870 stores scattered around the country.

Why did Starbucks fail to achieve the scale it promised when it launched in 2000? It certainly wasn’t for lack of marketing prowess. But to quote Bill Bernbach of Doyle Dane Bernbach (DDB) “Nothing kills a bad product quicker than good advertising.” And let’s face it Starbucks’ coffee, like what the Americans call beer, to Australians tastes insipid – a hot milky drink at best but not real coffee as we know it.

To be fair to Starbucks, what it calls coffee is popular not just in America but in many parts of the world where there is no pre-existing culture of fine espresso. Surprisingly, Starbucks is even popular in France where despite the epicurean culture for which the French are revered, a really good cup of coffee is hard to find in Paris. When I ventured to ask a Parisian restauranteur whether he had been to Italy and tried their coffee, all I got was terse “c’est merde!” in reply.

It seems that Starbucks is a hit in Paris but not in Rome or Melbourne.

Last week, Pandora, which once led the charge for world domination in music streaming, quietly announced that after less than four years down-under, it would shut down its operation in Australia and New Zealand at the end of this month. 

Not that there’s much wrong with Pandora’s product. But apparently Australians and Kiwis, as do much of the world, increasingly prefer the Spotify platform. Besides, Spotify had established a two year start on Pandora in this marketplace. What’s more the other two big players, Apple Music and iHeart have the backing of huge brands in Apple and the ARN network of stations that have been long established on our shores. On top of that, the mega-brand Google, has added its entry to the field, Google Play Music.

Then, to make things much harder, there’s real radio with which streaming companies must compete for advertising dollars. Many pundits expected that the streamers would eat radio’s lunch. So much so that SCA and Nova Entertainment both hedged their bets a few years ago by investing in Songl and Rdio. They soon discovered that the streaming start-ups were superfluous to their needs.  Perhaps Australia’s appetite for streaming platforms isn’t as big as first thought. For now, real radio remains king.

With a foothold of 27 stores still operating in Australia, rumours are that Starbucks is looking for local baristas to recalibrate the chain’s coffee products to suit Australian tastes in preparation for another shot at growing the business. 

In the case of Pandora, well, they could stay and ramp up the marketing and explore new verticals – they were already well down the track to providing in-store audio to Woolworths. Instead, they’ve decided to cut their losses and quit this great southern land for more fertile ground where the pickings are not so slim and competition from live and local radio is not so fierce.
In a very modest way, it makes me proud to be Australian.


Peter Saxon