Forbes: The Greek Paradox of Starbucks

The American magazine Forbes has published and extensive article regarding the Greek paradox of the international company Starbucks. Putting aside the issues of Greek bureaucracy, or the Greek financial crisis, Forbes attempted to find the reason behind the fact that Starbucks is lowering it prices in Greece, when everywhere else in the world, prices are increasing.

Making reference to a Wall Street Journal report, Forbes mentions that Starbucks in the U.S. has increased its prices due to an increase in coffee prices. “Starting Tuesday, some beverages in Starbucks U.S. company-operated stores will increase by between five cents and 20 cents,” notes the article, while it continues with the paradox “But there is one country where Starbucks is cutting prices, Greece.”

Furthermore, the Forbes columnist gives some examples of the drop in prices, which he found out during his visit in Thessaloniki two weeks ago. “According to a store catalogue I obtained during my visit in the city of Thessaloniki two weeks ago, the company has lowered prices substantially for several coffee beverages. A double espresso, for instance, now costs 2 euros, down from 2.60 euros; an espresso macchiato 2.50 euros, down from 2.95 euros; and a cappuccino Freddo 3.95 euros, down from 4.65 euros—to mention but a few,” he wrote.

But why has Starbucks, a well-established international company, decided to change its policy in just one country?

“The reason for this price decline is a recent drop in the Value Added Tax (VAT), which Starbucks passed on to customers, according to one of the baristas we asked for an explanation. That sounds kind enough on the part of the company. But the price cuts are sizable, much more than could be justified by a decline in VAT. So something else is at work—competition. Yes, competition from Mikel,” mentioned the Forbes article.

Making a brief reference to Mikel’s history, Forbes noted that the company was launched in Larissa in 2008. Seeing as coffee is a daily ritual for most Greeks, the company was very successful and even managed to overthrow Starbucks.

“Most notably, Mikel seems to be a popular destination for young people, helping the company spread buzz and grow by leaps and bounds, beating Starbucks by a big margin. In Thessaloniki, for instance, Mikel already has 20 stores and Starbucks only 4—with some Mikel stores located right next to Starbucks. Worse, the rapid spread of the new chain seems to have put Starbucks on the defensive, fueling a price war not seen in other overseas markets—Mikel offers all sorts of discounts that entice price-conscious customers.”

Finally, the columnist wonders if Starbucks in Greece will end up like franchise companies such as McDonald’s who are slowing fading out or will Mikel be able to enter the American market?