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Wednesday, April 2, 2003

According to Israel's Haaretz.com, poor sales and Delek's failure to find an investor to bail it out of a losing venture caused the decision to shut down the expensive coffeehouses. Starbucks Corp., the parent of Starbucks Coffee International, told Haaretz that its decision to dissolve the joint venture was driven by "market challenges," an allusion, the newspaper said, to "Israel's severe recession and security problems."

But like MacArthur's WWII promise to the Filipinos, Starbucks promises it shall return.

"It was a very difficult decision," Mark McKeon, president of Starbucks Coffee International for Europe, Middle East and Africa told Haaretz. "Following months of serious discussions and market reviews with the Delek Group, we came to this amicable and mutual decision. Our commitment in the market continues to be strong and long-term, and we will return at an appropriate time."

Starbucks and Delek opened their first Israeli coffee shop in late 2001 with plans to reach 20 outlets nationwide by the end of 2002, but wound up opening only six outlets, all in the Tel Aviv area.

Although Starbucks was hit by the Israeli recession and security problems, industry analysts have also blamed the company's decision to focus on the Tel Aviv region where it faced competition from established Israeli coffee chains such as Aroma, Arcaffe and Ilan's as well as independent coffee shops. They also blamed Starbucks' lack of marketing, noting that the company had been sure its brand name would be enough to attract customers without the need for an extensive marketing campaign.

"One can't launch a new brand in a competitive market without a comprehensive penetration package," a senior advertising executive told Haaretz.

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