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Starbucks to expand its Cape Town presence

A dyed-in-the-wool South African is driving the iconic US coffee brand in Cape Town: Adrian Maizey.

NOMPU SIZIBA: Starbucks is set to expand its offering into Cape Town imminently. The owners of the master franchise in southern Africa, Rand Capital Coffee, are said to be bullish on the South African market and aren’t delaying in their expansion plans. Starbucks started as a roaster and retailer of beans, ground coffee, tea, and spices as a single store in Seattle in the United States in 1971. The company has now grown to be a mega multi-national with 30 000 retail outlets in some 80 markets. And the plan is to stay in South Africa.

Well, to tell us more, I’m joined in the studio by Adrian Maizey, the owner and CEO of Rand Capital Coffee, the custodian of Starbucks here in southern Africa. Thank you so much for joining us, Adrian.

ADRIAN MAIZEY: Thank you for having me.

NOMPU SIZIBA: This seems rather a counter-intuitive move in light of the depressed economy here in South Africa and current issues around social distancing, given that your offering is one around great coffee and other drinks and social gathering. So tell us what informed this move and its timing.

ADRIAN MAIZEY: The Cape Town move in particular? The timing is maybe counter-cyclical, but perhaps that’s the right time to be investing – when you’re at the bottom of the market. There’s a little bit of a background. This is somewhat circumstantial.

When we acquired the business, there was already a lease in place for Cape Town. So we were somewhat obliged to move forward with the region. However, things got delayed with Covid. But it also created opportunity to enter the market where there were now opportunities to fill gaps where we previously couldn’t find leases or negotiate the type of lease that would make this economically viable – or at least as good as this potentially could be.

During the heart of the lockdown we started negotiating with landlords, and were able to strike some what we believe are good deals, both for us and them. They will allow us to be long-term successful tenants of theirs.

And so for me it was actually the perfect time to be entering the market while we raised capital just before the collapse, which is the perfect time to do it; then we put our money in.

So I think from that perspective it’s fantastic. Now, from the social distancing perspective, we are grab-and-go to a degree, and we’re also sit-down-and-drink-your-coffee. So I think we can serve both markets during Covid. And I think during Covid, in the middle of Covid, one would have said you’re not going to a restaurant any more. Now it’s refining, everyone’s working from home, and they’re looking for a place to work because home is uncomfortable. The kids are screaming, the Wi-Fi is not working, the phone’s ringing, someone’s vacuuming.

So we have a somewhat nice location for them with strong Wi-Fi, convenient seating with someone serving you if you need,– or you can get your own. Starbucks offers a person a third place, meaning at home is the first place, work is the second place, and then Starbucks is the place in between. While in the depth of the lockdown, we thought maybe we were going to be grab-and-go. Now we believe – as I believe – we’re going towards being more of a provider, an oasis for people to come to, to get away from the screaming kids, because there isn’t an office to go to any more. And so I think it’s actually timed quite well. That’s why,

NOMPU SIZIBA: So, as you say, you’re setting up these outlets in Cape Town. Whereabouts in the City of Cape Town, and what sort of factors informed the locations that you chose?

ADRIAN MAIZEY: There’s the low-hanging fruit, for lack of a better description. The core mall locations, the Cavendishes, the V&A, the Tyger Valleys, the Canal Walk and the likes. And then there are the more trendy locations, whether in the southern suburbs or along the Atlantic seaboard. We’re looking at all of those and effectively are going into all of them. The exact places haven’t been announced yet, except for Canal Walk – and that will be opening on November 19. But you can assume we will be in all the prime locations.

NOMPU SIZIBA: Excellent. And in terms of the other outlets, they’ll be opening soon thereafter.

ADRIAN MAIZEY: I am going, myself, for a two-week period, to be opening two stores. And then there are about seven stores opening roughly around the same time.

NOMPU SIZIBA: Starbucks remains for many South Africans somewhat of a novelty. You guys put a lot of emphasis on the “experience” in your coffee shops or restaurants. So what can Capetonians and visitors from out of town expect from an experiential perspective?

ADRIAN MAIZEY: This is a complex question, because we also have coffee as a commodity. What Starbucks has been able to replicate on a global scale, the experience that you talk about, is connecting with the customer. Now, anybody can connect with the customer. It can be the local guy owning the shop. You walk in, I can talk to you, you know who I am, I know who you are. You feel very comfortable. Doing that at scale is very difficult.

So, over the last few weeks, I’ve been talking to people that are owner-operators. They’re in the restaurant, they own the restaurant. It’s quite successful. It’s difficult to do that at scale, because the owner can’t be everywhere all the time. Starbucks over the years has perfected that to a degree that has allowed scale where we do have a connection with a person-customer working the store.

So from a Capetonian or Cape Town perspective, what they should expect is, first of all, service, consistent service, and really something that is a nice place to work now, or one to visit. That’s only going to be as good as our ability to execute on that.

And then, beyond that, there’s an offering that’s far broader than any of our competitors can actually offer. That’s something to do with the fact that Starbucks is a very big company. It is constantly innovating. It requires a lot of capital to do that, but they’ve developed it over the years. Every month or so we come up with a new campaign, a new product that we issue to the market, Some are successful, some are not. But if you change your menu that frequently it is quite challenging. You can mention the raw product, the training – all of that comes into it. So Capetonians will now get access to what we’ve really known for a while. People approach us first as a coffee shop; it’s really the breadth and depth of our menu. It’ll provide them with all sorts of options, which we hope they will enjoy.

NOMPU SIZIBA: Excellent. You indicate that through the expansion some 50 partners will be employed. That’s quite a nice term for your employees. Why is it important for you to refer to them as “partners”, and does this translate in fair remuneration for them?

ADRIAN MAIZEY: The number now, I believe, is closer to a hundred new hires, given the number of stores we’re building. So it has escalated. It was first going to be 10 coming in the next three to four months. They are referred to as partners. It’s a legacy Starbucks reference.

The management of Starbucks originally in the US at some point said, “We want to make everyone an equity owner in the business”. And therefore we’re partners, because they are owners of the business. That’s how everyone in the organisation got referred to. It was called “bean stock” as a play on words, and everyone got allocated bean stock. So that’s where the term “partner” comes from. They are basically owners of the business. Domestically, we are a brand-new company, we have to work through that.

My understanding, from a remuneration perspective, is that we pay reasonably well for the market, given the industry. So I think one of our advantages is to attract great talent, but it’s also the ability to grow within the organisation. Starbucks is very focused on staff and partner development, individual development. At the higher level it’s community development.

The mission statement of Starbucks is serving, uplifting the neighbourhood in person, one neighbourhood, one cup at a time – of coffee at a time, basically. We like to do that internally. The idea is to take someone and help them grow through a career path, and establish that. You need growth to do that, but there also needs to be a process in place and a programme in place. And so we have that offering. It’s not only about the financial incentive, it’s about what we bring to the individuals who work for us and how we can make them grow and be better, and be the best that they could possibly be. So we have a lot of focus on that.

NOMPU SIZIBA: And you would need to, given the fact that you say that you want to have this excellent offering that you’re talking about. You can’t just assume that people that you hire are going to be able to do it. You need to help them focus on your end goal.

ADRIAN MAIZEY: Correct. And, if they feel they’re contributing or adding value, they’re happier. Then you can end up with a better product. The customer will feel that. And that’s really what this is ultimately about. Even for me, ultimately, it’s about bringing back to South Africa, and trying to do good through a commercial aspect. So charitable things are one thing, but they’re not necessarily sustainable because they’re only dependent on someone giving you something. We are trying to create a sustainable enterprise that is commercially successful enough to allow it to continue and then employ and support the communities around that. It’s a grand goal, but I think we can do this while we sit with one of the best brands in the world that is known for that. So I couldn’t think of a better brand to be coming to South Africa with.

NOMPU SIZIBA: Beyond the immediate hundred partners that you’re going to be employing, no doubt there’s a fair bit of indirect employment that will have been created through this process?

ADRIAN MAIZEY: Yes. That’s a key aspect that is sometimes overlooked. If we build 10 stores, you’re now talking to all the contractors, the landlords who at this point need new tenants, the service providers, the food suppliers, everyone who supplies us as an industry or as an organisation. It helps them grow. For example, LSG Shy Chefs was our food supplier. Well, they went under when the airport shut down. Unfortunately, they lost as a result of Covid, but somebody else who has stuck around us from a food-supply perspective was surviving. We’ve now enabled them to maybe hopefully grow and do better – construction guys.

It’s been quiet, people aren’t investing. So we engaged three, four firms to do that. Furnishing has been made locally as well. And then all of the inputs that go into selling a product – hopefully they supply them locally.

NOMPU SIZIBA: And of course our President, Cyril Ramaphosa, has been emphasising supporting local businesses and local procurement. So that’s very positive indeed.

Now, in your already up-and-running businesses, what have the safety measures been that you’ve been putting in place to reduce the prospect of infections of Covid-19?

ADRIAN MAIZEY: The standard protocol exists as a given. I’m just backing up on the government –  it’s been extremely helpful during this period. We’ve all struggled and it has come through. Well, it’s easy to complain. It’s a very difficult job. And government through Ters and UIF has helped us through this period. I think our partners really are grateful for that.

Starbucks itself, at the corporation level, US and Europe, did also contribute to this period to help us through. So there are multiple stakeholders who have been quite influential and helpful during this period. Covid – the protocols are set where they are, and we will follow the rules. It’s very important for the health of our customer and our internal partners. But beyond the obvious that you see, there are the standard procedures.

NOMPU SIZIBA: In the short to medium term, Adrian, as we all get our heads and acts around the Coronavirus menace, what are your expectations around people’s appetite to sit in your establishment and chill, or even work or study? Do you expect that will take quite some time – or not necessarily? You live in Los Angeles, and the whole world is experiencing this thing. The United States is really badly affected. What’s the attitude there?

ADRIAN MAIZEY: I tell you, there are multiple facets to your question. Flying from LAX, Los Angeles airport, into Frankfurt, it looks like a nuclear bomb went off. There is absolutely nothing that’s open. It’s actually very scary. So on the outside, where we were operating, we were driving around, much like here, although in the US – at least in California – each state has its own rules. You cannot go into a restaurant. You can only sit outside. Most restaurants at this point have moved in the parking lot. It’s a bit of an interesting idea. At least we have the weather there for that to be okay, but you see the impact around the travel area.

The airports are absolutely dead. When I flew over from the US, there were two people in the plane. So you can imagine the cost of flying the plane across. Lufthansa was telling me – one of the flight attendants, – they were losing about a million euros per hour. That’s difficult. But basically you could see everyone in the world is doing the same thing as you’re doing here. Yes, you can go into restaurants. At the height of the lockdown I was really concerned about how the customers were going to come back. Even Starbucks was pivoting towards more of a grab-and-go model, but we’ve seen that people are wanting to get out. We see they need a place to work.

So my point is that we really do need that third place today –- more than ever. And, if you went into any of our stores today, you’d see lots of people sitting there. The  tables are all full. So I don’t think it’s going to impact us to the degree that we thought. Whether the spend is there is another question because, when you see those airports and all those businesses feeding and supplying and living off the travel facilities or infrastructure, that money at some point is not going to cycle through the economy.

That raised a little bit of concern for me. I see our spend is down, but the people are coming back. I don’t think consumer behaviour is going to change as much as we expect. What’s changing is the traffic patterns. Again, I don’t know if in six months’ time we’ll be back to normal. We’re all seeing the roads are lighter. But, if we continue to work from home, it’s going to be a different experience. We have to figure out a model that serves the customer.

NOMPU SIZIBA: Just on a personal note, you’ve got that quirk, but you’re actually South African.

ADRIAN MAIZEY: Yes – so excuse the accent. I’ve been gone for 29 years, and, if I speak with a South African accent, the Americans look at me like they don’t know what I’m saying. Especially in a telephone-type situation.

I was born and raised in Pretoria, went to Pretoria Boys High. I grew up in Centurion, went to Pretoria Boys High, and then I went to Tukkies for a year. Then I got a tennis scholarship. That was in 1993. I applied and I got into tennis in the US, and never had any intention staying there. One thing led to another and I ended up working for Deloitte. And here I am, 30 years later.

About six years ago I partnered with a couple of guys who have been  investing in South Africa for a long time. That was the agenda –investing into South Africa. It’s been quite an interesting niche for us, and it brings me back to my home with nostalgia. My family still lives here – my sister, my mom. My dad has passed away.

NOMPU SIZIBA: You’re a businessman, you obviously want to make profit down the line – but there’s also a level of emotional investment.

ADRIAN MAIZEY: I can’t separate that. At the end of the day, this is very emotional, because it is South Africa. Honestly, if this were Zambia, it would be interesting because of Starbucks, but there would be no connection to it – no insult to Zambia, it’s just that I don’t have any connection to them.

The brand itself is powerful enough as an attraction for one to want to be associated with it. So I guess I would be interested around the world, but I don’t have any advantage there, whereas effectively I am still local where lots has obviously happened in the last 30 years. I come back a lot, and I am South African. There’s no getting away from it. Hence the drive. And I think one ultimately needs that. If there’s not an innate higher drive than just purely money, it’s hard to really be the best you can possibly be, because that’s not as satisfying as doing something.

We talk about rugby players, rugby teams. As a team, you deliver. The All Blacks deliver, the Springboks deliver, as a group. Individually for their home team they may not do the same level of execution.

NOMPU SIZIBA: That’s right. Absolutely. Adrian, great talking to you. Thank you so much for spending some time with us. That was Adrian Maizey, the owner and CEO of Rand Capital Coffee.

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Why are we so fascinated with Starbucks, it is expensive

South Africans have learnt how to make good coffee and don’t need to pay over the top prices for fancy coffee.

This is not America.

one fast talking coffee salesman

American marketing hype.

They don’t sell coffee.

They sell flavoured hot or cold milkshakes with coffee in it.

Had it in the US.

Honestly just junk.

Your comments reminds me of someone in the motorcycle industry, telling me Harley Davidson is like a good American marketing exercise:

“they sell you the sizzle, instead of the steak”

Like selling you a lifestyle….clever.

Fascinating, so Starbucks is going to emulate the financial illiteracy of Taste Holdings management who oversaw the mighty collapse of Domino’s Pizza! Remarkable how executives of listed companies cannot even comprehend basic break even analysis (factoring in reasonable set up costs with decent ROE) & economies of scale in vertically integrated chains. And all this in a very saturated Cape Town market ensuring them a way smaller market share than elsewhere. Shine on you crazy diamond. I echo the comment below – this is not America where you can simply import your brand into a foreign country & hope for the best.

But surely Starbucks is in 76 countries for a reason?

End of comments.

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