Coffee to Go

Why aren't America's finest winning over the Israeli market?

Like the American coffee chain, Starbucks, which will close its branches in Israel at the end of the week, one of the largest fast-food chains in the world, Kentucky Fried Chicken (KFC), which has 5,000 branches in the United States and 6,000 in other countries, also failed here. Starbucks marketing experts and managers like to use the story of the failure of KFC in Israel as an example of the main problem with globalization: The encounter between an international brand (usually American) and the local culture.

"Do you know that they don't slaughter chickens abroad?" asks a Starbucks manager this week, and answers: "They attach two electrodes to the chicken, and it dies in a second. In no time." On the other hand, he continues, "in Israel they slaughter a chicken with a knife, in all directions, they let it thrash around, go into convulsions, rattle, and only after a long time does it die." He says that in a nutshell, that explains the failure of the chicken restaurant chain in Israel: "The skin of the chicken abroad is smooth. The skin of the Israeli chicken - after the convulsions, and as a result of the salting, as required by the laws of kashrut [Jewish dietary law] - is wrinkled and scrawny. When you stick a coating on smooth skin it stays on, when you stick it on wrinkled skin it doesn't stay on. The people at Kentucky Fried Chicken in Israel didn't foresee this simple fact." And he adds, "Not to mention the fact that the coating on the chicken at KFC restaurants in America is made from pig gelatin and milk, and in Israel it's made of synthetic gelatin and parve [non-dairy] milk powder. The chicken isn't the same chicken and the coating isn't the same coating, so how do they expect the brand to succeed?"

On the one hand, the standardization of an international brand is essential to its success - consumers are supposed to receive exactly the same product everywhere, so they will continue to enter the branches of the chain confidently, wherever they go - as pointed out by Dr. Talia Rimon, head of marketing at the business school at the Interdisciplinary Center in Herzliya. She says an outstanding example of a successful international chain, which uses the standardization approach, is the Scandinavian firm Ikea (which is in 44th place in Business Week's list of the 100 strongest brands in the world): Almost everything is identical in its branches, from the interior design to the products, the catalog and the service.

The Starbucks coffee shop chain (number 93 on the same list), which has 6,000 branches all over the world, also used standardization until now - the same coffee, the same interior design at the branches, the same foods served - and refused, say local managers, to be flexible.

Global v. local

On the other hand, many international companies use the "glocalization" approach (a combination of global and local): In other words, they preserve the main features of the brand, but adapt it, with a few nuances, to the local culture. That is the approach taken for example by McDonald's, the largest fast-food chain in the world, eighth on the list of the 100 strongest brands (after giants such as Coca Cola, Microsoft, IBM, Nokia and Disney), and certainly the most prominent symbol of America and globalization. Its managers in Israel, for example, had the sense to adapt the cooking of the meat to local tastes, and as opposed to the American McDonald's, where the hamburgers are fried, in Israel they are grilled.

Critics say that to a great extent, this combined approach - which is particularly successful in the food business - is the riskiest from a cultural point of view. Because in terms of culture criticism, the battle between the international brand and local culture is described as an attempt at American domination - via the power of standardization - of human variety, or of values of freedom, uniqueness and multicultural urbanism. When the American brand wins hearts by appropriating local tastes, its influence grows and the variety shrinks.

Of course, for marketers it's only a strategic issue: Tricon, which owns KFC, Taco Bell and Pizza Hut, "believes that business, like politics, is a local matter," as they said recently in Fortune magazine, in an article about adapting global brands to local cultures. Therefore Pizza Hut, whose pizzas are characterized by a thick dough, decided in some European countries to adapt the pizzas to local taste, and in those places provides thin pizzas, too.

In Japan, says Fortune, KFC (49th place among the 100 strongest brands) sells portions of tempura, alongside the traditional chicken dinner. Its branches in northern England emphasize a meat gravy and potatoes, in Thailand they add portions of rice in soya, in Holland potato croquets and onions, in France they add baked goods and in China "the chicken gets spicier and spicier as one travels inland." By the way, KFC - which didn't manage to dominate the fast-food market in Israel - is considered the most familiar foreign brand in China, even before McDonald's and Coca Cola (according to a survey by I.C. Nielsen, two years ago). Therefore, about two years ago demonstrators in Pakistan who were protesting against the American invasion of Afghanistan, moved from the U.S. Consulate in the capital to the local KFC branch. The local owners of the branch tried to hide the logo, but it was too late - the demonstrators set fire to the restaurant and in that way demonstrated their anger at the American empire.

Culture shock

The Israeli managers of Starbucks agree with the criticism leveled this week in the newspapers: They didn't manage to adapt themselves to the local coffee culture. Marketing experts repeatedly say the chain failed because of faulty management, incorrect choice of points of sale, overly high prices, coffee that didn't appeal to Israeli tastes, and a too limited, and not especially tasty, choice of foods.

And yes, Starbucks didn't succeed in Israel - as it didn't succeed in Austria and in Switzerland - because it chose to focus on Tel Aviv, a city with European roots, whose coffee culture, which was established here already in the 1930s, is typical of that in European cities ("Lucky are you, Tel Aviv" wrote Israeli writer Avraham Shlonsky, "that everywhere you look, coffee shops beckon"). Starbucks made the mistake of going after the demanding urban community, which already enjoys a variety of good coffee shops, including Arcaffe, Aroma, and many good neighborhood coffee shops, instead of going into the periphery, into the malls and commercial centers, where there is no competition.

The Israeli managers of Starbucks say the chain managed to take over the public space in England and in Japan, without adapting itself to the local culture, because there, as in the United States where it began and flourished, there was no culture of drinking good coffee before its arrival.

At Starbucks they are saying this week that the parent company has already learned from the mistake in Israel - as well as from the relative failure of the chain in Austria and Switzerland. In the branches that have opened recently in Turkey and in Greece, they will add for the first time, alongside the roasted, weak coffee created originally for American tastes, coffee that will be suited to local tastes, as well as baked goods, such as Middle Eastern-style cookies.

But in any case, from the point of view of the American Starbucks chain, the failure in Israel is not very important - says a lecturer in marketing and consumer behavior at the Interdisciplinary Center in Herzliya. He says that in any case, the chain wants to continue to spread over as many countries as possible, not only in order to grow and to increase profits, but as a marketing strategy of brainwashing, aimed at its American consumers. It is spreading all over the world in order to guarantee that American citizens who travel will come across the Starbucks brand wherever they roam - so that they will continue to visit the chain routinely on their return to the United States. According to this approach, the collapse of tourism to Israel, or the isolation of Israel from the world, is what is causing Starbucks to leave. In other words, it's the fact that the local culture is no longer relevant to Starbucks' needs, rather than the fact that the chain's manager has difficulty understanding the local culture, that is causing it to close its business here.