Starbucks Australia's first-ever profit, 23 years in, on Gen Z's iced coffee habit

Starbucks entered Australia in 2000 and expanded at a pace that far outstripped local appetite. By 2008 it had accumulated more than $143 million in losses and was running on $72 million of loans from its US parent; the global financial crisis forced it to close two-thirds of its local outlets and fire nearly 700 staff. In May 2014, Starbucks sold its remaining 24 Australian stores to the Withers Group — billionaire Russell Withers' convenience empire behind 7-Eleven — with the stated aim of building 'the most successful coffee chain in Australia'.

Under Withers the footprint was rebuilt slowly: eight new stores in the 2023 financial year took the count to just 67 nationwide. The results, lodged with ASIC and audited by PwC, showed the arm's first-ever profit — $3.15 million for FY2023, against a $5.5 million loss the year before and $13.3 million in the COVID year. Revenue rose 35% to $157.3 million, double-digit growth that far outpaces the industry's 4% average, and turnover per store improved from just under $2 million to $2.35 million.

Industry consultant Suzee Brain attributed the turnaround to a generational handover: for years Starbucks 'failed in Australia because it didn't connect with the coffee-centric culture of Gen Y and Millennials' — espresso snobs who shunned chains. Gen Z drinks differently, and the chain 'really nailed the cold-drink sector, the cold brews, the iced coffees, the frappuccinos, the iced teas', which also carry higher price points. Post-pandemic remote work and study, she added, put people in cafes for longer.

First-ever profit: $3.15M in FY2023 after losses of $5.5M (FY22) and $13.3M (FY21); revenue rose 35% to $157.3M, and turnover per store hit $2.35M.

Two decades of unprofitability ended only when a new cohort with chain-friendly, cold-drink habits came of age.

Cold brews, iced coffees and frappuccinos sell at higher price points than the espresso staples Starbucks lost on.

Turnover per store rose to $2.35 million, suggesting more efficient layouts and prime locations under the Withers rebuild.

A 67-store national footprint kept the recovery disciplined after the 2000s' over-expansion wrecked the economics.

A failed market entry can be a format problem: handed to a local operator, fewer stores in better spots plus the right product for a new cohort can flip two decades of red.

The profit remains fragile: the company sits in a net asset deficit of more than $22.3 million, far outweighing its $3.2 million profit, and the PwC-audited report carries a going-concern section resting on a letter of support from R.G. Withers Trust promising sufficient financial assistance. Starbucks Australia paid no tax in FY2022 or FY2023.