Italians Shun Domino's Pizzas, Will They Buy Starbucks' Espressos?

Seven years ago, Domino Pizza, a successful American franchise, tried to sell pizzas' to Italians, who are often credited as inventing it first. But it didn't work, with the company closing its 29 store locations in Italy, according to Bloomberg reports. Apparently, Italians have no appetite for American-made pizza. Instead, they prefer their own.

Domino's story doesn't appear to have discouraged Starbucks from moving into Italy four years ago and reaching 11 stores by early 2022.

Will Starbucks succeed where Domino Pizza failed? Will Italians develop an appetite for American-style cafes and espressos?

Thus far, it seems so. At least according to the company's interim CEO Howard Schultz, who told investors recently that Italians are buying the company's espresso. And that he's planning to open more stores in Italy's major cities. The American giant chain reported 318 additional stores in 3Q, with nearly 35,000 locations.

Josh Answers, the host at the Trading Fraternity, isn't sure about Starbucks' prospects in Italy. "In some ways, yes, but in many ways no," he told International Business Times in an e-mail. "The first thing to note is that European coffee culture, especially Italy, is completely different from the United States. Coffees with sugar, milk, and other flavors used as "pick-me-ups" throughout the day aren't common. Instead, for many Italians, coffee is a post-meal activity enjoyed at a restaurant over more conversation so they can savor and enjoy the flavors."

Nonetheless, Answers sees Starbucks winning from the younger generation and tourism, as is usually the case with American brands overseas. "Italians who have been drinking coffee at local shops & restaurants for years aren't going to make the switch to SBUX unless they can somehow alter their menu offerings to meet Italian culture," he adds. "The younger generation in Italy & all of Europe, however, is a different story; they are already proving that they are willing to make the switch. If younger Italians fall in love with SBUX like many Americans, they might have a fighting chance. The other thing that can keep them alive in Italy is tourism. It's one part penetrating the European market, another part providing your customers across the globe with their favorite brand & experience no matter where they go."

Will the winning two consumer groups be enough to keep Starbucks in Italy? It's too early to say. For instance, Starbucks has fared poorly in neighboring Greece where it faces stiff competition from local start-up Mikel Coffee Company, which has been opening coffee shops at a feverish pace, and is moving into Starbacks' home-turf the US. It has also fared poorly in Poland, too, where it's facing competition from Costa Café and local start-ups.

Still, Wall Street will be closely watching Starbucks' overseas expansion as it faces several challenges at home, like market saturation and unionization of its labor force, which have pushed some investors away from the company's shares. Over the last five years, Starbucks shares have underperformed the overall market, while the last year have lost 24% of their value.