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. Last Updated: 07/27/2016

Starbucks Defies EU's Skeptics

VIENNA, Austria -- It takes some hubris to bring an American coffee shop to Vienna, the city of cafes, and then to ban smoking in it.

But no one has ever considered Starbucks humble. And the move, a keystone of Starbucks' rapid expansion in Europe, appears to have paid off.

Since the coffeehouse opened in December in the smoky, beating heart of Vienna, near the opera house, it has been a resounding success. Now there are three others in Vienna. Dire predictions that Starbucks had finally overreached have proved wrong.

Many Viennese sniff that their culture has been infected, that Viennese use their 1,900 or so coffee shops to linger and meet, smoke and drink, savor the wonders of pastries with cream and marzipan, ponder the world, write books and read free newspapers.

They drink from china cups and order from a waiter, usually in a stained black dinner jacket.

Some Austrians say a caramel macchiato is worse than a Coca-Cola, likely to do more damage to European values (and waistlines) than a Big Mac.

There was also skepticism about the Starbucks brand, associated with globalization and mass American culture. "It was the hardest part," said Franz Holzschuh, who leads the Starbucks joint venture in Austria. "People would say, 'You're the McDonald's of coffee, with paper cups.' I'd explain a hundred times that we're not McDonald's, that we're high quality and not cheap and only use paper cups to go."

The smoking issue loomed large as well. Holzschuh, a heavy smoker, originally argued that no Austrian coffee shop could possibly ban cigarettes. "Some 40 percent of Europeans smoke and 60 percent of Italians," he said. "That's half your market."

The U.S. Starbucks bosses were unfazed. "They said that we have 3,000 nonsmoking stores and the 3,001st will be nonsmoking, too." Holzschuh conceded but kept thinking, "O.K., friends, let's wait and see." The Vienna store opened, and "in the first two months, we had 100,000 guests," Holzschuh said. The store sees Europeans, not Americans, as its main clientele.

The first Starbucks here stands directly opposite the venerable Sacher Hotel and cafe, home of the Sacher torte. It is around the corner from Cafe Mozart, where Harry Lime lingered in "The Third Man."

In Austria, there is a coffeehouse for every 530 people, and Austrians drink 1,000 cups of coffee a year outside homes and offices. This is, quite simply, the densest coffee market in the world.

One of the most competitive, too. "Austrians love their coffee," Holzschuh said. "We go three or four times a day to a coffeehouse to meet friends or do business."

Still, there are plenty of holdouts. Herbert Lackner, chief editor of the magazine Profil, has most of his meetings in traditional coffeehouses like the Cafe Ritter. "I can smoke and read a newspaper, and I like coffee-coffee," he said. "I don't drink marshmallow-flavored coffee."

"People linger over their coffee here," he added. "It's not something you drink to wake up or guzzle on the street."

But reactions to the nonsmoking policy have been only positive, Holzschuh insisted. Signs in Starbucks read: "Aroma-Schutz durch rauchfreien Raum" -- aroma protection through a smoke-free space -- and then thank the customers for their understanding. "We looked for a sentence that said, 'Dear guest, it's not about your health, it's about the coffee,'" he said.

While emulating some early Starbucks stores, the European coffee shops differ from many U.S. ones these days by offering plenty of comfortable chairs and free newspapers.

"We don't want to sell coffee, we want to sell a relaxed 15 minutes," Holzschuh said.

Here in Vienna, there are tables and armchairs on two levels, with plenty of free samples, like the chocolate muffin and the frappuccino. Cappuccino and latte are the most popular choices, followed, Holzschuh said with a smile, by caramel macchiato.

Drip coffee accounts for less than 1 percent of sales while whole beans now make up about 15 percent of sales here. Customers spend on average about $5 a visit, paying about the same for a coffee as at the other big shops like Cafe Mozart.

"The first surprise to many patrons is that our coffee is terrific," said Peter Maslen, president of Starbucks Coffee International, based in Seattle, who would hardly be expected to say anything different. "But to us, that's just the price of entry. It's the whole experience we need to provide: how you're greeted, whether there's a place to sit, whether you feel rushed."

Maslen lived for a time in D?sseldorf, and he sees a big opportunity in Germany, too, where another joint venture, with KarstadtQuelle, a unit of the Karstadt department store chain, opened its first two stores in Berlin in late May.

The deputy managing director of the German joint venture, Pascal Krian, is not concerned about smoking. "The point is not to forbid something but to leverage the aroma of the coffee, which smoking destroys," he said.

"We're absolutely convinced there is a place here for Starbucks. There is a direct link between the barista and the customer, and in a country where service is a bit of a problem, we think every customer will feel it from the first moment in the shop."

With four stores in Vienna now, Starbucks plans to open about a store a month in Austria for the next five years. German plans are even bigger: five to 10 stores in the next 12 to 18 months and some 200 stores by 2004, with a total of perhaps 1,500.

By the latest count, Maslen said, Starbucks has 5,405 stores worldwide, 1,153 of them outside the United States. "The whole international expansion is important to us," he said.