Coffee in Australia and shorting stocks on Wall Street
This is an unusual post by a stock market short-trader and investor, about a time they shorted Peet’s and almost got burned. For me, the most interesting part was the comparison of entrepreneurial culture in Australia and the US.
As an Australian the success of Starbucks (or Peet’s in San Francisco) puzzles me. Australia is blessed with a plethora of interesting and sometimes quirky, often very stylish cafes. For those who are interested here is a photo of my local (Bronte) strip of coffee shops. They are better than any strip I know of in New York, SFO or Chicago. The coffee is better too – and that is widely commented on by visitors to our shores.
It’s not that Australia is even a particularly coffee addicted country. Per capital consumption is not huge by developed country standards and is lower than the United States. We just have a better coffee scene.
It puzzles me why. There are awful lot of things that the United States does (substantially) better than Australia so this is an oddity deserving some explanation.
American coffee chains (particularly Starbucks but also some of the donut variety) have tried to break in and mostly failed. Starbucks closed most of its stores last year after multi-million dollar losses. They couldn’t cope with the Australian competition. Which is odd because in most things the US is a far more competitive market than Australia – and US senior management tend to be more battle hardened than their Australian peers (see my piece on the use of American CEOs in the Australian context). Its just the competition in cafes is far more fierce here.
I would love to be corrected – but I think the reason has to do with our wage structure. American low-end wages are very low indeed whereas Australia has minimum wages at quite high levels. Hiring unskilled labour to run a coffee shop according to a formula (and devoid of in-store entrepreneurial talent) works in America but does not work in Australia. Also entrepreneurial talent in America has too many opportunities to waste itself in a coffee shop – whereas small-time competent entrepreneurs will open a small coffee shop in Australia. [Maybe one of the good things about America is that it uses entrepreneurial talent well.]