Starbucks plans to open on Dawson Street

RetailingStarbucks, the world's biggest speciality coffee retailer, is opening one of its largest Irish outlets in the former Ebookers travel shop on Dawson Street.

The US giant recently pledged to open a new store every three and a half hours but industry sources claim the company's growth rate in Ireland has been surprisingly sluggish.

So far, the iconic brand has eight cafés in the Republic - seven in the capital and one in the Value Retail factory outlet outside Kildare town.

Such a relatively small network means its market penetration is far below that of established indigenous brands, like O'Brien's, Insomnia and West Coast Coffee.

In the UK, however, Starbucks is the dominant player. In nine years the company has built up a network of over 400 cafés, making its signature green and white medallion as familiar a sight on the country's high streets as McDonald's golden arches.

It was assumed that Starbucks would launch a similar blitz on the Irish market but, according to property sources, the coffee titan's roll-out has been beset by planning problems, intense competition for suitable locations and spiralling rents.

Negotiations for sites can also be tortuously slow and it is understood that the deal on the Ebookers shop took up to six months to complete.

The Seattle-based coffee chain is paying over €180,000 a year for the 270sq m (2,906sq ft) shop after the landlord, a private investor who bought the building for €4.5 million three years ago, decided to significantly enlarge the property's retail space.

Ebookers, the online travel agency, closed its flagship outlet on Dawson Street in May last year and agreed to sell its lease back to the landlord for €150,000 at a passing rent of €93,500. Colliers Jackson-Stops acted for the landlord while Lisney handled the negotiations for Ebookers.

Industry experts claim the Dawson Street location is perfect for Starbucks, as it places the global brand at the heart of Dublin's coffee culture. The US giant has faced criticism in the US and UK for clustering outlets in urban areas already crammed with cafés and espresso bars.

In her book No Logo, Naomi Klein argued this "cannibalisation" strategy results in the loss of smaller, independent traders.

Such negative publicity has already hit Starbucks' Irish expansion. In 2005 the company was forced to open its first outlet in Dundrum Town Centre rather than the higher-profile College Green site after claims that the chain's presence would "dumb down" an historic part of the city.

The company is currently seeking planning permission for its Dawson Street shop.

According to industry experts, Starbucks is forking out topline rents for its preferred locations. In some cases, such as the new scheduled outlet at the Oval office development on Shelbourne Road, where the US chain is paying around €130,000 a year for 125sq m (1,345sq ft) of space, the rent is thought to be up to 30 per cent above the area's average retail rates.

The opening of these two new cafés would bring Starbucks Irish network to double digits after more than 18 months in the market.

Yet, while Starbucks is far from becoming a market leader on the basis of its current store numbers, the company's property agent, Jones Lang LaSalle, is believed to be in negotiation for at least a dozen more outlets.

Strong growth has been the linchpin of the brand's success and, at the company's recent AGM, chairman Howard Schultz unveiled ambitious plans to open 10,000 more stores over the next four years, which works out to be almost seven a day. Currently, Starbucks operates 13,168 outlets in 39 countries.

The bullish comments came in the wake of a 20 per cent slump in the company's share price from its 52-week high in November, following a slew of negative headlines over fair-trade issues, brand strategy and investor confidence.