A Venti Mocha, in Russian at Last

http://www.nytimes.com/2007/09/06/business/worldbusiness/06cnd-sbux.html

September 6, 2007
A Venti Mocha, in Russian at Last
By ANDREW E. KRAMER

KHIMKI, Russia, Sept. 6 — With the hiss of an espresso machine and a note in Russian explaining the meaning of tall, grande and venti, Starbucks opened its first coffee shop in Russia today in a mall outside of Moscow.

The opening sealed a victory for the company in a fight with a Russian trademark squatter who had barred Starbucks from coming to Russia for more than three years, just as a coffeehouse culture burst onto the scene here. Starbucks refused to pay the squatter and eventually prevailed in court.

Still, that dispute highlighted the challenges for Starbucks as the chain strives to expand outside the United States, a market that will eventually become saturated, making future growth at home more difficult. Starbucks intends to open 20,000 coffee shops overseas while operating about that number at home.

With the opening of the first Russian café, Starbucks, which is based in Seattle, now operates in 43 countries, said Carole Pucik, a Starbucks spokeswoman. The company plans to open a flagship Russian shop on Old Arbat Street, an iconic address in downtown Moscow, later this year. “We see lots of opportunity here,” Ms. Pucik said.

The menu of basic coffee drinks is the same as in the United States, and indeed everywhere in the world, Ms. Pucik said, while the sandwiches and baked goods are adapted for local tastes. The Russian shop, for example, offers a mushroom and cheese sandwich.

One thing that is different is the price of a cup of coffee. Hard as it may be to believe, the prices can actually be higher than in a typical Starbucks in the United States.

In Russia, the prices are a reflection of the oil-driven economic boom times here; a tall filter coffee costs 75 rubles, or about $2.92. The priciest item on the menu was a venti mocha, for 230 rubles, or about $8.98. For comparison, a venti mocha at Starbucks in New York costs $4.71.

Starbucks, meanwhile, is betting Russians will take to the carry-out coffee culture that bolsters sales in the Untied States but is all but unknown here. Russians typically sit down to drink hot beverages. Yet Starbucks officials say that may change as the pace of life picks up. “Moscow is a dynamic city,” Ms. Pucik said. “They will want a choice of taking their drink with them.” The company is offering its standard paper cups.

Starbucks first registered its trademark in Russia in 1997 but did not open any coffee shops here because of the economic crisis of 1998. Then in 2002, as the economy was picking up again, a former car alarm salesman and trademark squatter, Sergei A. Zuykov, filed a request with Russian authorities to cancel the chain’s trademark because it had not been used in commerce in Russia. He then registered Starbucks in the name of a Moscow company he represented as a lawyer.

Mr. Zuykov defended his claim to the brand for three years while asking Starbucks to pay $600,000 for him to abandon his registration, which the company declined to do.

He lost his case in November 2005 as Russia stepped up its bid for membership in the World Trade Organization and hewed closer to international standards in intellectual property right protection.

Still, in spite of this setback that allowed competitors a head start, Starbucks said it sees plenty of room for more coffee shops in Russia. Ms. Pucik, the spokeswoman, cited data from Euromonitor International, a market research company, showing Moscow has one coffeehouse for every 3,187 people. For comparison, New York has one for every 365 people and Paris one for every 126 people.