The home advantage wasn’t enough to save Second Cup in the ’90s, when Seattle-based Starbucks wrested dominance of the Canadian premium-coffee sector away from the company on its own turf. But now the coffee chain has a plan to expand into territory where Starbucks will have trouble following.
In June, Second Cup launched its first café in Islamabad, Pakistan, with 20 more locations planned to open in the next three to five years. The country’s growing middle class has increasingly attracted North American fast-food chains, but many have found it a harder market to crack than they expected.
This is especially true in Pakistan, where North American coffee culture is gaining popularity, but anti-American sentiment runs high. Second Cup has found being Canadian gives it some cachet, however: it can satisfy the allure of western culture, without the negative political associations that go hand in hand with being a U.S. multinational. Kentucky Fried Chicken, for instance, shuttered 60 stores in Pakistan during anti-American protests last year.
“People like Canadians,” says Jim Ragas, president of Second Cup International, “As we grow, I see that as a big plus for us.”
Second Cup has already tapped the Middle East for growth, with franchises in Kuwait, Oman, Saudi Arabia and others. In general, striking a balance between novelty and cultural sensitivity is the challenge at the moment, says Ragas. Learning about regional preferences in Pakistan could make it easier for Second Cup in the future, as well; Ragas says the country serves as a good testing ground for a possible move into the far larger Indian market.
Tea has long been the traditional drink in South Asia, but coffee consumption is rapidly growing among young people in Pakistan, creating a market for premium coffee shops. The bitterly contested Canadian coffee sector, on the other hand, is only getting more cutthroat, with McDonald’s and Tim Hortons now offering espresso-based drinks. So Second Cup is expanding where its competitors are less likely to go.
Samiullah Mohabbat, the representative of World Franchise Associates in Pakistan, explains that many brands, including Starbucks, are hanging back to see what happens under the new government, elected last May.
“[Second Cup] should understand this opportunity, and develop the brand fast,” he says. Ragas agreed it helps to get in ahead of rivals from back home, but says he also isn’t afraid of a challenge this time.
“You welcome competition because it makes you better,” he says.