Battle for customers' allegiance as Starbucks expands in Sweden?

4:54 min

Love it or hate it, a giant American coffee chain has slowly been dipping into the Swedish market for a few years now. The company just opened two flagship cafes in the heart of Stockholm this month, and another opening downtown is slated for spring. What does this mean for the competition and for coffee-drinkers?

The week the American coffee chain opens a flagship cafe in Stockholm's neighborhood of Östermalm, a woman stands outside taking pictures of it with her smart phone. 

"It's awesome," she tells Radio Sweden, adding that it reminds her of when she used to live in the U.S.

On this December day, a supervisor in a red apron ventures out into the cold weather. On one hand, he's balancing a tray full of plastic cups filled with hot chocolate and topped with whipped cream.

A passer-by squeals with excitement as she helps herself to a sample, and others look happily surprised by the free treats. In no time, the tray is empty.

The coffeehouse that started in Seattle in the early 70s has grown into a company serving up millions of drinks, from frappucinos to grande cups of joe, to customers all over the globe. Starbucks has had a presence here in Sweden since 2010, when it opened at Arlanda airport, but so far, there are only a handful of the cafes in this country.

But of course, there are already plenty of cafes and coffee chains here: lots of mom & pops, then the big chains like Waynes Coffee and Coffeehouse by George. But Espresso House is the biggest of them, with about 150 cafes in Sweden and growing. How did they feel about the fact that the world's largest coffeehouse chain had just opened a flagship store right in their backyard. Was it war?

John Nylén is the CEO of Espresso House in Sweden. On this morning at headquarters, cartons of coffee grinders are stacked in the hallway, waiting to get shipped out to the cafes. There's a fully outfitted coffee bar right here in the office, used for both training purposes - and convenience. Nylén seems proud of the front desk, because even though the company has been around since the '90s, he says they just hired a receptionist a few months ago - a sign of "being a grown-up company".

Nylén says they've already experienced going head-to-head with the American company at the train stations in Malmö, Gothenburg and Stockholm, and that it didn't affect their revenue.

His company doesn't plan to change anything to meet the new competition – he doesn't think it will affect them. He also says the competitor's plan to start opening in ICA supermarkets won't affect them either. 

"We don't have anything like that in our strategy, so go ahead," he says. This doesn't mean he's not curious about what the new competition is up to. He went by the Östermalm flagship the week it opened to check it out.

"It's interesting to have one of the biggest and strongest brands in the world actually opening in a big city like Stockholm, and now opening more intensely," he says.

Nylén explains that in Sweden, the market is dominated by smaller café businesses. In other words, coffee chains don't have nearly the market share that they do in places like the U.K., so there's room for more, according to him.

More big brands could put pressure on some of the mom & pops to step up their game, he says, but the pressure can also go the other way. Nylén says some of his strong competition comes from the small cafes and konditori that are well-run.

As for the the behemoth chain from the U.S., Nylèn stresses their expansion is no war, in fact, he welcomes them. The coffee-drinkers Radio Sweden interviewed outside his competitor's flagship seemed to agree that there's room for more brands here – they seem to want a good blend of places to choose from.

As amicable as all this sounds, however, one woman sipping her sample hot drink reminds Radio Sweden that there is another form of competition cafes also have to contend with: "We have a great [coffee] machine at work, and it's free there," she laughs.