Starbucks Coffee International and Israel’s Delek Group today announced they had reached an agreement to end their joint venture in Israel, and that the Starbucks chain in Israel would close.
The decision to dissolve the joint venture has been due to on-going operational challenges in the market, the companies said in a statement. Israel is one of the few places in the world where Starbucks has failed to penetrate the market.
“It was a very difficult decision," said Mark McKeon, president of Starbucks Coffee International for Europe, Middle East and Africa. "Following months of serious discussions and market reviews with the Delek Group, we came to this amicable and mutual decision. Our commitment in the market continues to be strong and long-term and we will return at an appropriate time."
According to a statement to the Tel Aviv Stock Exchange, the agreement to operate the chain will be cancelled effective April 4, 2003. Delek said that ahead of that date, Starbucks will hand over its assets in Shalom Coffee Company, the joint venture that runs six Starbucks stores in Tel Aviv.
Today, Delek owns 80.5% in Shalom Coffee. Delek said that following the agreement to shut down the chain, Shalom Coffee wrote down a one-time charge that would negatively affect its year 2002 results by NIS 7 million.
"As these are still very early days of our growth, we are committed to making strategic decisions to help ensure our future success," added McKeon. "We are very confident that the acceptance of the Starbucks brand is extremely strong, and we remain committed to our expansion plans and strategies in the region."
Published by Globes [online] - www.globes.co.il - on 31 March, 2003