Tuesday, September 29, 2009

Instant Coffee at Starbucks?

You heard correctly. Starbucks is launching a new instant coffee, hoping to appeal to recession-scarred Americans and Canadians who are counting their pennies. According to the Wall St. Journal:
The Seattle-based coffee giant on Tuesday is planning to roll out Via to Starbucks stores across the U.S. and Canada after having tested it in Seattle, Chicago and London for several months.

. . . Via will be available in stores such as sporting-goods retailer REI and Office Depot Inc. On Tuesday, all customers on domestic United Airlines flights longer than two hours will get free packets of Via . . .

"We recognize there's a very large opportunity in the grocery aisle," Starbucks Chief Executive Howard Schultz said during a conference call with reporters.

In traditional supermarkets, Starbucks will go up against industry giant Nestlé SA, maker of Nescafe Taster's Choice, which already is running ads attacking Via.
The Toronto Star reports:
Priced around $1 a cup, Schultz said he thinks consumers will see Starbucks "Via" as good value. But the proof will be in the drinking, marketing expert David Dunne said.

"It's got to taste significantly better than existing instant coffees and pretty close to a ground coffee from Starbucks," said Dunne, a professor at the University of Toronto's Rotman School of Management. "I think it's a risky move if you don't have a clearly better product."
I agree with Dunne. Besides, introducing an instant coffee will compete with Starbucks' existing house brew. If I were Schultz, I'd be concerned that such a move might cause many consumers to buy-down -- i.e., to shift from buying Starbucks house coffee to buying Via. This shift would cut into the coffee chain's profits.

A marketing expert might question Starbucks' decision from a different standpoint: does a brand that has built its image around premium coffee cheapen that brand by sinking into a Sanka world?

I guess that question will be answered over the next year or two.

No comments: