February 13, 2009
Starbucks Rolling Out Instant Coffee
Instant coffee
is for amateurs, right? Don’t real coffee drinkers grind the beans from
fresh and go to the coffee pot or preferably the French press from there?
Starbucks
has built its business around the cachet of drinking gourmet brewed beverages
but now the chain is rolling out a soluble (see: instant) coffee under
the Via brand name.
The new instant
coffee seems like a departure from Starbucks core identity but, according
to three unidentified executives interviewed by AdAge.com, it will
clearly differentiate from instant brands including Folgers, Sanka and
Brim.
“It’s a breakthrough
in soluble coffee,” a person identified as being “close to the
project” told AdAge.com.
The development
of Via is said to be the brainchild of Starbucks
CEO Howard Schultz and is expected to get strong marketing backing from
the company. The product, which is scheduled to be introduced at Starbucks’
annual meeting on March 18, will initially be sold in the chain’s cafes.
There is no word if it will eventually migrate to grocery stores.
Discussion Question:
Will entry into the instant coffee category dilute the Starbucks brand
or is it the right product for current economic times?
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The flaw I see in this news is not so much the development of instant coffee, but the decision to launch it in Starbucks’ own stores first instead of in grocery stores. No one goes to a Starbucks looking for instant coffee, but some customers in grocery stores are looking for instant coffee and that’s where this product should be launched. Normally, the current instant coffee brands don’t even cross my mind, but I would consider purchasing this product to use in dessert recipes or as an emergency coffee of last resort. Not the best idea, but not entirely off the mark. A $17 billion market is, after all, not to be ignored.
When I worked for Bose, an engineer came to the store and showed me this prototype clock radio. I said to him that it was silly for a world-class audio company to be manufacturing and selling a clock radio. Especially one that would cost almost three times more than the current premium clock radio on the market. My famous last words, “It will never sell.”
Of course I’m referring to the Bose Wave Radio which has been a phenomenal seller. (You can see why I don’t consult on product development!) My point is that Bose completely redefined that product category with the Bose Wave Radio, just like Apple has redefined the MP3 player and Smartphone. I believe Starbucks could redefine instant coffee.
Yes the store experience is a key element of the Starbucks strategy, but they also sell quality products to be brewed at home like I do every morning. I’m willing to pay a premium price for a quality product, and so are a lot of consumers.
So my time at Bose has taught me not to bet against a product just because it is in the same category as other commodity products. Then again, if Starbucks doesn’t recreate the category then I think it could definitely hurt their brand.
It’s nice to see the comments here because now I know I’m not alone. I just keep shaking my head at what Starbucks is doing to their brand. Howard Schultz has gone from the man who was going to bring the brand back to its roots to the man who’s going to drive a stake through its heart faster than any executive I’ve ever seen. Even the automakers in their desperation aren’t sacrificing their brands at the same rate.
This is the classic “cooler heads” example. Instead of panicking, use the recession to rebuild the business. Close stores to limit the ubiquity/fast foodness of Starbucks. Use the loyalty program to encourage people to stay with the brand, get BETTER (Not cheaper) food and let the brand live to fight another day. I’m beginning to think they’re not going to emerge from this recession–or they’ll be next on the government gravy train because they’re cutting off their brand at the knees.
In the everlasting pursuit to expand the brand’s reach, dilution of the brand has had varying effects in several industries. If we look outside our world to the car biz, as an example, many brands have gone down the scale to offer “entry-level” choices: Jaguar’s X-Type (a flop), Porsche’s Boxster (success). While others have tried to go up the food chain, like VW’s Phaeton (total flop). If you have a strong, recognizable brand, determine what the perception of that brand is. Or better, yet, what it COULD be. Only a few years ago when you said, “Apple,” you thought of a niche, maybe dying PC firm, and now what do you think of? If Starbucks wants to give it a try to reach an untapped (for them) audience, why not? A more cost-effective and less threatening method may be to try it out in a virtual world first, like SecondLife, and see what the world thinks.
I was this year, as in years past, since friends and family know my affinity for coffee, given a pound (or the equivalent measure) of Starbucks Christmas Blend in whole bean. While it’s really good coffee for home brewed, it’s not like a cup brewed at Starbucks.
While ‘Via’ may be a really good instant (we shall see), it’s still instant. If it’s at a premium price (and it will be) compared to other brands, it’s still instant. It will taste like instant coffee no matter how good their breakthrough might be.
Starbucks’ value is their experience. This entry won’t help that. Starbucks was all about the experience and the product delivered through the experience. They are, of late, failing at both. Forget the new products and focus on the core experience.
I had a cup of Starbucks this morning. It was not the cup I preferred. It wasn’t bad, but the blend posted that I chose ‘was still brewing’. How can you be out of the only thing you sell? How can you not be ready at all times when the customer enters the door? How can you not have the primary product you posted on the boards not fresh and readily available? The unit was short staffed and not ready for business and their primary purpose.
Starbucks issues are purely the fact that they have lost their focus on their primary purpose–what made them great. It has nothing–absolutely nothing to do with the economy. It has everything to do with the fact that they are no longer different. Starbucks customers (those gained by their original experience) don’t want a McD’s latte. The don’t care about 25-50 cents. However, when you no longer are a value or deliver the experience, why not pay less when the experience (a not so great one) costs the same? Consumers aren’t basing their decisions solely on their wallet, they are making them on what the calculate when they do their own value equation.
When I have to microwave it, stir it, wait for it to dissolve, and the cringe when I take the first sip, Folgers will do. An instant is an instant and the label or brand won’t change the cringe at 5:30 AM in the kitchen!
Forget the new products. The magic bullet struck them a long time ago. The problem is that it struck and went through the other side. Aim and fire towards what made them great and their customers will again reward them. They are waiting and they want that relationship back.
I think it’s interesting. With this roll-out we will soon see how much of Starbucks’ earlier success was (1) REALLY about the taste of their coffee, or how much was always (2) about the perceived social cache of being seen sitting inside there or carrying a Starbucks cup around.
Unless they use a new cup style designed specifically for the new coffee that glaringly says, “I ordered the new instant, second-tier version,” the “cache” (2) folks will still have that at a lesser cost. We all know that a lot of status-conscious people used to carry Saks and Brooks Brothers shopping bags around, filled with goods from other retailers, don’t we?
Starbucks is in very deep trouble, and even in a future improved economy will likely never regain their old hold on premium-priced coffee. I don’t blame them for trying to hold on.
Wrong, wrong, wrong! Starbucks’ success is based on setting themselves apart from the rest of the pack, not stuffing themselves onto an already crowded shelf with what is likely to be an inferior product.
Relevant corollary:
Krispy Kreme donuts in C-stores and gas stations.
It doesn’t matter if this is the most innovative and wonderful instant coffee imaginable. If it is billed as “instant coffee” it will be a very bad idea.
No need to pile on but this just makes me smile.
For all their talk about getting out of music and focusing on coffee and their heritage, this is something else entirely. Might work from a business standpoint but what about making K-cups or something instead?
SBUX has become nothing more than a mass market brand without a unique selling proposition other than massive distribution.
Starbucks has totally lost its way. They built their business on being a retailer of premium products, in a comfortable setting oozing with ambiance. They promoted the fact that coffee was served by barristas, who memorized your face, and your drink, and served it up with care and perfection. Now they are offering instant coffee, and breakfast combos, they make them look like a poorly executed McDonald’s wannabe.
They need to go back to the basics, and quit worrying about Wall Street. It no longer is about increased revenues each quarter; it is about survival. And if Starbucks continues to make these types of errors in their strategic decision making, they will not survive.
I suspect that what was probably a supply opportunity for Starbucks got twisted into a supposed brand marketing play. To wit: Starbucks buys beans as cheaply or cheaper than anyone; they have an abundant supply or even oversupply; the instant coffee business is significant; so why not give it a shot? The mistake occurred when they got “creative.” Rather than attaching their name to the product and, horror of horrors, selling it in their stores, it could have been a Via brand product in supermarkets or even a private label product. If the original objective was to create a market for excess beans, this would have been the best way to go.
Well, here we go…I used to refer to instant coffee as “Hillbilly Starbucks!” Now it’s coming true!???
This is definitely a bad idea.
Despite the stigma around drinking instant coffee (I hate it too), there are more “upscale” uses of this product for which foodies like me would enjoy having a Starbucks brand to choose from.
I recently tried out the Barefoot Contessa’s “outrageous brownie” recipe, which called for instant coffee. If Via was there on the grocery shelf to choose from, I would have thrown it in my cart alongside the Godiva chocolate chips, instead of the brand that I would never purchase otherwise.
Could there be others out there like me looking for a higher quality ingredient for their gourmet desserts, espresso martinis, etc? Not to mention the hiking/camping crowd that are currently stuck with a mediocre cup of joe when out on a trip….
I believe this instant coffee approach will fit well with their “instant” espresso machines. These faster machines produce a beverage that has no taste of coffee, but consumers seem to value the speed over quality, so I could see the sales of instant coffee doing well there, too.
The big question is whether or not consumers will continue to pay $6 for coffees that aren’t really anything like coffee at all.
Most will claim this just the latest stumble by Schultz and another nail in the coffin of their eventual demise. I disagree. First, the move into another aspect of their core product category is smart marketing. Second, there are many reasons for using instant coffee that has nothing to do with “the perfect cup of coffee”: an ingredient for recipes; quick coffee while traveling; and more. Finally, there is a huge instant coffee business out there for people who actually make instant coffee every day in their homes. A percentage of these will certainly be willing to pay a premium for this brand name.
My only criticism will come if it is launched only in the cafes. It belongs in the grocery store along with Starbucks whole and ground bean coffee, ice cream, and bottles of Frappuccino. The stock may have stumbled and their mystique has become a bit damaged, but there are still long lines at most Starbucks stores I frequent. I predict they will be just fine, and will have the last laugh as the economy improves and even before.
The upside is that it expands the Starbucks franchise. The downside is that if it is (a) not superior to other solubles or (b) bad relative to ground Starbucks, then you are going to see franchise dilution and even potential backlash. The current economic times may be seeing a reduction in Starbucks’ sales, but if this product can’t perform very well, it’s only going to hurt them in the near term, as word spreads.
Sometimes there are counterintuitive ideas that work in the marketplace…not so many years ago the whole-bean coffee market belonged to A&P and its Eight O’Clock brand. Now its become quite a large business with major players, such as Folgers.
I personally am not a fan of instant coffee but if I’m time-starved and don’t want to wait in line or pay $5 for a coffee at Starbucks, then why not give their instant coffee a try?
I do think they will need to provide strong incentives to get trial–either high value coupons (ROP and online) and/or free sample packs at their stores or other high volume traffic locations such as commuter rail stations, etc.
Add me to the skeptics club on this one.
Although I’ve never tried it, I’d be willing to bet that Via’s the best instant espresso coffee you ever tasted. And the brand name is superb–Via means “way,” but also “life,” like “chai” tea.
Calling it “soluble” or instant, super-premium or value-priced won’t matter. Via threatens to turn the Starbucks cuppa from a living, breathing, ritualized consumption experience into a mere product.
When I started working in the c-store industry, instant coffee was very prevalent as a way to avoid “waste.” It turned out to be a really a way to avoid sales.
For a company like Starbucks that is positioned as an “experience,” I think this is a bad idea. Let’s assume that they have truly discovered a new, unique way to create instant coffee that tastes good (OK–it’s a stretch), it will be expensive to create trial–especially in their core customer who disdains other brewed coffees.
Given their issues, I would think the money this will take could be put to better use.
I’ve said here before (not long ago) that Starbucks is appearing desperate. Well, here we are again. What are they thinking?
Starbucks used to be the antithesis of instant coffees. Remember General Foods International Coffees? The instant flavored coffee in a can? General Foods still sells these, but this used to be considered (pretty much the only option for) a yummy, flavored coffee treat with an international flare. Then Starbucks came along and radically changed our notions of premium, international coffees.
Now Starbucks is downscaling in a way that I think will not sell in the short term, and will probably harm them in the long run.
No wonder executive vice president and president, Global Consumer Products, Foodservice and Seattle’s Best Coffee Gerardo Lopez has resigned for “personal reasons.”
This thing is struggling to keep the wheels on. They already ceded to McDonald’s earlier this week with their “value’ menu. More at my post here.
I have never met an instant coffee that was drinkable.
Obviously there is a market for instant coffee, which I find very surprising. In the UK, a very large market. But, making a cup of brewed coffee doesn’t take that much longer than instant. In fact, Starbucks has a handy device for making brewed coffee by the cup.
However, accepting the fact that there is that market and, most important for Starbucks, this product must be far, far superior to instant coffee currently on the market, then there is a huge opportunity. If “Starbucks” is to mean great coffee, then why not provide a vastly superior product in every sub-category?
Actually, I have some very close friends who are not coffee drinkers. They prefer tea. So, the only coffee they have is instant. I guess it works kind of like tea. When I visit for the weekend, I drink the instant (ugh!). Perhaps the next time I visit I will take Starbucks’ new product.
It’s like Starbucks wants to become the next Kmart, introducing bad idea after bad idea. I’ve got a feeling this is just another idea to be made fun of. My guess is it will be expensive and not be able to compete on price with both private label and brand name instant coffee. It appears that Starbucks is throwing mud at the wall to see what sticks. I wonder what clever joke will be made up by McDonald’s and Dunkin’ Donuts as they make sport of Starbucks!
Will instant coffee dilute the Starbucks brand? Interesting question:
Unfortunately, the assumption here is that coffee aficionados are frequenting Starbucks in the first place. Which I do not believe is true. Coffee aficionados who want the perfect cup understand the difference between fresh roasted select beans done in small batches…and large commercial operations that go right into the vacuumed sealed bag…delivered to the store who knows when? It would be a desperate day when a coffee aficionado reached for the jar of Sanka (do they still make this?) in the morning…this is why small companies like Dunn Brothers in Minnesota can survive the Starbucks onslaught. They roast their beans in small batches right in the store.
Starbucks already has pre-packaged cold coffee drinks (in bottles and cans), ice cream and frozen treats…instant coffee, why not??? I personally do not think it will dilute the brand in any shape or form. The only question is, will it sell in a crowded space? In the new millennium, what is the difference between instant coffee and using a coffee maker that uses a pod (which Starbucks already sells)? I mean other than the cool gadget that sits on your kitchen counter, that is. In the purist sense, I would argue that there is little difference. At best it might reach an audience that Starbucks would not otherwise reach. Isn’t that why we see both Starbuck, Caribou and Dunkin’ Donuts ground and whole bean bags on our grocers shelves in the first place?
No offense to Starbucks or their consumers but, when was the last time you were in line at a Starbucks and heard a customer ask about where the beans were sourced from or the date the batch was roasted and shipped to the store? Granted if you asked I am sure an associate would be happy to explain the details to you.
Well since everyone is throwing bricks, here’s mine. Starbucks management seems to spend too much time drinking their own coffee and not enough time reading the newspaper. We are in a recession, and over-priced coffee is not a necessity. I would love to know how many share points Dunkin’s coffee picked up when Starbucks had their last price increase. I bet more than 10.
Starbucks seems to think that what was a good idea 15 years ago is still a good idea today. I am afraid they have expanded their horizon well beyond their sphere of influence. They have opened stores in markets where the name is known but the culture is absent. Their culture seems to have evolved into hero worship where they believe that their founder can do no wrong. This idea–like their last retail price increase–is a bad idea. I just hope the boys at retail get their pound of flesh for distribution and shelf space, because I think that is the only real revenue this product will produce. After all, what we really need now is another overpriced, mediocre product.
Some people want cold coffee in a bottle. So Starbucks sells cold coffee in a bottle. It doesn’t kill the brand. It just makes some people happy. So Starbucks will try selling instant coffee, too. If you don’t like instant coffee, you won’t buy it. No one likes every flavor at Baskin-Robbins. But it’s still a great brand.