Starbucks: Now Most Expensive in Instant Coffee Too!

Includes: MCD, SBUX
by: Todd Sullivan

Remember this memo? This was the "new" direction Howard Schultz was taking the company in March 2007.

Fast Friday's NY Times:

Starbucks is moving into the instant coffee market as it works to shake off its reputation as a seller of expensive coffee drinks.

The company, based in Seattle, plans to unveil Via instant coffee on Tuesday and make it available next month.

Starbucks says Via was in development for 20 years and replicates the taste of its coffee. Three single-serve Via packets will cost $2.95, and 12 packets will be $9.95.

The move pits the company, which already sells its coffee beans in grocery stores and in its own shops, against giant food sellers with established instant coffee brands, including Nestle, the maker of Nescafe, and Kraft Foods, the maker of Sanka.

Instant coffee, which Starbucks says has a $17 billion global market, was more popular decades ago in the United States and remains a staple in parts of Europe and Asia.

“Starbucks is trying to go where the customer is,” Tom Forte of the Telsey Advisory Group said.

Starbucks is “giving a customer an opportunity to experience the brand at a lower price point,” Mr. Forte said. “The company is being aggressive in trying to generate sales in an increasingly weak economic environment.”

Simple analysis is that Starbucks once again has no idea about its market. "20 somethings" do not "trade down" to instant because a Starbucks label is slapped on the package. Nor will your 80 year old grandmother switch from her Folgers to pay 3 times as much for Starbucks instant. Mystifying...

This does not move the needle on people's thought process from "expensive" to "value". It moves it from "quality" to "crap". Somewhere McDonald's (NYSE:MCD) execs are laughing at this one.

Nice job Howard....

Disclosure: Long MCD