Starbucks: Now Most Expensive in Instant Coffee Too!

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

Fast forward....to 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 (MCD) execs are laughing at this one.

Nice job Howard....

Disclosure: Long MCD

Comments

[Roger Knights:]

Regardless of the malarky that Starbucks put out to save face, this may be a smart move. IOW, if what people really want is a comfy venue to park their butts, grab a danish, and read the paper for a while, then giving them the option of a cheap "cup of joe" to complete the package is what's needed to entice them into parting with their cash. Starbuck's margins will suffer, but its bottom line could perk up.

PS: If volume leads to better profits, maybe Starbucks will begin offering happy meals, etc. [/sarc]

Feb 15 08:39 AM

[Joyful Alte...:]

I think Starbucks intends to sell Via in supermarkets rather than in their coffee shops.

Its price is way too high to replace my Maxwell House (Folger's tastes nasty), but I'll probably buy it once for the novelty.

Feb 15 11:53 AM

[BerkeleyBob:]

Those following Starbuck would be well advised to check out the latest conference call transcript from PEET. Although some (wrongly) grumble about a "burned" tast, Peet's coffee is better and the company is conservatively managed. Probably has better supermarket penetration, smaller number of stores, and most importantly, less debt.

Feb 15 03:24 PM

[sundrenched:]

I've been going to a Starbucks in a Singapore office complex for years almost every morning. The drop-off in customers since the start of the year is astounding. It's a big place (I reckon 30-35 tables) and it used to be packed. Last couple of times I was there at 9am, there were maybe 5 tables occupied. Afternoons are better, but before you could rarely get a table, now usually no problem. Since it's had a good run since November, this may be a good time to go short. I think the stock has very little upside in the near term, but could easily drop back to 8 dollars.

Feb 16 06:47 PM

[jenny:]

I think this is something I would at least try. Any Starbucks fan will at least be curious to see if they can deliver quality taste in these instant coffee packets. Not to mention, if they are good, I could see myself using them in the morning because I frankly just dont have the time to go to Starbucks anymore and its not so much an issue of whether SBUX is too expensive or not. This could also bring a new sort of class to making coffee at home. Folgers is just kinda a joke for younger kids..no one wants to be using the coffee their grandma likes. Via is quick,easy and has a reputation that some people may be looking for.

Feb 18 02:30 PM

[instantcoffee:]

Why not BUY 100% AMERICAN INSTANT KONA Coffee from Hawaii? 2 great mobile sites. instantcoffee.mobi and mulvadi.mobi. compare with 100% instant kona coffee at 30c/cup!

Feb 19 05:02 PM

[BTShine:]

I am 26 and have converted to Starbucks Via. It's convenient and tastes much better than the coffee I make at home (with Starbucks beans).

Apr 21 09:32 PM