Starbucks' Path to Longevity

A cup of coffee is a cup of coffee, or isn't it? On Tuesday Starbucks Corp. (NASDAQ:SBUX) announced a new product to help them compete better in the market. As this article reports, "Starbucks unveils Via instant coffee", it is entering the instant coffee arena.

This move represents a marked departure from Starbucks' established brand, but MSSI data on customer spending at the retailer shows that perhaps its revenues are not suffering as much as one would think. Although there have been declines with spending down 4.85% compared to October '08 statistics, 2008 taken on a whole, however, shows increases in the three customer categories it tracks.

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Average monthly spending has increased by Geezeo users at Starbucks by 24% January '09 on January '08 numbers and 27.53% over all of 2008. The figures show that consumers are not as worried about overpaying for their coffee fix as has been supposed.

Starbucks' move highlights the economic doubts that a lot of retailers are entering 2009 with and that perhaps is the real conclusion to take away from this news. The year started by spending dropping rather steeply after year highs in December, however, the spending average was more than 150 basis points above the average 2008-month.

This new product Via, Latin for 'street', might indeed represent Starbucks' path through these uncertain times shaped by overall consumer skepticism. While it has been reported that instant coffee represents a small demographic within the United States, the firm is thinking globally, which should enable it to stick around for some time to come.

This data was compiled by the Geezeo Main Street Spending Index (MSSI).

Comments

[Walt17:]

Geezeo users are spending more. Total consumer spending is down.
I believe that total spending is the more relevant metric.

Via is intended to capture market share overseas, primarily in UK and Japan, where instant coffee is more accepted. Via will likely boost Starbucks's revenue to some extent, But I am skeptical that this boost will be enough to overcome the total consumer weakness.

Feb 19 08:02 AM

[schade:]

Like Walt17 alludes to, I think consumers have caught on to Starbucks, that's why this whole Via move is interesting to me, but I can't see it helping too much either, especially since coffee is coffee to me.

Feb 19 10:54 AM

[Joseph Sherman:]

Starbucks should be asking what this will do to the brand? Will it still retain a gourmet premium or become the Walmart of coffee?

Feb 19 08:57 PM

[jenny:]

As for the people though who are not spending at Starbucks because they don't want to overpay for coffee will find that the instant coffee is an acceptable alternative. I don't really thing SBUX is bringing down their brand by introducing this line. I think it was smart to reach all corners of their market which is something every company has to do right now given the economy. Sentiment is bearish right now for SBUX (www.predictwallstreet....) but I think once people see that SBUX is trying to adapt and accommodate to the new environment, sentiment could become optimistic.

Feb 23 03:16 PM

[natenut:]

If you have ever tried any other instant coffees lately there is a lot of room for someone with a good product.

Mar 03 03:38 PM

[natenut:]

If you have tried any other instant coffees out there i'm sure you realize there is room for improvement. viva la starbucks.

Mar 03 03:40 PM