Starbucks goes Instant

From modest beginnings in Seattle in 1971, then built into the world’s largest coffeehouse chain by Marketing Director / entrepreneur turned CEO, Howard Schultz, back in 1987, Starbucks currently runs over 16,000 stores in 49 countries. In 2007, it faced declining sales & profitability in the US, with stock price sharply falling even before the global financial tsunami. Schulz had to step into the CEO shoes again in January 2008 to turn around the business. One measure implemented was to close 900 stores in the US while targeting to open 900 new ones in overseas markets.

The latest addition to a series of growth initiatives is the launch of an instant coffee, Via.

Via is targetting the global USD21Bn instant coffee business, directly competing with Nestle. The move to capture the massive wholesale & retail market is sound, but Schultz’s proposition that Via instant coffee & the Starbucks brew taste exactly the same might not be smart. He reckoned that he has served Via at home & in the office, and guests absolutely cannot distinguish any difference between the two If this is indeed true, why would consumers still buy take-way coffee or coffee bean from Starbucks? Might as well keep Via at home & in the office.

It is true that the so-call Starbucks experience built over the years could never be replaced & in-store consumption is unlikely to be affected. The trick of product extension is really to capture the instant coffee market leveraging on the Starbucks brand strength, while not negatively affecting any existing business at all.

Via costs less than USD1 per packet/cup in the US while a tall Latte is USD3.50. .