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February 17, 2009

Re: Starbucks VIA

SBUX_Via

By now you’ve heard Starbucks is introducing an instant coffee product. It’s a just add water and stir packet called VIA. Okay. Fine. That’s cool. Starbucks has long-dabbled with concentrated instant coffee.

For the past ten years, the Frappuccino ice-blended drinks you’ve been enjoying have been made using a powdered coffee concentrate. And the bottled Frappuccino drink from Pepsi uses concentrated coffee as its base. So concentrated instant coffee isn’t new for Starbucks.

What is new … is how Starbucks is positioning this product. Howard Schultz, Starbucks ceo and chairman, is talking about how VIA will "disrupt and reinvent the instant coffee category."

That’s right, "disrupt and reinvent the instant coffee category."

Hmm … priorities seem to be misplaced.

Shouldn’t Starbucks be more concerned with disrupting and reinventing their core retail business and not the instant coffee category?

Lack of rejuvenating their core retail business has resulted in closing nearly 1,000 locations, the loss of almost 6,000 jobs, and the marginalization of the Starbucks brand.

Selling instant coffee isn’t an instant fix to solving Starbucks problems. It’s a distraction, not a solution.

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Comments

I *hate* instant coffee! Takes me back years, just imagining the (awful) smell of it. Count one Starbucks customer out... :)

Debbie ... you might wanna wait to offer an opinion on the taste of this instant coffee until after you've tasted it.

As you are well aware, lots of people offered up hasty opinions on blogs, deriding it as instant, low-quality journalism from amateurs. Then many of these people tasted blogs and liked it. Some even grew to love it.

I have no doubt this product will taste okay. I have major doubts about Starbucks spending time and energy on an instant coffee product when it needs to spend its time/energy on rejuvenating its core retail business ... and not on trying to disrupt the instant coffee category.

It's funny, just this past weekend I realized that very few coffee makers make single serving packets. I was going camping and the grocery store I went to for the coffee, only had one choice with a single serving packet. It ended up being an unmemorable cup of coffee, I would have chosen the starbucks brand if they had singles!

I agree I think they should focus on some healthier options to get people back into the store. Drinking a couple thousand calories in a coffee drink is not appealing when you're concerned about your health. More healthy options would be wonderful.

My take on this is that Howard Shultz is trying to do 2 things:

1. Put the genie back in the bottle, with a half-hearted effort to get back to being "real."
2. Continue the expansion into the mainstream with things like VIA.

And the reality is that by expanding into the mainstream in the first place, they ceded their position as the "underground" folks. I don't think they can get it back. At least not as Starbucks. Maybe with a separate brand dedicated to craft coffee, but that would be another animal altogether.

Starbucks is now mainstream coffee. For people who want an upgraded, reasonably decent cup of coffee or latte. So something like VIA is really more suited to that brand IMHO. "On-the-go" is what Starbucks is today - not a Third Place. Instant coffee is just the latest extension of that evolution.

I can sense the disappointment Mr. Shultz feels in not being the cool coffee anymore. But, that ship passed him by while he was creating one of the most successful mainstream brands in the world. I think he needs to move forward, not backwards, as unpleasant as that is to him. Truthfully, I don't think his heart is in it, so he should probably step aside.

The Starbucks brand will never equal "great craft coffee" again.

Kelly, healthy options exist at SBUX. Any espresso beverage can be made low-fat with savvy substitutions. SBUX sells low-fat and whole-grain pastries. Obviously they do not sell enough "healthy" pastries, otherwise the pastry case would be jam-packed with healthy options.

Quick service restaurants have learned customers say they want healthy options but when offered healthy options, they opt not to purchase them.

Healthy food is difficult for a QSR to define because customers individually have different definitions for what is healthy and unhealthy. Some define healthy as low-fat. Others define it as all-natural/organic. Others define it as vegan. And others define it as gluten-free.

I can't think of a QSR that has successfully solved the healthy riddle.

Mike ... great take.

Here's something that most people forget about coffee ... it's 98% water. Having just add water and stir instant coffee is only one part of the process. VIA will only taste as good as the quality of water that is used. So maybe SBUX should try to sell instant water to add to its instant coffee. (Said ... jokingly serious.)

John,
Thanks for posting on this. I think Howard has lost his mind. What he needs to disrupt and reinvent is the category he is currently in: retail coffee/tea. There has been a small hint of this: the new wave of tea products, specifically the tea lattes. Since moving to Austin, I NEVER go to Starbucks. There are too many other local options. But I went in to use the wi-fi while getting my car fixed recently and sampled a tea latte. Now I am addicted to them and have gone back several times in the last month. I have also told lots of people about them via Facebook and in-person.

There is much they could do improve the stores. Make them more locally relevant with decor, etc. Be more healthy and have sugar-free options (agave, anyone?!). By entering a completely new category, Starbucks is going to lose even more focus on the stores. And now is when they need that focus. And reinvention. Time for Howard to go, John. He's no Jobs.

Jackie ... as an outsider, I can only speculate Howard Schultz has lots of "YES People" surrounding him and not questioning him on these short-sighted and unfocused business decisions.

Starbucks needs to fix its engine and stop worrying about incidentals like hubcaps, hood ornaments, and pin stripping.

Wouldn't it be great if this instant coffee did for instant coffee what Starbucks did 15 years ago for drip coffee and espresso beverages?

The challenge is, I don't know that people are clamoring for a more portable form of coffee. Other than bringing it to work in my lunch pail or on a camping trip... I can pretty much get a cup of coffee nearly anywhere I want.

It would be nice to have Starbucks instant coffee replace Nescafe instant coffee (like in Greece where they make a Fredo and Frappe coffee beverages using a powdered coffee base).

It seems to me, this is a time when Starbucks should be making deposits in their coffee expertise account... Items that strengthen the brand and core coffee expertise.

Coming out with a less-than-fresh powdered form of coffee (even if it tastes great) feels like a withdrawal from the coffee and brand account.

By the way, Starbucks has been using instant coffee for years to brew the mix for Frappuccino. It tastes fine when mixed with that pre-sweetened milk-based concoction.

What Starbucks needs right now are ideas that make customers feel good about spending 4-bucks on a latte during a bad economy.
- Freshly steamed milk (everytime)?
- Fresh and properly pulled espresso shots?
- As promised, friendly service?
- As promised, clean stores?

You kind of sound a little rough on the coffee giant... I think, if its any good, and they this mirco-brew process they have been perfecting for years does take instant coffee and make it not only drinkable, but good that would be huge. When 'fixing' a company you can't only focus on solving the problems. You have to continue to move forward and think outside of the box or your company will not last.

But Angela, SBUX problems are inside the box ... inside the four walls of their boxy retail locations.

To paraphrase a Malcolm Gladwell quote:

"If you always have to think outside the box, maybe it’s the box that needs fixing.”

In other words Starbucks doesn't need innovation, it needs renovation. (That's a classic Sergio Zyman line.)

Instant coffee is just the latest in a series of deconstructing steps. There was a time not to long ago when walking around with a Starbucks cup had a certain perception attached to it. Starbucks was creating categories back in the day when they were selling the experience as opposed to the instant coffee they now peddle. The perception of someone sitting in a Starbucks sipping a latte is now being viewed with disdain. They have become the commodity that they raged against so brilliantly in the past

Based on this instant coffee launch, I have to question where SBUX sees itself going in 10 years? In my opinion, it's all but lost its cult like following that I seem to recall it having when I was introduced to the brand in the mid 90's. I recall wanting to see an actual SBUX in person (it was a goal of mine) as we didn't yet have any where I am from in Wisconsin.

Fast forward 15 years, if I'm first being introduced to SBUX today, and my first foray into their brand is a NESCAFE like blend of goodness, what does that say about the perception that I'm going to have of the brand?

If I were to put a stake in the ground on where SBUX need to move toward, I would say that they've lost sight of their loyal communities wishes - and I don't just mean regular drinkers, but the towns, cities and city blocks that they serve. I see independent coffee houses thriving in our area at levels that reflect their respective involvement in the community. Where is SBUX on that? The promise of the "third place" seems to have faded...

They're also becoming 'slightly' "harder to do business with". The recent Gold Card is an example. As a gold card holder, I need to explain, each time, to the Barista that "yes, I money on the card, it's not just for discounts", and then listen to the airport SBUX pretenders tell me each time that "they don't do the discount." Is the 10% worth making my transaction a pain? Barely.

Focus on the communities, focus on making yourself so easy to love that I simply can't see going anywhere else.

I think Howard is looking at the reality of the situation. The real growth for the company the last several years has been on the shelf. Selling various versions of the brand in every grocery and convenience store in the world.

What he is doing is using the Starbucks name to get into another part of that market. Let's face it, they overexpanded the stores and it was time to pull back anyway. People are waking up (no pun intended, maybe) to the fact that they charge a lot for a cup of joe. Even McDonalds has made inroads to that business.

They started down this path (a smart path) years ago when they sold their first bag of Starbucks brand coffee in Kroger. That's when they reinvented themselves. Now they are just cleaning up the old stuff.

In Japan Starbucks has launched a number of unusually "non-Starbuckian" products - including a premium canned coffee - that has been successful both in terms of sales and in the repositioning of the "canned coffee" category in Japan. (And as an aside, it's definitely the most drinkable of all of the chilled canned coffee products on the shelves of convenience stores here).
Obviously the canned coffee category is not that would port over to North America, but the finer points of their foray into instant coffee are almost identical to what they've done in Japan; take something that's a relevant product association for the Starbucks brand and attach a unique "obtainable" premium image to it. Personally, I'm curious to see how this works out.

Joe P. ... to your point, SBUX is a lot like an alternative band that made it big and went totally mainstream. That type of band was once cool and represented a badge of honor for its small fan base. When the band achieves total mainstream appeal, its coolness appeal is gone and that small fan base moves on to something else.

Starbucks is no longer cool. As it tries to pretend its still cool, it just looks more foolish.

Your line ... "They have become the commodity that they raged against so brilliantly in the past." ... is dead on it.

Dana ... that Gold Card "loyalty program" is interesting because it is so confusing.

What's the difference between a regular SBUX Card, the Gold Card, the (RED) Card, and the SBUX/Visa Duetto Card?

If Starbucks partners (employees) can't keep track, how can customers keep track?

Starbucks used to be able to develop "loyalty" through the store partner/customer relationships. They've given up on that and instead, hope for customer loyalty from a Card that gives special discounts.

SBUX used to be about doing business in personal ways, now they are using impersonal means to do business. Big change.

Joe J. ... selling whole bean coffee in Grocery stores was a smart move. Selling the bottled Frappuccino product in convenience stores was also smart. Smart, for the reasoning you listed above.

I'm gonna be interested to see how SBUX sells the VIA product inside its retail locations. Will they have packets at the POS (point of sale) for customers to trade down from a brewed cup of coffee? I dunno.

I also hope SBUX stresses the important role high-quality water plays in the taste of the VIA instant coffee. If your tap water tastes funky, SBUX VIA will taste ultra-funky ... in a very bad way.

Jeff ... this instant coffee product has much greater potential in International markets than it does in the States. I would have preferred SBUX launch VIA full-on in International markets first. Then, bring it to the U.S. market.

Ramrodding it in the States feels forced and foolish.

The opportunity to improve SBUX domestic fortunes rests inside its retail locations and not with selling instant coffee packets. Earlier in this comment thread, Paul Williams outlines a few ways to improve the in-store SBUX business.

Shouldn’t Starbucks be more concerned with disrupting and reinventing their core retail business and not the instant coffee category?

As I stood in line this morning, waiting with a dozen other people for a cup of Starbucks coffee in a retail location with 3 tables and 5 chairs and listening to 3 overworked clerks/baristas bitch about opening earlier and working harder...

Yeah, focusing on the retail business means work and releasing a new product just seems so damn exciting...

I miss the original concept of Starbucks.

Maybe Starbucks thinks that having a store on every corner does not cater to the increasing laziness of the population. Quality brand coffee you can carry in your laptop bag. There's been times I have been at an event that served terrible coffee and having one of these coupled with a hot glass of water provided (for tea) would have been great.

I disagree with the author and do not think it's a distraction, I think it's a new revenue stream. More like a band-aid. Most innovations are born out of band-aids so I don't think you can completely rule this out and the CEO's ambitious comments could be proof that the company recognizes the severity of the situation and realizes that it can build new brand opportunities within complimentary markets.

I actually applaud the company for taking an innovative and proactive approach to continuing to grow their business instead of simply declaring threat level orange and sitting around trying to solve a problem that is macro-economic in nature.

It makes a ton of sense to me.

Joe O. ... band-aids do not cure the root cause. They only help surface problems to heal. SBUX has depper, more fundamental business issues that VIA, not matter how "innovative" it is, will never be able to solve for.

Great post and right no. SBUX has lost their way.

What is still so interesting is how people defend the company in spite of so many bumbled moves. Love your comment on the confusion of their loyalty strategy.

One way to understand their loyalty approach is to think about it in terms of "form of payment". Gold lets you use any form of payment while the others are tied to the Starbucks card or the credit card. Which is of course the last way they would ever explain it, internally or externally!

"What is new … is how Starbucks is positioning this product. Howard Schultz, Starbucks ceo and chairman, is talking about how VIA will "disrupt and reinvent the instant coffee category."

Some interesting substitutions in the above:

Howard Schultz = Rick Wagoner
Starbucks = GM
VIA = Chevy Volt
instant coffee = American cars

Gee, at least Wagoner can claim to be in the business of making American cars (arguably). But in both cases, who thinks the product is truly beneficial to the bottom line? Wagoner thinks the problem with GM is that it missed trends like hybrids. Of course it's not just the job of CEOs to see trends, it's their job to invent a core business with lasting value.

Schultz thinks the Starbucks brand is about all things coffee, and it's supposed to lead trends in that area. As opposed to creating lasting value in its core retail business.

Maybe it _can_ move in that direction, but seriously, does anyone think that VIA -- regardless of how good it tastes -- will be the brand's savior when it becomes the coffee of choice on airlines, in hospitals, etc.? Maybe I am cynical, but I don't think instant coffee in those situations creates the good associations that a warm coffee shop filled with good smells does. Instant coffee may taste fine, but let's face it -- it's institutional in character. This is the direction the business wants to head in? Talk about a peanut-butter, multi-headed-hydra, strategy ... at this point it's almost comical.

When Howard Schulz posted his memo and then became CEO, I had really high hopes for Starbucks returning to quality coffee-making and an authentic coffeehouse experience. But since then, all their new products were not coffee-based. Lemonade, berry tazos, oatmeal, etc. The coffee drinks haven't improved, and not a whole lot seems to have changed with the store experience (although they added a loyalty program).

I think Peet's offers a branding lesson -- quality that is true to the brand, and a much more authentic in-store experience. Starbucks seems to me to be further degrading its brand into a commodity product, and I don't expect it to ever turn into the quality brand that Schulz discussed in his memo. Starbucks may be realizing a new revenue stream, but ultimately cannibalizing their retail business, IMO.

what they should do is introduce a "K" cup -- http://www.keurig.com -(like their competitor Caribou) - that's an instant coffee that could help them with some brand loyalty. Today's culture doesn't want to carry around an instant packet.

John hits the proverbial nail on the head when he poses the question "Shouldn’t Starbucks be more concerned with disrupting and reinventing their core retail business and not the instant coffee category?"
This is, and unfortunately has been for many years, the pink elephant in the room. "Hey! Look over there at the cute puppy" strategy hasn't worked, and will undoubtedly continue to lead to Starbucks loss in market and 'mind' share. Company's like Cafe Coffee Day (you may not know who they are, but you will) read the Starbucks play book. Literally. CCD, and many like them, leveraged the truly innovative things that Starbucks brought to the market, AS WELL AS learned from their mistakes that came shortly there after. Innovate or die. The Third Place doesn't really resonate if it's based on sameness.
It's about a quality product (coffee please), personalized service, in a comfortable space. Almost 30 years ago, the look and feel, of the Starbucks environment was created. Strategically informed? Doesn't really matter. It was new. It was fresh. It was unique. Unfortunately, 12,000 'stores' later, above and beyond a change in laminate, color palette here and there, nothing has evolved. Certainly, the operations teams love it. Does the customer?
In the early days at Starbucks, the notion of "Make the familiar new, and the new familiar" was much more than incredibly powerful mantra-it was the integral foundation for the company's brand DNA. It served as the marching orders for all aspects of what they did internally and externally. Served as the design brief for store design, real estate strategy, product development, HR practices, and innovative outreach programs.
The very power of 'creating' something new, but leveraging the familiar literally opened doors for diverse people across the planet, enticing them to explore new tastes and experiences.
So. Why the rant? Consistency is imperative when it comes to your product, coffee. It is the death of you when it comes to store design and experience. Ubiquity, as Uncle Howard once said, was spun as a necessity in order to provide brand access to the the masses. I'll go with that. Ubiquity does NOT mean sameness of experience. Remember the number one tenet of Retail, customers are fickle and they demand change. You provide the 'new' in a meaningful way, they will come.

Good stuff "shyguy" ... your insights speak of a someone who has spent time inside the Starbucks tribe. Thanks for sharing.

It seems like SBUX is in a skid, but instead of turning into it, SBUX is heading toward the ditch.

VIA may make good business sense, but it doesn't make brand sense. If the organization wants to go after that market, it should do it with a different brand...a different price, a different package, a different location, etc...and get back to work on the Starbucks brand.

I laugh from crying so hard, I cry from laughing so hard at(with) Starbucks these days. They've become a sad parody of the great Mac vs. PC TV commercial "Bean Counter":

With dwindling piles of money, Schultz sits there and debates...

Publicity/promotional stunts
(shut down stores for espresso training/push cash)

Publicity/promotional stunts
(give away free coffee to voters/push cash)

Publicilty/promotional stunts
(get Oprah to plug 'are you in?'/push cash)

Fix core retail business
(pick strategies to strengthen brand, focus on committments to customers & partners, stay true to original company mission/no $)

Nah, that would 'cost' too much, and its so much quicker, easier and less expensive for Bono to tout VIA Ready Brew in an Ethos water bottle paid for with the (Red) card. hahaha

John, I agree this is just another distraction, not a solution.

And, if this is such a "confident...proof is in the cup" product as Schultz says, then why the limited launch in only 2 markets (with others to follow in fall)? Why not wait, do it right, not rush, and have it INSTANTLY available everywhere? All this buzzing, and no ready brewing!

Instant coffee will kill the brand.

Guy Kawasaki got a free unsolicited sample sent to him. Says he's not a coffee drinker by tried it.

http://tinyurl.com/aey4gv

Also commented, try it before you judge it... and MOST interestingly... said...

What if this is Starbucks iPod Nano?

Interesting perspective.

Paul ... I just tasted the VIA Italian Roast. My tasting notes are:

Process:
Used high-quality, filtered water
Used electric kettle to heat the water to 200-degrees
Added the hot water and stirred

AROMA:
Semi-sweet dry cocoa smell
Dull, cardboard-like aromas as it cools

FLAVOR:
one-dimensional flavor -- roasty
lacks the caramel sweetness I expect with Italian Roast

BODY:
surprisingly medium-to-full bodied
as it cools a bit, it has adequate mouthfeel

FINISH:
slight acidic notes
lingering Starbucks "roastiness"

VERDICT:
Rich flavor for instant coffee. Dull flavor for brewed coffee. Tastes like a milder dimensions imitation Italian Roast. I prefer the real thing and not an imitation.

I agree it's moving away from their core business. Instead of thinning out and focusing they are creating more noise and areas to get lost in.

Maybe it'll be huge and revitalize everything but more likely it will just continue to spread the brand.

On it's way to dissolving, Starbucks goes soluble.

How can you be the underground brand if you do not even recycle glass bottles, much less the rest of the trash?

Starbucks is McDonalds for wannabe cosmopolitans. The chain's identity has always been about about the quick buck and rapid expansion.

In the process, the franchises suffered because the franchisees and their personal could not be properly trained as nobody understood how the corporation related to its customers.

If you want to maintain your brand, you need to define your identity more carefully so that your people can project it every day.

The instant coffee is only the latest manifestation of a compromised brand and a sloppy business model.

As it is, Starbucks gets on my nerves. I'd rather go to the real McDonalds. At least, they have their shtick down.

This seems so desperately counterproductive for a company that was set on elevating coffee-drinking as an experience. And to make more known (or obvious) that they use an instant powder or mix in any of their popular drinks is to shoot themselves squarely in the foot!

They're becoming a bit like IHOP to me - Pancakes are pretty basic; even I can make a pancake, so why go the the trouble & expense to drag the family out to IHOP? Well, if I can use an instant mix to make my own cup of coffee like Starbucks... Granted, most people can't make a cup of coffee at home quite like Starbucks, but you certainly don't want to do anything to foster that perception.

We wrote a note on this...producing it here to join in a very passionate discussion.

Starbucks supposedly attributes this VIA idea to ensuring consumers are in touch with it even in these challenging economic times, as well as drive penetration of its coffees.

We ask the question... why do folks drink at Starbucks?

1. We dont think its the coffee. Maybe a lot of folks think its the best coffee in the world, we believe its the ambiance. The experience of finding a "third place" away from home and office.

Starbucks Via encourages you to make your coffee where you want to drink it, cheap. Unless you really really love the coffee flavor, why would you spend 1$ to drink it in your office cubicle or on the couch?

2. Its participating in a brand. This is important...by drinking at a Starbucks or taking out a coffee in a Starbucks cup, you're participating in the brand. Connectivity with a sense of empowerment. (http://rituvenkat12.blogspot.com/2008/07/connectivity-and-empowerment.html)

Great brands do this. They allow you a duality of your personal space while giving you the freedom to connect to the wider community that uses the brand. think iPod/ Nike.... your iPod has your music...its personal...but when you carry your iPod around, you are making a statement to others.

Starbucks does this (did this?) with its coffee.

Drinking a Via in my IBM mug is not the same thing. We are not connecting with the brand anymore. We will not be able to justify the premium anymore.

Unless we really really think its great coffee. We dont.

If millions of people are drinking Starbucks for the great coffee flavour and really miss that, Via will work.
If not, we think this is a flawed idea. Great for short term sales, it will not work in the medium to long term.

I have to disagree with Rob O. Companies that don't reinvent themselves over time become insignificant and will be overtaken by newer, innovative competitors.

Have you actually TRIED the VIA coffee before you slam it? In many parts of the world (like the UK and Japan to name but two) horrible tasting instant coffee commands a HUGE chunk of the market. Do you fault Starbucks from wanting to capture a portion of that same very lucrative market?

Most instant coffees are freeze dried and piss poor in taste. With VIA (yes, I've tasted it) Starbucks delivers a high quality instant cup of coffee to people that may have never set foot in one of their stores.

To the many other ranters and Starbucks haters, no, instant coffee won't ever be the exact same experience as brewed coffee, but VIA is very, very close to brewed flavor and will appeal to many parts of the world's coffee drinking population. Starbucks was successful in introducing much of the world to high quality coffee and espresso beverages. Why is it so hard to see them lead a revolution in what has been a long neglected and stagnant segment of the world's coffee market -- by bringing its innovation and european style dark roasted coffee flavor profiles to the instant coffee enthusiast?

The next time you are stuck on a cross country flight and are limited to your airline's usual cup of schlock, I'll be enjoying my freshly brewed cup of VIA, and smiling smugly at all my fellow passengers who are wondering why their coffee doesn't smell (or taste) a tenth as good as the fresh cup I am enjoying!

I challenge you to grab a friend and conduct your own blind taste test against ANY other instant coffee, or frankly, any other mass market brewed coffee. I'll bet you choose the instant VIA over Folgers, Yuban, Maxwell House, or any of other major ground coffees.

Agree with everyone. This was beyond a stupid thing to do. Wrote a post about it (see below). I think unless they pull the Via back, and reinvent the entire brand, Starbucks is finished. Maybe you won't see it happen quickly, but it will.

By the way my 2 name suggestions for the new brand are "Schultz" or "1971," both representing the spirit of getting back to the basics of the brand. Wonder what others think of that, if you agree that they should just scrap the old brand and start anew.

Or maybe they should do what Gap did, and have a premium line (Banana Republic), midprice "something for everyone" line (Gap), and low-price line (Old Navy). The SBUX equivalent would be Schultz/1971/(new name here) for the premium line, Starbucks for the midprice line, and something else for the low-price line (name to be invented). If they have to, maybe they could park Via there or in fact even call the whole thing Via. But keeping it together with Starbucks is a disaster waiting to happen. (This last part is not in my blog.)


http://brandingandsocialmedia.blogspot.com/2009/10/via-will-kill-starbucks-star.html

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