Starbucks CEO, Howard Schultz, has been hyping a major announcement for weeks, hinting only that it would involve “innovation, competition and value”.
Before he could present the idea at a planned New York press call on 17 February, executives close to the project spilled the beans to Advertising Age.
According to a memo to staff from senior vice president for public affairs, Vivek Varma, the world’s largest coffee chain has been working on the project for more than 20 years and now has a patent pending on the technology that delivers Starbucks coffee in an instant form.
Varma’s email said that Starbucks Via will “absolutely replicate the taste of Starbucks coffee” and that it’s a “transformational product”.
He added that the $17bn instant coffee market offered a significant opportunity for Starbucks. Kraft’s Sanka and Folgers, and Nestlé’s Nescafé, are the dominant brands of instant coffee. While the product has fallen out of favour in the US, it’s still widely consumed in countries such as the UK and Brazil.
The Wall Street Journal has reported that the instant coffee packets, marketed under the name Via, will be available in stores for $2.95 for a pack of three or $9.95 for 12.
Starbucks aims to tap into the instant coffee market as sales of its premium espresso-based drinks fall. But Starbucks is internationally famous for offering fresh, roasted coffees, while instant coffee has a reputation for poor quality and questionable taste. It’s no wonder that some analysts are asking, ‘Will this move extend the brand, or destroy it?’.
Financial analysts have anticipated a turnaround concept from Starbucks for more than two years, ever since the company’s profits began to decline due to over-expansion and increased competition from McDonald’s and Dunkin Donuts.
Schultz’s attempts to attract buzz with new products, including breakfast foods and Vivanno smoothies, have mostly failed to impress. UBS analyst David Palmer thinks the new, instant coffee may be more of the same. “It’s no big deal,” he said. “What’s different about soluble coffee is that it’s equated with poor quality.”
Starbucks’ claim that Via tastes just as good as brewed coffee will be put to the test soon enough. Coffee guru Andrew Hetzel, who owns a coffee consultancy called Cafemakers, is skeptical. “I have an expectation of what it will be like, and I think it will be harmful for the brand,” he said. “They’re really looking to generate revenue in the short-term to meet the expectations of investors.”
Starbucks says the prototype for its new instant coffee was first made in 1993 by the late Don Valencia, who headed the company’s early product development. Valencia’s initial efforts were popular among travelling executives who couldn’t get a Starbucks’ white chocolate mocha while away from home. The Wall Street Journal reported that executives quickly dubbed the new product ‘Jaws’ (just add water and stir).
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