I normally cover startup technology on this blog but occasionally I think it’s good to look at what’s happening in the wider world of marketing to see if there are lessons we can learn and apply to our little corner of the world.
This week Starbucks launched Starbucks Via, a product they describe as a “breakthrough in instant coffee”. The company says they have worked for 20 years to develop a process of making instant coffee that preserves the coffee’s taste, quality and freshness to the point where a cup of Via tastes just like a fresh brewed cup of Starbucks coffee.
My first reaction when I heard about Via was “Are they nuts!?” What happened to the “third place” coffee house experience? Do Sanka drinkers dream of coffee made from “the highest-quality, ethically sourced 100% arabica beans?” What happens to their “premium” brand when customers see it in the grocery store next to Folger’s? If this stuff really tastes as good as brewed Starbucks, aren’t they encouraging customers to stay at home drinking $1 cups of Via rather than visiting their nearest Starbucks for a non-fat, extra-hot Mocha Frappuchino for $4?
Positioning: Us vs. Us not Us vs. Them
Starbucks hasn’t gone so far as to claim that Via isn’t instant coffee (a common tactic when re-defining a category) but they are careful not to compare themselves directly to Sanka or Nescafe. The reference point is their own brewed coffee. Via is described in their marketing as instant coffee that “tastes as delicious as our brewed. Almost was not an option.” This is a bold (sorry I couldn’t resist) move for Starbucks. Their positioning sets customer expectations for taste sky-high. Decades of experience has taught us that instant coffee tastes nothing like brewed coffee. The challenge for Starbucks is not just to make it taste good, but to make us believe it tastes good.
Starbucks is taking this challenge head-on by staging the Starbucks Via Taste Challenge. Participants can sample Starbucks VIA
next to the brewed coffee and see if they can taste the difference. This tactic shows that Starbucks is confident in the quality of the product, and allows consumers to experience it in the coffee house context, driving home the message that this is not instant coffee as you currently know it.
It’s important for Starbucks to establish brewed coffee as the reference point for pricing as well. Starbucks Via sells for around $1 a serving which is significantly higher than other brands of instant coffee.
Use Cases – Drink Premium Coffee Not Swill!
Some folks have worried that positioning Via against Starbucks brewed coffee will cannibalize in-store sales. I believe the bigger risk for Starbucks is that people (Americans in particular who don’t drink much instant coffee) won’t know when it makes sense to drink it. Here Starbucks takes a page out of he product marketing handbook and makes sure their marketing includes a litany of what Starbucks refers to as “usage occasions.” These show that Via isn’t just for folks that drink instant coffee, it’s for people in situations where they would normally drink lousy coffee or no coffee at all. Airline coffee stinks. The free coffee in your office is disgusting. The website, the Facebook group, the YouTube videos and the Twitter account are all as focused on educating people about where Via could be used as much as the taste. For example, the video documenting the Starbucks Via Roadtrip stop in Vancouver didn’t include a single quote from a Canadian about the taste but did show a host drinking Via on the Capilano suspension bridge.
Sales Channels – Keep my Starbucks Away from that Sanka
In addition to its own cafes, Starbucks Via will be sold in REI,
Office Depot, United Airlines, Barnes & Noble, and
Marriott and Omni Hotels. Distributing the product this way drives home the use cases and keeps Via away from being directly compared to other instant coffees. You won’t see Via in a grocery store until sometime in 2010. My guess is that’s a deliberate move to ensure Starbucks has had a chance to get customers talking about the taste and “usage occasions” for the product. I won’t be surprised if when Via does show up in grocery stores it’s sitting closer to the regular Starbucks ground coffee than it is to Sanka.
But isn’t the Starbucks brand all about the in-store experience? The answer is not really. Starbucks has been selling Frapucchino drinks, ice cream and ground coffee in grocery stores for years. According to Starbucks, instant coffee makes up 40% of the $21 billion global market for coffee. Starbucks has been hit hard by the recession and forced to close nearly 1,000 stores. They are under pressure from McDonald’s. Expanding the brand outside of the retail outlets makes sense for them in this climate.
Can Starbucks Via be Successful?
I took a break while writing this and walked over to my Starbucks and
bought a 3-pack of Via. Honestly, I thought it tasted pretty good. A co-worker saw the package and commented, “Instant coffee, gross.” Can Starbucks convince us that great tasting instant coffee is not only possible but worth paying a premium for? Only time will tell.
Photo credit: Kevin Lim
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The use case point is one I had not read in other people’s analysis of this launch but it’s right on the money and good food for thought.
Great analysis April. Your last question (Can Starbuck’s convince us that great tasting instant coffee is possible) will be their challenge. We’ve been conditioned over the years that instant coffee tastes like, well, instant coffee. Would they convince die-hard instant coffee drinkers to fork over $1 per cup? My guess, not really. Would they convince die-hard non-instant drinkers to switch? My guess, not really. IMO they’re now left with a market of non-instant drinkers that in some cases (as you’ve outlined) need/want a coffee and will not settle for instant (or some other kind of lousy coffee). How big is that market? I have no idea. I know that I’ve been in that situation and end up doing without. But as you say … time will tell.
Hey Amrita – thanks for the comment. April
That is certainly going to be the big hill for them to climb in North America. Everyone who saw the Via package had the same reaction at first. Internationally though, the reactions might be different. The U.S. makes up only 4% of the instant coffee market today. That tells me that there is potentially an untapped market and that there are other countries that may not have the same “instant coffee is gross” reaction that we do.
April
V e n t i L a t t é !
You look like a latte guy – you know that? 😉
April
Agreed. An eye-opening (so to speak) analysis. Well done!
I love this post – being a diehard Timmy’s fan myself, I rarely buy Starbucks beverages – when I do it’s usually because I have a meeting there, and even then I get tea. But the idea of a quality instant coffee definitely piques my interest – Timmy’s doesn’t have anything of the sort. So I think you’re taking the approach of people who are already diehard Starbucks fans – and then I do think you have to worry about whether they’ll see use for instant coffee, and if it will affect them actually going in to purchase the more expensive beverages. I look at it from the POV of people who dislike Starbucks, or can’t afford their prices, or are just huge fans of other coffee chains. This could be a way for Starbucks to grab market share from these people – I for one would definitely take these packets on a plane, or use them at home when I don’t want to go out and buy coffee (right now I use awful instant coffee that no human should be subjected to). So it will be interesting to see how existing Starbucks customers adopt Via, but also if it has any affect on bringing new customers in.
Terrific article, April. You nailed their marketing strategy of “us vs us” and the “have great coffee in places where you didn’t think you could” use case argument.
I’m curious whether you think they have to take share away from the Sankas of the world to win – I don’t think they do, just to tip my hand. They’re inventing a segment here and drafting on the success of their core brand – and at the price points they’re suggesting, they can make money on this thing pretty quickly.
Thanks,
bob
Look at it this way: Star*ucks has managed to convince most of a generation that their swill — horrible stuff made from over-roasted low quality beans — is what good coffee tastes like. Like them or not that’s quite an incredible achievement. If any organization can repeat this feat with instant coffee, it’s them.
Ooh! Now I have the urge to go spend $200 on some running shoes that cost $8 to make. I feel like a real consumer!
Hi Erin,
Thanks for the comment! I think that’s a big part of what Starbucks is trying to do. There is this massive category – instant coffee is something like an $8 billion market – where their regular competitors don’t play so there’s got to be some opportunity there.
The risk (as a lot of the coverage has pointed out) is that introducing a cheaper alternative to their brewed coffee de-values their brand and the price they can command for brewed coffee. In my mind McDonald’s and Tim Horten’s have already done that. This gives them a way to go somewhere that those brands don’t go.
April
Hi Bob,
Thanks for the comment. The global market for instant coffee is huge (around $8 billion) and the united states only accounts for around half a billion of that. Starbucks has the opportunity to re-invent the category especially in the States. In the UK or Japan, where the majority of instant coffee drinkers are, they will have to compete to some extent but again, even in those countries, the concept of premium instant coffee doesn’t exist. The big hurdle for Starbucks to clear is – can instant coffee really be “premium”? Once it clears that hurdle it needs to educte the market as to when you would/could drink a premium cup of instant coffee. And you’re right – those “usage occasions” are often different from those of regular instant coffee.
April
LOL! Tell us how you really feel! I’m just doing my marketing analysis thing here – I’ll leave the coffee analysis to the experts 😉
April
April,
Insightful analysis. Great use of use cases. I wonder if the ‘afforable luxury’ branding will help Via find a niche. I will try some this weekend. Starbucks owes you a commission.
Paul
Very insightful article. While this is such a hot topic, and so many people are busy writing the same stuff over and over again, I found yours to be different and thought provoking.
LOL! I don’t know about that but if some free VIA made it’s way over here I’d drink it!
I think the concept of affordable luxury is exactly what they are going for. It will be interesting to see if they can convince people that instant coffee qualifies as a “luxury.”
Thanks for your comment!
April
Hey – thanks, I appreciate that!
April
Starbucks VIA tastes exactly like Starbucks brewed coffee, and that’s…burnt!
April
great post. I was at Starbucks yesterday and the guy in front of me did the taste test. He guessed wrong and was surprised by the goodness of Via. But here’s the thing they are basically telling all their customers that they’re suckers. Pay $1 + hot water for coffee or pay much more for fresh brewed. Except that the packets now sell in bundles of 3 so they get you either way.
I think this is a desperation play for SBUX. They know people can buy better coffee elsewhere for less and now they need to reinvigorate the brand. Instead of getting into a price war to bring back customers they’ve decided to diversify the product line. But it’s just coffee. This will go the way of the McDLT burger and other fast food experiments.
Prediction: via will disappear by Jan 2010.
Hi Apirl
Great discussion, I totally agree with you I am big fan of Starbucks, the instant coffee idea give me some thought, they target people who love drink starbucks, but consumer drink starbucks for many reason, My reason to drink this are combination of starbucks culture and stronger taste coffee. I would love to smell the coffee bean in the store and look at the layout, enjoy the music, talking to the people around, the happy staff and enjoy my coffee. I belive a lot of people like me. although they proved this instant coffee have similar taste, everyone agree this taste, “Are they really going to buy it”? and also look at price 3$for 3package if I add one dallor I could have 3 cup(tall) coffee with sugar&milk in the store, or 3shot of Grande Americano. and for their target group starbucks lovers, who like enjoy their coffee at home/office or on going, they are so easily to swichover other cheaper brand instant coffee. The ads and the taste challenge absolutely awarness the good starbucks instant coffee image, but not immediately to boost sales.
But there is potential market out there we need to keep eyes open it, especially Asia market Chinese market.largest instant coffee market there. Using Starbucks brand image and reputation about instant coffee tasting in North America,extending some instant product line mocha,Cappuccino. Will be good competitive product in China.
Starbucks is the biggest “rip-off” retail outlet in the World. Their prices are outrageous and totally unjustified. It is shocking so many “yuppies” are so brain dead that they are wiling to fork over 4 bucks for a coffee drink. Personally, I like the taste of Costa Rican coffee with its hazelnut flavor. Sanka tastes like Costa Rican coffee and is a treasure mostly unknown to the younger generations in America. It has a taste that is as good as any gormet coffee in the World and better than any other decaf. Starbucks VIA – a real “dud.”