Starbucks instant coffee: breakthrough innovation or brand suicide?
Barely two years ago, Starbucks CEO Howard Schultz admitted in a leaked memo that the chain had lost its passion for coffee, acknowledging that its ambitious growth had seriously damaged the brand experience.
Starbucks was the quintessential example of the experience economy. As a commodity, coffee is cheap: offering consumers an inviting ‘third place’ was what reportedly enabled Starbucks to charge $4 for a latte.
Schultz cited two specific examples as symptomatic of the chain’s demise: the switch to automatic espresso machines, which eradicated the evocative smell of freshly ground coffee, and the ‘cookie cutter’ approach to store design, which led to a sterile atmosphere lacking the desired neighbourhood feel. Starbucks’ failure to break the Australian market was compounded by a strong, pre-existing cafe culture and the superior quality of independent and local chain offerings.
Given Schultz’s admission of the importance of brand experience, I was puzzled to read that Starbucks’ is launching an instant coffee under the name Starbucks VIA Ready Brew. Furthermore, rather than an opportunistic effort to appeal to cash-strapped consumers, Schultz claims that Starbucks has in fact been working on this for two decades:
We have worked for nearly 20 years to develop an instant coffee that offers customers the quality and taste they expect from fresh-brewed Starbucks coffee, and a unique and convenient way for them to enjoy it,” said Starbucks chairman, president and ceo Howard Schultz. “This is a big move for us — the opportunity to reinvent a category, create new rituals and grow our customer base is substantial.” Howard Schultz, Starbucks CEO
Given the universally awful nature of instant coffee, perhaps we should be thankful that Starbucks has tried to shake up a category where innovation is usually confined to gimmicky packaging formats. VIA Ready Brew’s single serve portions and relatively premium price (US$2.95 for 3 servings) certainly seem like an attempt to differentiate from the likes of Nescafe.
The Starbucks spin on VIA Ready Brew
Creating a genuinely superior instant coffee offers Starbucks a platform for huge growth: the category is estimated to be worth US$17bn globally and in the UK it accounts for 81% coffee sold. Furthermore, given the context in which instant coffee is consumed, there seems little risk of VIA Ready Brew cannibalising existing customers, rather, it should enable the brand to reach with the large number of coffee drinkers who do not currently visit its stores.
However, sales of VIA Ready Brew itself will not be the ultimate measure of success. While Starbucks may hope its espresso bar heritage will have a halo effect on VIA Ready Brew, there is also inherent risk in Starbucks associating its core offering with the instant coffee category. What really matters is how this launch impacts brand perception among Starbucks’ core customers. If Starbucks’ claims about superior quality prove to be unfounded, it runs the risk of losing the trust of these consumers and fatally damaging an already ailing brand.
Starbucks VIA Ready Brew is currently only available online and in Starbucks stores in Chicago and Seattle. To find out more or order some visit the Starbucks US site.