has brewed up a new variety of coffee that could cheapen its brand aura but pull in billions in revenue.
Via, a minutely crunched bean that dissolves in boiling water, is intended to steal from the $16 billion instant coffee market outside the USA, especially Japan and the United Kingdom.
In the U.S., where instant coffee sales are about $1 billion annually, Via will go after the 65 billion cups of brewed coffee that are consumed annually.
Via will be sold in single-serve foil packets, about the size of your index finger, and packaged in an oversize matchbook. It will be available in Starbucks, Costco and Target stores in Seattle and Chicago March 3. A packet of three will sell for $2.95; a 12-pack will cost $9.95.
Chairman and CEO Howard Schultz introduced Via, currently available in Italian Roast and Colombia varieties, in New York Tuesday before media and analysts, who tasted the product.
"This is a patented process in which we have cracked the code on replicating Starbucks coffee," said Schultz, who said the product has been in the making for 20 years. Only in the past two years, he said, has Starbucks found the technology for the "micro grinding" which allows the coffee to dissovle.
The beans are sourced, roasted and brewed in the same way beans are processed for Starbucks brewed coffee, and that allows Via to taste like a regular cup of brewed Starbucks.
Playing in a downscale market won't tarnish Starbucks' premium image, Schultz says. Although the dollar-a-cup cost is cheaper than a cup of coffee brewed at a Starbucks store, it is a premium over traditional instant coffee.
A ShopRite in New Jersey for instance, sells a 19-pack of Folgers Coffee Singles for $7.59, or 39-cents a cup while Via will cost 98-cents or $1.20 a cup depending on the package size. Starbucks sells a cup of brewed coffee for about $1.60.
"We realize this is a very tough environment," Schultz said. "Who would pay a premium in this market? But for less than $1 a cup … people can have a cup of coffee that's the mirror image of Starbucks. We think it's going to be positive."
While the product is billed as "Ready Brew," TV, outdoor and Web ads by BBDO, New York, carry the theme "not instant, instant."
They show the words "not instant" written in a plain font followed by the word "instant" in bold, colorful designs to show the Via way.
"This is a clean, nice easy way to introduce it in a bold, Starbucks-ian voice," says David Lubars, chairman and chief creative officer, BBDO. Via and its advertising will be national this fall in the U.S. after evaluating the best ad mix in Seattle and Chicago.
The theme is designed to "tell consumers what the product is, not hide from it," says Michelle Gass, Starbucks executive vice president, marketing.
A giveaway of more than 2 million samples will be the "single biggest sampling push in our history," she says.
Starbucks needs to make a big push. Since the start of the year, the coffee giant has announced layoffs of 1,370 people, following results for the quarter ended Dec. 28 when sales for stores open at least a year fell 10%.
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