Sunday, March 22, 2009

Is Starbucks VIA the wrong path?

 When Starbucks announced last month that they were introducing instant coffee called VIA in their shops, I was totally shocked.  After reading part of CEO Howard Schultz’s memoirs cum history of Starbucks in his internationally acclaimed book “Pour Your Heart into It”, one thing struck me: that this Seattle-based company took coffee very seriously.  And this reflected in their company philosophy that each cup of Starbucks coffee should be of the highest quality of freshly ground beans that are brewed to perfection.  In fact they were so dedicated to their philosophy that the introduction of frappuccinos (fraps) initially sparked a gargantuan debate amongst top management.   Apparently, fraps were considered by coffee connoisseurs as an abomination of the original brewed espresso because they were frozen, too dolled up and flavoured, thus hiding the true taste of the brew. 

In fact, going back a little in time, one of the earlier inspirations of Starbucks were the Italian espresso cafes in Milan where people passed by in the morning on their way to work to grab an espresso from their favourite espresso café owners, stood for a while to chit chat about the weather and the news, and then left.  The transaction took only a few minutes, but already involved a lot of personalized interaction with the barista. The espresso and this sort of interaction inspired the founders of Starbucks and decided to bring to test the idea in Seattle. First it was a Milan type café with no tables.  So connoisseurs queued to get their espressos and that was it.  As it became more popular, people wanted to stay a bit longer to chat and demanded for tables and chairs.  So management put in some tables.  And soon, they were attracting not just the connoisseurs, but also people in general who were curious about this coffee craze. So by educating their customers about coffee, word of mouth spread and more and more people were attracted to come and experience the interaction and the nice ambience.  As more kinds of people caught the craze, eventually requests started coming in for different flavours and variations, so then came the espresso based lattes and the mochas, then the frappuccinos.      

And now instant coffee?  After all the investment poured into educating customers and staff about the best ground beans and the beauty of espresso and whole bean coffee in general, why the sudden move into instant coffee?  Won’t this move dilute Starbucks’ brand equity?

Before answering the question directly, I’d like to think that Starbucks has always put a premium on satisfying their customers by listening to their needs.  One can see from the way they evolved that each change was made in order to address a customer need.  From the addition of tables to the frozen fraps, each change was a dedicated action to satisfy the customers even more.  By evolving and responding to needs, their targeted audience grew wider and wider.  It wasn’t just coffee connoisseurs anymore or just people on the go, but everybody who loves to meet with friends and family or kill time in a nice place with nice music over a cup of coffee! In Manila, some Starbucks shops are even outfitted with meeting rooms to accommodate students and businessmen alike who needed a nice place to study in or conduct a business meeting.  Undoubtedly, Starbucks has evolved into a lifestyle brand with an impetus to listen and adjust to customer needs constantly.

And now, with the deepening financial crisis, and with several Starbucks shops closing, I can only surmise that the call of the public is for cheaper but decent instant coffee.   

When a short frap could easily cost you $5, and a regular brew around $3, it’s becoming harder for consumers to part with their hard-earned dollars.  But with less than a dollar per cup of instant Italian blend VIA, will customers come looking for Starbucks again?  Assuming that most of Starbucks customers are not coffee snobs or connoisseurs anymore, I think it will work.  As many homes are brewing their own coffee at home or turning to instant coffee to save money, it only makes sense for Starbucks to allow its customers to experience the brand once more at a lower price point.  By doing this, they’re not only responding to customer needs, but also tapping into a larger customer base that is just waiting for instant coffee to become better.  With VIA, as long as it is what they claim to be, which is the product of 20 years of research on the Starbucks way of making instant that tastes just like a freshly brewed Starbucks coffee using a super secret technology (want to know more? Please see the youtube link:, then I believe it will make a lot of consumers happy. 

The Starbucks quality touch that its customers are used to: still there, through an offering of premium VIA flavours and nice packaging. 

The distinct freshly brewed taste using only the best Arabica beans: still there, using their super secret technology. 

Therefore as far as brand equity is concerned, I don’t think Starbucks has much to be worried about as long as it delivers on its promise of having instant that’s not really instant that tastes like brewed, the Starbucks way.  VIA is definitely the right way to go right now.

But now they also have breakfast meals similar to McDonald’s?  But this is another discussion for next time.





Kirti said...

Nice post. Starbucks is looking at capturing the existing instant coffee market from Nescafe. The loyals of Starbucks cannot have a Starbucks coffee any time of the day if they are at home / office. By having this option, one can enjoy Starbucks anytime. Something about having a bigger share in more 'cups / sips per person'

Shipra said...

Really Nice Post!