Friday, November 20, 2009

Starbucks VIA™

Blink:
Back in March, I addressed the introduction of Starbucks VIA™ Ready Brew:
http://smartketingreflections.blogspot.com/2009/03/march_01.html. I promised a progress report.

Read On:
The launch of VIA™ back in March marked a strategy by Starbucks to shift away from cost cutting and launch new products in an attempt to further reverse their revenue and earnings decline. VIA™ first appeared in Seattle and Chicago, but then rolled national this past September, complete with their clever buzz marketing campaign Starbucks Via taste tour:
http://www.youtube.com/user/Starbucks#p/c/68876D21EDB46C78/8/SDrViL04joc.
In early November, Starbucks announced a strategic alliance with Acosta Sales & Marketing Company that will facilitate distribution of VIA™ to convenience, grocery and drug stores next year in the company’s quest to capture its share of the $21 billion soluble global coffee market. In Howard Schultz’s words; “The future of the company is not based solely on cost takeouts. It’s based on innovation and the emotional connection and trust we have with our customers.”

As of last week, Schultz’s blueprint called the “Transformational Agenda” has been working. Their stock tripled from a 52 week-low to $21.76 on the news of a strong quarter and a bullish outlook. Two contributing factors being improved store operational processes and an aggressive social media campaign which resulted in Starbucks being the number one brand on Facebook and Twitter.

VIA™ in its initial launch phase has outperformed its test plan. In spite of these results, it is too early to evaluate whether Starbucks instant coffee strategy will be effective long-term. Again I will go on record. Back in March, I suggested that instant coffee was too mainstream. As a result, Starbucks would lose its aura of an Italian espresso bar, the original emotional connection and trust it created with its guests. To further corroborate my point, in my next blog, Lessons from Airwalk, I will address how a brand can decline long-term when it decides to go mainstream.

4 comments:

  1. Oh I must disagree with your last point that 'bucks will lose its aura. Its still a community... Via is an effort to translate the full flavored Starbucks brew into a more convenient and portable form. As a traveler I am all over it...I can never get a good cup of coffee in my hotel room; Via has solved that issue. It truly delivers. Had it not delivered, it would have damaged the Starbucks brand severely. As it is, I think that it has enhansed it. Those who have the opportuntiy to use the Starbucks community (their stores) are not thinking (or drinking) Via. They can use that to RECALL their community when they cannot be there. In retrospect, I think its brilliant.

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  2. Unlike Tom, I don't like the taste of Via. While I think it's probably the best instant coffee on the market, it doesn't do it for me. That said, I still love Starbucks and think the instant coffee is addressing a different occassion or need state. I don't think it's brilliant, but makes total sense.

    As for the stock, I highly doubt Via has anything to do w/that. They closed 20% of the stores and had a major restructuring which is working.

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  3. Simply put: Starbucks caught the incurable chain account sickness, and got lost in the black hole of shareholder return. It will never be the same Starbucks Howard Schultz created in the early years.

    Today, Starbucks business decisions, like launching instant coffee, have nothing to do with neither brand authenticity nor brand equity like the business decisions of the early days. All the chess moves today are based on creating shareholder wealth. Starbucks Via is another prime example of its trying to tap into a $20 billion market opportunity and do it better than the other guys, creating some more of that tasty double tall no whip mocha with caramel profits. It is not personal it is just business.

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  4. Laughing at your predictions now that stock prices are touching $60. Starbucks' brand associations may not be what they used to be, but consumer values have changed too much for them to stay consistent. Starbucks capitalised on the instant coffee trend and successfully sold the promise of instant coffee as an affordable and convenient luxury.

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