Starbucks… Back to the same old Grind???

Recently Starbucks launched its VIA Instant Coffee product, for $1 a packet or cup. When I first heard about it, I thought they were crazy! Here you have a true category creator, in this case premium coffee, coming up with what to many is a downscale, basically commodity type of product. Look at it this way, currently you can get a 20 ounce cup (“venti”) for over $2 today in the Boston area where I live, or you can get a cup of instant (Nescafe and even Tasters’ Choice) for pennies.

Is there a difference in taste? You bet. Then does this mean that Starbucks is lowering its standards?, in essence looking to capture that “cup of joe” on the run crowd?, probably not, at least directly for a $1 a packet.

To most of us Starbucks means affordable luxury, infinite choices, the third-place on top of home and office, “Venti” and “Grande” instead of large and jumbo, rich flavored beverages, etc. How does this square with a product category that we associate as bland, chemically adulterated, “instant” coffee…

The danger here is if we associate VIA as an instant coffee product. If it comes down to price, it is very expensive. And if it is not positioned strategically, then the “instant” product can take the Starbucks brand down a notch or two. Talk about a potentially very dangerous brand conflict in the works!

If customers begin to associate a premium brand with a commodity product, the risks are:

  1. elevating the commodity product while at the same time lowering your brand value, and/or
  2. trying to swim upstream and justify an off the charts price against other much cheaper products in the, in this case, instant coffee category.

A mis-fire and at best the product will fail with worse consequences possible if people sense that brand is deteriorating and losing value.  Talk about high risk and high stakes.

And Starbucks has muffed it before.

Remember how in their zeal to speed up service they mechanized the bar drink process in order to serve more customers more efficiently? They reduced the hand crafted nature of the beverage and role of the barrista. This opened the door for potent “new” competitors such as Dunkin Donuts and even McDonald’s to leverage mechanical processes and also offer such beverages, enter the premium category and take market share.

Add to this that the company has taken what appears from the outside to be a passive marketing posture these past few years with flattening sales to boot, and I wondered how they could pull this off.

Glad to say, Starbucks did it… and did it with superb marketing intelligence!

You could see this high level of marketing thinking in the launch itself.

If you are a Starbucks fan you may remember that this past fall they had VIA tastings in each store as part of the rollout. The interesting thing was what they tasted VIA against. My initial thought was that they would taste against Instant Coffee to show how much better (hopefully!) it was.

But instead they did something completely different… they tasted and literally positioned VIA against Starbucks brewed coffee itself and used Instant to define convenience, not the category.

I will argue that this was a stroke of marketing genius. Here’s why.

  1. They redefined the instant coffee category into Blue Ocean, uncontested territory, from a low price/commodity play to convenience… take it anywhere.
  2. Instead of trying to push up market in the instant coffee category ($1/cup price for a product costing in the pennies), they pushed down in the brewed category (Starbucks flavor for $1/cup).

Roll it all up and with VIA now you can now have a cup of Starbucks you can take or have almost anywhere for a buck! Sounds good to me, and tastes good too! Apply marketing at this level to the company overall, well Happy Days may indeed be back at Starbucks again.

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