Will Starbucks' instant coffee Via prove to be a weak brew or caffeine kick?

LONDON - Will Starbucks' instant coffee launch dilute the brand or shake up the sector?

At first glance, Starbucks' decision to launch its first instant coffee product, Via Ready Brew, is, frankly, illogical.

Much like Marks & Spencer's ill-advised jam-sandwich nostalgia trip, it smacks of introducing a lower-quality product in the quest for a quick buck.

Starbucks, which launched Via in the US last month and is trialling it in a handful of London outlets, priced £1.20 for three servings and £3.95 for 12 servings, claims the product is 20 years in the making. Chief executive Harold Schultz promises to 'reinvent' the instant coffee sector, as well as expanding the chain's target audience.

However, with the brand posting its first quarterly loss last year, and planning to close about 1000 outlets worldwide, an industry report by Mintel suggests the launch is aimed squarely at reconnecting with consumers who are not willing to splash out on a trip to a coffee shop, thereby putting the Starbucks brand directly into people's homes.

Debbie Smith, managing director at ad agency Meteorite, which works with rival brand Costa, is scathing about the project, claiming it is at odds with Starbucks' core positioning.

'It's a mistake. It could end up seriously diluting its brand,' she says. 'Starbucks as a quality coffee store has undergone something of a crisis of confidence recently. It has gone from niche to mass in a short space of time and lost touch with its roots.'

Jim Slater, Costa's marketing director, is adamant that it has 'no intention' of launching an instant coffee product, which he describes as 'anathema' to its brand proposition.

Not everyone is so disparaging, though. Consumers are bombarded with messages from the coffee sector covering everything from Fairtrade to the latest home espresso pod, so a retail brand like Starbucks stands to achieve huge cut-through with its new product in a sector where premium is the growth area. Sales in the coffee market have risen 19% since 2002 to reach £720m in 2007, driven largely by a 65% rise in roast and ground coffee sales.

According to Mintel analyst Michelle Strutton, Starbucks may be about to usher in another category in the coffee sector. 'Now is the perfect time for Starbucks to launch Via,' she says. 'It will be going into the premium end of the market, and it may even carve out a new super-premium niche. All of the brand leaders will need to take note.'

Andrew Doyle, chairman of branding agency Holmes & Marchant, which has worked on Kraft-owned instant coffee brand Kenco, believes Starbucks will cause the major players in the sector a few awkward moments.

'This could well force the big brands to up their game, to invest in quality and taste, not just communications,' he says. 'The entrenched brands have too much to lose not to respond, but they are oil tankers and take a while to turn, so Starbucks could well have a great short-term harvest.'

Doyle is particularly keen on the fact that Starbucks is making the product available only in its coffee shops. 'There are 54 varieties of instant coffee in Waitrose and adding another would have been nuts,' he continues. 'This way Starbucks can stop consumers from being promiscuous.'

However, one factor Doyle may have failed to take into account is that Starbucks already sells its whole-bean coffee products through conventional retailers. Moreoever, a company spokeswoman would not rule out the possibility that Via may eventually go head-to-head with Nescafe and others on the supermarket shelf.

The next point of interest in the battle for consumers' coffee mugs will be to see how quickly instant coffee brands at the upper end of the market, such as Kenco and Lavazza, will react, as they cannot afford to let Starbucks cream off the top-end without a challenge.


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