Taste-testing Starbucks instantFebruary 17, 2009: 6:09 PM ET
By Beth Kowitt
The company that brought premium java into the mainstream is now selling instant coffee. Is this the latest sign of the apocalypse?
At an event in New York today, Starbucks (SBUX) introduced the result of its biggest research investment to date: Starbucks Via Ready Brew, available in individual servings (a three-pack sells for $2.95; a 12-pack for $9.95).
Before you start accusing the iconic retailer of desperate measures, give Via a try. Here at Fortune, we have a machine that brews a fresh cup from Starbucks beans in less than a minute. We compared it to the Via and couldn't tell which cup was the instant. Both had a rich aroma and flavor.
Starbucks is starting off by offering Via in two roasts—Colombia and Italian. And yes, you do notice the difference in instant form. While some instant brands are barely recognizable as coffee, the smooth, nutty flavor of the Colombia roast and the darker, smokier Italian both hit the mark.
We tasted other instant brands too and there was simply no comparison. Kraft's (KFT) Maxwell House, Smucker's (SJM) Folgers and Nestle's (NESNVX) Nescafe, among others, tasted like they were manufactured from chemicals. As Schultz told the crowd this morning, "This is not your mother's instant coffee."
With Via, Schultz is attempting to break into a $17 billion market that comprises 40% of coffee sales worldwide. In the U.S., where instant is a $700 million market, he sees this as a way to give customers unlimited access to Starbucks, whether on a camping trip, at the beach or aboard a red-eye flight.
According to analyst Sharon Zackfia of William Blair & Company, the biggest opportunity for Via is abroad. In the U.K. and Japan, Starbucks' biggest markets outside the U.S., instant sales make up 81% and 63%, respectively, of total coffee sold. In other countries, the key will be to get Via on grocery shelves.
The move may raise some eyebrows. After all, when founder Howard Schultz replaced former CEO Jim Donald with himself a year ago, he claimed to be "refocusing the company on providing customers with the distinctive Starbucks experience." Instant coffee doesn't really fit with the plush couches and fresh-brewed aroma of America's favorite "third place," as Schultz likes to call Starbucks.
He admits that Via doesn't come without its challenges. "The connotation of instant is an uphill battle," Schultz said. "There's been zero innovation in the last 50 years in the category of instant coffee."
There's also the issue of price. While a cup of Via works out to less than $1, it's significantly more than the $3 or so you might pay for a jar of Folgers that brews 60 servings. Why not just cough up the extra dough for Starbucks drip?
Zackfia is keeping her expectations low, saying Via "won't even amount to a rounding error this year." But at a time when Starbucks is closing hundreds of stores, confronting its first ever profit declines, and trying to boost a stock that has lost 47% of its value over the past year, every little bit helps.