Staying Real in an Instant

Today, we announced that Starbucks will introduce an instant coffee, providing our customers with great tasting Starbucks coffee, anywhere and anytime. Not surprisingly, this news raised some eyebrows and some cynics are asking, "Why go instant, Starbucks?"

There are numerous logical reasons: the significant size of the instant coffee market ($17B globally); the increasing mobility of consumers (imagine a cup of Starbucks VIA Ready Brew on a mountaintop); and, regardless of our ubiquity, that customers continue to tell us they want more Starbucks, and more ways and opportunities to enjoy it.

But beyond these market trends, there is a larger rationale. During trying economic times, the brands that endure are those that that adapt to the changing needs of their customers, without forsaking their core values. We think introducing a paradigm-changing and better-tasting instant coffee is a way to bring quality and value to the mass market, and to turn on a whole new set of coffee drinkers to the Starbucks brand. This is a considered bet for us and we know we'll learn a lot as we launch the product in leading markets over the coming weeks.

I think John Quelch, the Harvard Business School professor and marketing expert put it best: in a tough economy, consumers are redefining value. They are consuming less, and focusing more on seeking satisfying experiences that enhance their lives. He calls this growing segment "The Simplifiers." They want fewer material goods, and more quality-of-life experiences. At our core, we have the right stuff to appeal to these consumers, whether it's the respite from the world our stores provide or now with Starbucks VIA ready brew, quality coffee on-the-go.

As I've written in this space in the past, I believe that today, perhaps more than ever, we need to be mindful of who we are. We are forced into making decisions without perfect information: delay a decision by even a day and the economy will have changed shape once again. Business in this climate is more art than science. At Starbucks there are no sacred cows -- except one. I believe that it is crucial, and I think our customers agree, that we remain true to our core values. To adapt is essential in order to survive, to walk away from our founding principles -- the very reason for our being -- would be reckless.

Like all businesses, we're aggressively managing the short term, with an eye firmly fixed on the future. But things will never go back to normal. When the economy does stabilize, I do not believe that we are going to see behavior and attitudes automatically flip back to what they were during more prosperous periods. There's been a mental shift that will be hard to undo. As Prof. Quelch puts it, the temporary coping mechanisms people put into place to deal with the immediate crisis will take on a new permanence - "The Simplifiers" will grow in number, looking for experience and value for their hard earned money.

Still, in spite of the current market realities, I know some will question our decision, and I understand this reaction. Expectations from brands like Starbucks are high, and interaction with our brand is very personal.

Yet in spite of those high expectations (or perhaps because of them), we are confident we can disrupt and reinvent the instant coffee category -- introducing quality coupled with value. I believe that Starbucks VIA Ready-Brew is just that - and the proof is in the cup.

Howard Schultz is chairman and CEO of Starbucks Coffee Company.

Comments

[ch4r1iegr1]

I only buy organic (better for health and environment), fair-trade coffee (that wasn't picked by slave children) from local coffeehouses (supporting the local economy and my neighbor) and I always bring my own stainless steel mug (reducing future landfill waste). If I forget my mug or can't find a local organic purveyor I forgo the coffee fix (a.k.a caffeine drug addiction).

What market segment does that put me in? I don't even know what "satisfying experiences that enhance their lives" means. Is that kind of like life?

Consumerism is dead. Support your neighbors, not corporate fascists who try to sell you the illusion of quality.

[ParacelsusTheophrastus]

I was happy with the oatmeal I got at Starbucks. It was great to have a healthy fast food and a very reasonable price.

[Beachrunner]

If you want the taste of Starbucks at home, brew up some Maxwell House in the normal manner, then put it on the stove in a pot. Boil for five minutes. When it starts to smell burned, take off stove and drink.

Same taste, less expensive!

[TruthmongerII]

I've wondered how a chain can have stores on every block in some metro areas and still make a profit. Oh they didn't, so now they're going to sell us on instant coffee made from unexceptional beans. Woo hoo! Can I get a pop tart with that? Another observation: neighbourhoods lack mom 'n pops, hardware and notions because everywhere one looks, there's a Starfuc*s.

[Steve Connolly]

Instant coffee? Thanks Howard. Always looking for instant gratification. When the longest standing professional sports franchise in Seattle, the Seattle Supersonics, did not give Mr. Schultz instant profit gratification, what did he do? He sold the franchise to Oklahoma City, on the word of a businessman who "promised" to keep the franchise in Seattle. Howard, instant this!

Steve Connolly
Tokyo

[cwb0711]

Hiring attentive personnel who know how to use the words "please", "thank you", who know how to keep the stores clean, who don't have attitude, and who show some concern for personal grooming would do more for the brand than anything else. I participated in a Starbucks survey recently and the dissatisfaction with the service and personnel was not probed, but the fact that I was merely "satisfied" with my Americano was probed. It's hard to screw up espresso and hot water. It's much harder to find, develop, and retain personnel who present the proper face of the brand to the customer. That's where Starbucks needs to focus. Along with some SKU rationalization.

[AnnfromCA]

Well, instant might do well in other countries. Here, I'm afraid, it's going to turn the brand into nothing more than Folgers.

[SimJack]

Nice ad, I want equal time/space. Instant coffee, how freakin' green is that?

[Paschal Fowlkes]

"customers continue to tell us they want more Starbucks, and more ways and opportunities to enjoy it."

Really? I'm no Starbucks hater, but with that much coffee on the menu, who in their right mind would need more ways to enjoy it?

[apduncan1]

Instant coffee? Yeech!

[Erik Oberholtzer]

I fear Starbucks is moving down a dangerous slope that will further dilute the brand. Instant coffee goes against every principle the company was built on.

[tailgateshirts]

You guys do realize this is a product extension, not what they are serving IN the stores right?

[skippypicasso]

Who cares; it's all gross.

[CallMeNAG]

Oh, please. The only time "Howard" (actually, his writers) posts on this blog is when he wants to advertise. People have bigger things to worry about than this.

[3fingerbrown]

Thanks for that, Howard. Wait till I tell my wife I'm a Simplifier. She thinks I'm just cheap.

[SNusbaumer]

I'm confused. Is this a blog or an advertisement? Where is the line here? What is next -- the CEO of General Motors blogging an ad?

[JustThisGuy]

Well someone wrote about the 'patriotic' drive to buy 'american' cars on the front page... Have not read it yet.

[Wilsonfisk89]

You know, with all this talk of how cheap it is to use Via, it is just as cheap, if not more so, to buy a pound and make your own coffee. I buy a little over a pound every week and a half or so, at about 9-12 bucks. I grind it fresh and use a french press, and get about 15-20 cups out of it. So, why sacrifice taste (sorry Via), when you can make fresh coffee cheaper??