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.
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As a lover of the original Starbucks 20 years ago in Seattle...I ave to say I have become disgusted by the way the "brand" has lead to a lack of quality. I do sometimes like the CDs though...
I also really like your chewing gum.
I have never liked instant coffee but will probably try this just because all of the naysaysers have caught my attention. I live in a small town and brew Starbucks at home. It is really great coffee. But maybe the instant will be more cost effective if I make only what I need. I would also take it traveling if it was as good as the beans.
Someone should crunch the numbers. One pound of whole bean coffee makes 40-50 cups of coffee. Of course the cost of this coffee will vary but lets say it is 10.00 a pound and it makes 50 cups. That would make each cup .20 cents each. I would like to know the cost of the instant coffee and how many cups you can make from it to see if one would actually save by buying instant.
Also, Howard says instant is convenient for people who are mobile like hikers. Well this hiker makes his coffee cowboy style and first grinds his whole bean coffee before taking it with him in the wilderness. Try it sometime, it's like a Grizzly Adams version of a French Press.
Did this company pay for this advertisement? It looks like an article but it smells like something else.
I love Starbucks! One plea: you have the best choice for healthy food of any chain, please don't change this! I love the Greek yogurt, the fruit and cheese plate and other offerings.
I support my local Starbucks because the manager works so hard to keep the line moving and know everyone and what they like. 51st and Madison Ave location deserves a shout-out!
I grind and brew my fair trade, shade grown coffee at home. Starbucks "core value", is to keep people on coffee plantations enslaved, so they can make billions. Local coffee shops keep the money in the community.
Local coffee shops keep the money in the community?? How? They pay local taxes just like Starbucks.
For someone who seems so bent on waving the holier than thou ethical flag you clearly don't have a clue about what you're talking about. Have you ever actually worked in a local coffee shop? I worked in a couple in college. My mom and pop bosses paid me minimum wage and offered me no benefits. Starbucks might sell crappy, burned tasting coffee and wildly unhealth pastries but at least they offer benefits to their employees unlike the vast majority of local shops. They also make pretty huge charitable donations. On top of that they pay more in taxes than most local mom and pop shops which means they put more money into the local schools, libraries, etc.
Vladdycat, if you really cared so much about the oppressed working class you would refuse to shop at any business that fails to provide their employees with medical benefits. Keep in mind that Fair Trade regulations don't include treatment of the people who actually sell you the coffee.
It doesn't seem you were making coffee into your career. Did you happen to compare prices and margins between local and non-local businesses? Did Starbucks donations go to any charities in your community? I co-owned several Mom and Pop businesses (bakery/coffee shops) and we offered our managers subsidized health benefits and an employee buy-in plan, and our wages were well over minimum. We also donated money and food on a regular basis--a lot of it. Our prices were lower than the chains, and our quality was at least as good (I like to think better). Still we couldn't compete with the chains' marketing budget or get enough people to shake their McMindset--
I'm not sure that many people know what good coffee is. Starbucks has good coffee- strong and hearty. Buy the Grande "coffee of the day" hearty and it will set you back $1.80 and it will be excellent.
Lots of places have good coffee, try a Leelanau Coffee Roasters Italian Roast next to your corporate brew and you will never drink the Starbucks swill again. Plus buying local coffee keeps your money working in your community.
On reflection after my last comment, I'd add: fine the local donut shop and buy their donuts to pair with an 8 oz cup of coffee for 99 cents like a depression era promotion. The local donut shops would like that and you'd be under the price of dunkin and mcdonalds.
Donuts. Do people still eat those? Yuck.
I'd say to compete you need to undercut the price of Dunkin Donuts and McDonalds coffees that are your current competition. Unfortunately, you already lost the high-end coffee battle to Peet's and some of the other boutique roasters in the country.
McDonalds coffee is not a competitor - They serve SBC, which started as Stewart Brothers Coffee, changed to Seattle Best Coffee - Starbucks owns them. Subway chain stores are beginning to push SBC coffee, as well. So, Howard still makes a buck for SODO. Want some great coffee from a roaster who, Duane Sorenson, cares about the growers and the environment and his employees? Stumptown is roasted in Portland, OR - Sold on line - Suggest you begin with Hairbender.
I came to this post looking to see Seattleites bash Schultz for selling off the Sonics. LOL
The ambivalence toward Starbucks is highly amusing, but the truth is that most are right when they point out that $4 for a coffee drink is ridiculous, even in the best of times (sorry, Faith Popcorn!).
But I'm on the road a lot and I am forced to drink coffee from a variety of vendors. McDonald's coffee, Dunkin' Donuts, and even most restaurant coffee is not good. If one thinks it is, one does not know good coffee...
... he said, nose in air, his muttonchops almost tickling his monocle...
Now that's a great image! Not entirely right on, but...close.
Thanks for the lesson in humility, SS.
i drink coffee, grind beans at home, and even roast beans at times. i know what excellent coffee is and i also know that mcdonalds and dunkin donuts have good coffee.
You're right, Rosa. My taste is no more the standard than anyone else's. But, as some long gone Latin once said, 'de gustibus non disputandem est.'
You wish the new brand will be named Thunder, eh? Yes, Howard ruined the Sonics, turned Thunder. However, McDonalds serves SBC, the old Stewart Brothers of Seattle, morphed into Seattle's Best Coffee and, ultimately, bought out by Starbucks. They did the same to Terrafazione and recently, Coffee People, in Portland. This is why I remain true to Stumptown which is a Portland, OR roaster that cares about the environment and the growers. Stumptown is, also, sold on line. Try their Hairbender. Stumptown is not trying to buy out all of theircompetitors. Howard, you were a marketing genius when you took control of that little store in Pike's Market, but, you have lost your soul along the way.
Yup, Howard ruined Torrefazione, which for years was my favorite. SBC had its roasterie on the island on which I live but their coffee has always been on the bitter side. I'll check out Stumptown (if the coffee's as good as their name...).
Thanks for the recommendation, Paul!
I'm not a coffee drinker... so I could pretty much care less about Starbucks...
but I love this line...
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.
The things that endure adapt... but still remain true to their core.
Funny - that line struck me as absurdly obvious, i.e. "The secret to successfully crossing the street is to adjust your timing so you pass BETWEEN the cars"
Or, we scr*ewed you during good times but we're willing to adjust our prices now that we're scared $hitle$$ of going under - I refuse to drink coffee at Starbucks or for that matter any boutique coffee shop, there's no "fair trade", it's all a ruse that's perpetuated through fancy advertising campaings. Ask the bean-pickers, they don't even get three cents to the pound.
When charging $4 for a latte is no longer optional, because McDonald's has come out with something half the price that tastes just as good, I guess you go for instant coffee. Unfortunately that will probably be overpriced as well, and in this economy, people won't pay high prices for instant coffee.
McDonald's has drinkable coffee?
Starbucks blew it by not offering free WiFi.
I work for a company where the employees travel quite a bit (to an from client sites) and we never go to Starbucks. It's too much of a hassle to get a T-Mobile account, and with this economy I don't think our company would reimburse the expense anyway.
Ditto for the weekends- my husband and I go to when we want to sit with a cup of coffee in the evening, we go to Saxby's, Cosi's or an independent coffee shop with free wireless.
I agree with you 100%. I couldn't believe they wouldn't dish out the $30 for internet access for its patrons. Many a meetings could have been held there....but weren't.
I am a fan of Starbucks...but have stopped going because I can't even afford my quadruple espresso macchiato.... much less a $4 caramel macchiatto.
We still shake our heads at the "no internet" thing... and the business that was lost with it.
Wi-fi users take up space someone coming in for a quick snack could be using.
I'm not going where the product (coffee, pastries) is secondary to the lounging.
Instant coffee? Try Sanka, the astronauts drank it.
The best that can be said of Starbucks is that it is barely relevant. The coffee's not that good now (and never was), and management and Starbucks' many fans have been completely clueless. Best of luck with the brand dilution, we'll see how it works out. Thank goodness Mr. Schultz has earned enough money trying to convince people what he was serving qualified as coffee.
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