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

[breadandcircus34]

First off, why are you using this site for PR?

Secondly, this sounds like a good case of a company that has grown so large it forgot its way.

Starbucks and the whole "fancy coffee drink" movement came as a response to the crappy coffee offered by Folgers and Maxwell House. It looks like you are just becoming what you used to be an alternative to.

Perhaps homogenization and lessened quality is a just a product of corporatization.

But at any rate, you are now in a red ocean so enjoy what you have sowed.

[jsarets]

The only context in which I would ever use instant coffee crystals is as a supporting ingredient in a recipe that doesn't taste like coffee (e.g. chili).

[JimBozo]

Wow! What a great idea. I'll have to try that next time I make chili. BTW, I always add chocolate to mine, and it rocks. I can see a dash of instant coffee adding to the mix. Thanx jsarets.

[EngineerBill]

The starbucks brand is in serious trouble and "instant starbucks" or "ready brew" or WTF you want to call it won't help matters at all. The development of Pikes place coffee was a step in the right direction. Unfortunately, the execution has been awful. First, it is not available at any supermarket starbucks, second a lot of the stores run out of it and/or make it very hard to buy it by the one pound bag. (I am one of those whuo likes to buy coffee by the bag.) If your stores do not do a better job of making the pikes place flavor available, people will be turned off as better run coffee houses take your business.

[yappnmutt]

you are better off downscaling your operation, lowering your prices, offering cheaper coffee compliments and competing with dunkin donuts and maybe even mcdonalds.

another instant coffee on the market is just another instant coffee on the market.

[jsarets]

I think they're completely misinterpreting this "simplifier" trend.

As a part of the business cycle, shifts in purchase intent are caused by shifts in time preference. During the boom, businesses buy capital goods to generate profit in the future and households buy consumer goods to satisfy immediate wants. During the bust, businesses sell capital goods to raise cash for immediate use and households divert income to saving for the future.

In other words, during the down times, consumers don't want instant gratification if it comes at a premium. People don't value their time as much and are more likely to trade extra work for lower prices. I suspect that in these economic circumstances, the ground coffee consumer is more likely to switch to whole beans than to instant coffee crystals.

It's the products that need to be simplified, not the processes by which they're used. The idea that a recessionary mindset will encourage Americans to embrace convenience foods to an even greater extent than we did during the "on-the-go" mindset of the dot-com boom strikes me as remarkably tone-deaf for a major food service corporation like Starbucks.

I bet that this product has been in development since before the financial crisis and that this is their lame attempt at salvaging a macroeconomic marketing angle ex post facto.

[James Boyce - Huffpost Blogger]

remember when Krispy Kreme thought it was a great idea to sell their donuts in supermarkets? and then the donuts in supermarkets were terrible and it destroyed the brand? I'm just saying

[ROFLMAO]

core values... Harvard business school... paradigm-changing... managing the short term...

It all sounds so slick and professional, no wonder they pay you 100s of 1000s every year. Except for the unfortunate fact that Starbucks is being run into the ground (no pun intended).

Can you say "over-expansion?" Did you have to have 20% growth EVERY year?

Starbucks is a metaphor for all of corporate America - being driven to bankruptcy by snake oil salesmen in expensive suits.

[secondnature]

My daughter, an assistant store manager, was cut unceremoniously from Starbucks along with 870 other ASMs last week with THREE weeks severance. After 7 years. She was supposed to take over as manager and they hired an external hire with no experience because they could pay her less. And my daughter had to train her. Boo for Starbucks.

[AmandaRuth]

very similar to my husbands story. After 17 years, and constant sacrifice of family to work, his job was eliminated at Corp, in July, and less than a week later, advertised on craigslist as non benefited contract labor. Core values, indeed.

[Lemeritus]

Boo for Starbucks, indeed! It wasn't the coffee that got me hooked on Starbucks -- I being one of those "You want HOW MUCH for a cup of coffee?!" -- but people like your daughter. At each of the three Starbucks's locations I drop into on my regular meanderings, I'm almost always treated like a long-lost friend -- they know my name, what I drink, and that I can be tempted by an "old fashioned". Nothing McDonalds or Dunkin can brew can come close to that kind of service. Thank your daughter for me, secondnature. And, Mr. Schultz... maybe you're marketing the wrong thing and overlooking some extraordinary "natural" resources.