Via helps to reshape Starbucks portfolio
June 9, 2010
by Eric Schroeder
NEW YORK — Twenty years in the making and less than a year after its national launch, Starbucks Via instant coffee has become a rising star of the Seattle-based company’s portfolio with eyes on establishing a leadership position in the $23 billion instant coffee category.
Howard Schultz, chairman, president and chief executive of Starbucks Corp., elaborated on the initial success of Via as part of the company’s larger turnaround effort during the Sanford C. Bernstein Strategic Decisions Conference held June 2 in New York.
Mr. Schultz said Starbucks is in the midst of launching Via in 30,000 points of new distribution — in grocery, drug, convenience stores. The figure is impressive considering the product went national just this past September. More impressive, Mr. Schultz said, is the fact Via is expected to easily exceed $100 million in revenue its first year, a total he said less than 5% of new U.S. consumer product brands are able to achieve. Looking to the future, he said the brand could be a $1 billion brand for Starbucks.
But the road has not been easy. Starbucks spent more than 20 years trying to “crack the code” of replicating the taste of its coffee in an instant form, a challenge Mr. Schultz said industry observers questioned whether Starbucks could pull off.
“There were headlines at the time saying we must be pretty desperate if we’re going to go down this track,” he said of the company’s foray into instant coffee. “But what people don’t realize is that our research strongly suggested that if we could re-create the taste of Starbucks coffee and had the power of our brand associated with it, our customer base would really trust that the proof of everything we said was not marketing and P.R. or packaging, but the proof would be in the cup. What has resulted is significant incrementality in our stores as a result of this new product.”
While consumer response to Via has not surprised Mr. Schultz, how and when the product is being consumed has.
“The initial research we did before we went to market strongly suggested that this product would primarily be for people on the go — being able to take Starbucks coffee where they couldn’t get it,” he said. “What we’re learning in terms of what’s happened is that 50% of Via that’s being consumed is being consumed at home. And that’s shocking to us, which opens up a whole new opportunity.”
That opportunity includes competing in the single-serve business with Keurig and Green Mountain, which require machines for their coffee products. With no machine required and the ability to take Via anywhere, Mr. Schultz said Via is well positioned to make its mark in this category as well.
“The household penetration of (single-serve) is really in its embryonic stage, and like any new category and technology there’s going to be lots of chapters,” he said. “And I can only tell you that as the leading specialty coffee brand in the world, there’s no way that we’re just going to ignore this opportunity. We think we’ve got a winning platform and proposition with Via.”
Additionally, Mr. Schultz said Starbucks does not plan to stop with its current three stock-keeping units of Via — Italian, Colombian and decaf. In fact, the company is just getting started, he said.
“We are going to build out a portfolio of unique beverages, of unique varietals, blends and form factors in which Starbucks Via will be a significant new growth vehicle for the company domestically and internationally,” he said.
As an example, Starbucks on June 26 will roll out on a national level Iced Via, which is described as a pre-sweetened version of Via, designed to be consumed cold, dissolving easily. Each single serving packet is designed to be mixed with 16 oz of water.