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Once again, it's time for Starbucks to wake up and smell the coffee.

February 19, 2009

 

Last March I took some shots at Starbucks. Looking back, it was clear they deserved them. Now again, this week Starbucks is back in the news with the introduction of another new product, Via, an “instant, soluble” coffee product, to be sold in 3-pack or 12-pack portions. One of the world’s leading professors of marketing, Harvard University’s Dr. John Quelch, has written that this is a positive move on Starbucks part. He wrote on the Harvard blog http://blogs.harvardbusiness.org/quelch/2009/02/how_starbucks_via_helps_consum.html the following comment:

Starbucks’ launch of Via shows great commercial courage. And commercial courage is what consumers need in the face of this recession. The courage not to lower prices on existing services, but to innovate, to provide new solutions that offer unprecedented value.”

While I see Prof. Quelch’s point that in the U.S. market instant coffee has had no premium player, I disagree completely that the introduction of Via is a good extension of the Starbucks brand. 

 

First, Starbucks has never really been about the coffee. Howard Schultz created an aspirational brand identity around Starbucks as a social ethic. The term "The Third Place" described the mythical place in the loyal consumer’s mind (not some ubiquitious retail selling space). This is true brand equity.

 

Second, despite what has been a flurry of recent new menu items from Starbucks, this "place" certainly wasn’t centered around a perfect shot of espresso or a foaming cup of soy milk latte. These are products, not the brand. 

 

Third, as Starbucks has become a mature and monolithic retailer, it has refused to grow with a changing market and a new generation of consumers. In recessionary times people desire to connect to brands that comfort them, as they did with Starbucks immediately after 9-11. If Starbucks current challenges were only about price than Panera Bread, also a beneficiary of the post 9-11 times, would also be losing market share (which it isn’t). 

 

The Starbucks brand has never been the "coffee" it has always been the "place." Via doesn’t occupy that place, in fact, I doubt it even knows the neighborhood.

Posted by Chris Muller on February 19, 2009 | Comments (16)

11/21/2009 12:04:00 PM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Dana commented:

Starbucks tastes burnt to me. We have a great new local coffee place called Crimson Cup that kicks butt all over Starbucks as far as I'm concerned. Yeah, they still have the sweet drinks (which I actually prefer) but they don't taste like someone overcooked them in the microwave. Now if someone would just come up with a sugar-free line of frozen lattes I would so be there.


10/27/2009 9:48:00 AM PDT
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
cathy commented:

Starbucks had it's roots in freshly brewed coffee, now you go into a store, can't even smell coffee because of new machines and their pre-ground bags they use, and now Instant? Insane. I just did a blog on starbucks at beyondbitch.wordpress.com


8/6/2009 1:44:00 PM PDT
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Jeff commented:

I think Starbucks is the McDonalds of coffee. McDonalds put frozen fries in the basket and the fryer does the rest. Starbucks uses super-automatic espresso machines and all the "barista" pushes the button of the drink ordered. The machine grinds the coffee beans, extracts it, dumps it, froths and adds the milk etc. There is no art or finesse. No "cooking". That is why you can't see what they are doing.


3/6/2009 6:40:00 PM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
StePat commented:

McD's coffee.....I finish every cup. Starbucks....my stomach starts hurting about half way. I respect both brands but McCoffee wins this battle.


3/3/2009 10:20:00 AM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Randy commented:

Correction, Dr Muller. I've recently (within the past week) gotten coffee at both Dunkin' Donuts and McDonald's in Metro NYC (Yonkers, NY, specifically), and both were served in styrofoam cups. I am not a Starbucks customer myself; I find their coffees universally overroasted and overextracted. But they do have a huge brand loyalty.


2/23/2009 1:52:00 PM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Larry commented:

Chris, I have to agree with Lee. Although I am not a loyal Starbucks customer,(I prefer to brew my own coffee and pocket the difference) I believe that the average customer goes there for the coffee. In fact I'd be willing to wager that a very large percentage of the customers never step foot into the store, instead opting to use the drive through. The "


2/23/2009 12:30:00 PM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Bailey commented:

Wow- Great article! Here is the deal- Fast Food is frowned upon by Specialty Food Consumers. It was this consumer group that crowned Starbucks as the leader in of Specialty Coffee. Ever since the coronation, Starbucks has done everything possible to remove "


2/23/2009 7:37:00 AM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
AJ Sawhney commented:

Good article. I very much agree on the fact that Starbucks is branding, a coffee lifestyle. The VIA is taking away from the whole experience. This could work for them, if the altered their strategy, like Nandos sauces it needs to offered in all supermarkets, and promoted effectively. I know in England, drinking coffee is very popular from drinking at home and more of a convenience, amongst with sipping tea and crumpets, so it may grab peoples interest. However i dont think this will be successful for Starbucks and just become another expensive venture.


2/23/2009 12:05:00 AM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Paul McRuer commented:

drinks and get back to basics. If you made great coffee you wouldn't need to pour flavoured syrups all over it. In response to the comments left, you guys crack me up. Bob's comment: "...of the company that educated the world on coffee." Bob, please don't throw the rest of the world in with the US. Starbucks did not educate the world on coffee. Europeans have been drinking great coffee long before Starbucks turned up. In fact Starbucks is consistently rated low as far as coffee chains go around Europe. In the UK out of the 10 chains that get surveyed annually, Starbucks sits at the bottom of the pile so Starbucks don't make great coffee. Even McDonald's new McCafes (the coffee shop arm of Mcdonalds) that are slowly opening around Europe make better coffee. The problem in the US is that there is a lack of quality alternatives. Bigger is not better when it come to coffee.


2/23/2009 12:03:00 AM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Paul McRuer commented:

I think adding an instant version to their product line is a mistake. It cheapens the brand in my opinion and makes it look like they are getting desperate. They grew too big too fast and now have nowhere to go except down. They should be focusing on improving their core product which should be the fresh coffee served at their stores. Remove some of those gooey oversweet "


2/21/2009 12:22:00 PM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Chris Muller commented:

I do try to stir up comments, and seek to be accurate. So, just to set the record straight, if you go to the Starbucks website www.starbucks.com/retail/nutrition_beverage_detail you will see that the Caffè Latte is described as "Rich, full-bodied Starbucks® espresso in steamed milk lightly topped with foam." The Grande with soy milk has 170 total calories, 40 Fat Calories and 125 mg of salt. A Large Nonfat Latte with Suger Free Vanilla Syrup at McDonald's has 110 total calories with 0 Fat Calories and 190 mg of salt. Both are roughly 16 ounces. And, as far as I can tell, neither Dunkin Donuts nor McDonald's serves their products in styrofoam cups any longer, plastic coated paper is the industry standard. Finally, my commentary was about the dilution of the Starbucks brand due to the introduction of Via. If the company wants to own the "premium" instant coffee market, the product should be sold in grocery stores and other retail outlets, not in their branded coffee shops, where, based on the intensity of most comments, you agree with me that high quality fresh brewed coffee is their core product compentency.


2/21/2009 7:22:00 AM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Bob Cerrito commented:

If you compare the Mcdonalds or Dunkin coffee served in styrofoam to the much better quality coffee that is served by Starbucks coffee and cant tell the diference then it makes no sence discussing it with you Dr. Muller. The fact that the others try to promote the idea that their brand can compete with Starbucks is just marketing jiberish. You seem to have some bias against Starbucks that cant be based on taste or experience. Mcdonalds, has built their fortune on pedaling fat and salt, and Dunkin, on fat and sugar. neigher can touch the superior environment or products of the company that educated the world on coffee. Look at the customer base of those three companys and realize that only those who cant afford or cant taste could chose those lesser brands.


2/20/2009 4:51:00 PM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
David L. Paul commented:

Just to let you know that a latte is not a foamy drink so your comment "Second, despite what has been a flurry of recent new menu items from Starbucks, this "place" certainly wasn't centered around a perfect shot of espresso or a foaming cup of soy milk latte." Is not accurate. A foamy drink would be a cappucino. So I have to agree with Lee Peterson above with, it just seems that you are stirring up things to get comments. I am a food and Beverage Manager for a convention center which includes a Starbucks, while our business in whole has dropped our Starbucks outlet still makes great money.


2/20/2009 3:17:00 PM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
lee peterson commented:

Chris, Seems to me like you're writing this to stir comments vs being accurate. Well, you got me there. Starbucks taught us all about coffee . . . Starbucks is the Mothership of coffe in the US . . . Starbucks IS coffee, the place is a bonus . . . if it wasn't for them Dunkin' would never have improved, McD's would never have brought it mainstream and we'd all still be drinking Sanka from a can! -- are you kidding?? I will go 3 miles out of my way and past every Caribou to get to a Starbucks because the COFFEE is so much better. I never "hang out" in the third place, I go for the Joe, so does everyone I know. Fundamentally wrong on that one, Chris.


2/20/2009 2:07:00 PM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Kate Leahy commented:

Another issue: isn't Via still more expensive than brewing regular coffee at home?


2/20/2009 8:14:00 AM PST
In response to: Once again, it's time for Starbucks to wake up and smell the coffee.
Dan Holm commented:

Dr. Muller - I couldn't agree with you more. VIA is nothing more than a distraction from Starbucks real issues. It's Howard's attempt to become relevant using a medium that simply appears to be "

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