Saturday, February 21, 2009

What the holy heck is Starbucks up to? (continued)

For those of you who may have missed it, an Associated Press (AP) article on Starbucks ran on Wednesday, February 18, 2009. My local paper ran this article with the headline: "Struggling Starbucks puts image at risk by offering instant coffee."

Before running the abridged summary of the article below, I need to ask the question - Is it still possible to buy stock in Peet's Coffee? OK, here's the short version of the AP article:

Starbucks Corp. has delivered a jolt to its devotees and rivals: It's embracing instant. The chain that helped create the gourmet coffee industry and became the industry leader began selling its new instant coffee online Tuesday, ahead of a nationwide launch to coincide with the company's first major ad campaign.

Called Via, the water-soluble product sells in packets of three for $2.95 or 12 for $9.95. Just Columbia and Italian roast varieties will be available at first.

Critics say the move smells of desperation as the chain closes locations in the United States and overseas and cuts about 1,700 jobs.

Andrew Hetzel, the founder of coffee consulting group Cafemakers, said the new product could denigrate the premium positioning that helped establish Starbucks. "I see it as... a very short-term approach to a long-term brand problem. They're throwing things out there to see what hits."

Even competitors seemed surprised. Micheal Fell, president and founding partner of Biggby Coffee, a premium coffee chain of about 100 stores mainly in the Midwest, said he follows the company closely so he knows what his biggest competitor is up to. He called the announcement "shocking."

"We try to make sense of out of everything that they do," McFall said. "This one I'm having a hard time making sense of."

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