Is America Outgrowing Starbucks?

9 years ago

If there were ever a company symbolic of the time when housing prices increased with double-digit predictability each year, when annual bonuses were confidently assumed, and 401k's swelled with irrational exuberance, it is Starbucks.

With customers who adored it with cult-like devotion, Starbucks thrived in a time when excess was not only excessive, it was also fun. But, like the 30-year -old who gets on the scale and discovers she can no longer eat a Big Mac and fries without consequences (okay that happened to me at 14), indulging in Starbucks is quickly beginning to feel like an activity from our lost youth. That feeling is not good for business.

Remember when we stood in line for 15 minutes every morning to get a no fat venti cappuccino with a hint of vanilla? Remember when spending 30-40 dollars a week for coffee didn't seem like a big deal? Ah, those were the days.

It's not just that the company grew too fast and now has to contract.The problem for Starbucks is much more fundamental. For many, Starbuck's entire brand promise feels out-of-sync with today's more grownup mindset.

If you had purchased Starbucks Stock on December 1,2004 you would have
paid $62.36. On Friday, it closed at $9.15 and the good folks at Blogging Stocks say "Anything more than $5 per share is too much to pay."

To say that Starbucks needs to rethink its strategy is an understatement. But changing strategy is risky particularly if the shift flies in the face of everything the brand promise has represented to loyal customers. Can Starbucks, a company that will forever be linked with an indulgent lifestyle succeed in an era of austerity?

Which brings us to Starbucks solution to the indulgence/austerity dilemma. About the time my plane lands in Chicago's Midway Airport Tuesday morning, the Starbucks Coffee shops in Chicago(and Seattle)will exclusively be introducing the company's latest product - not a $4 00 latte,cappuccino or frappuccino concoction, but what can only be described as the Anti-Starbucks -- a one buck packet of instant coffee named Via.

This is not instant coffee as you know it.
This is rich, flavorful Starbucks® coffee in an instant.

The announcement, a couple of weeks ago, that Starbucks was launching a line of instant coffee, was met with criticism and some sadness for a iconoclastic company that many see as dying a slow and painful death.
First, the criticism:

But fresh brewed, ground-from-beans-that-very-day-coffee is their stockin trade. They run a great risk of diminishing their brand by offering what is in effect the antithesis of their core product. Their assertion that people can't tell the difference between the two doesn't matter.

Instant coffee has a bad reputation in the United States. Remember Mom with watery Sanka (when she wasn't revving up on Tab)?
                                                             Val Brown, HuffingtonPost

Now the sad from commenters on Starbucks Gossip:

  • I want to cry now.
  • Okay, company over. Everyone go home...
  • Starbucks,
    I have no words left for you. I bet the innovative, romantic, original Italian cafe's where young Schultzy got the idea for 'bux neverpackaged nor sold instant coffee.
  • Dear Starbucks

    Pls. go read the case study of New Coke.
    Pls. go hire some outside Brand Integrity consultants.
    Pls. find a way to not make me embarrased to walk around with a Starbucks-branded go mug.
    Your former fan.

    For those who were around in 1985, instant Starbucks feels eerily similar to the introduction of New Coke - a classic example of what not to do to your brand.

    ...the Starbucks brand promise contains many elements none of which involve expensive and environmentally incorrect individual packets of instant coffee.  Oops, sorry, Via Ready Brew.
    Senior management and top-level marketers at Coca-Cola similarly messed with the brand promise: that Coca-Cola had tasted a certain way ever since its invention in the late 1800s–and that you could count on that same memorable flavor forever.
                                                    Content Marketing Today

    The folks at WalletPop participated in a taste testing of Via.

    Amey Stone, the founder of WalletPop and current editor of BloggingStocks and DailyFinance, told me,"The instant has less of the fresh-burnt bitterness of Starbucks' regular brew, but has a slightly gritty texture."

    News editor Claire Robinson added, "I tried the medium and bold blends first black and then with milk, which is how I usually take my coffee. I found them both to have a decent normal coffee taste mixed with a funny taste that is not pleasant on the finish.
                                             Beth Pinsker

    Industry experts say the real audience for this product is Europeans who seem to embrace instant coffee a lot more than Americans. According to statistics instant coffee makes up a whopping 40% of European coffee sales. For them, having Starbucks Instant may not seem like quite the disconnect that it has to American coffee drinkers.

    In a very unscientific poll, I asked my LinkedIn and Twitter communities to share their thoughts on whether this product line would be successful.LinkedIn Survey on Starbucks

     If for some reason the product does help the company's bottom line it still doesn't solve a bigger long-term problem for the company ---what does it want to be when it grows up?


    Elana blogs about business culture at FunnyBusiness

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