Why Starbucks' VIA Instant Coffee is Bigger Than Frappuccino
Starbucks (SBUX) proved skeptics wrong about its foray into single-serve instant coffee, VIA. The little packets hit $100 million in sales in 10 months flat, a milestone VIA achieved three times faster than did its better-known, sexier Frappuccinos.
Some retail-watchers --including my BNET colleaue Steve Tobak -- thought Starbucks was crazy to get into instant coffee. Starbucks will compete with its own fresh-brewed coffee and erode coffeehouse sales! It'll be associated with the low-quality instant category, better known as foul grandpa-coffee!
But instead, American caffeine addicts snapped up VIA like mad. Starbucks' little coffee "pods" popped up in 30,000 locations and captured 30 percent of the premium, single-serve coffee market. Here's why VIA proved a breakout hit for the Seattle latte giant:
- Affordability. If a pricey latte is the ultimate in affordable luxury, a single-serving coffee that's still good-tasting but less than $1 a cup is a perfect fit for the Great Recession era. It probably planned the launch before the economy crash, but Starbucks' launch timing proved fortuitous. Cash-strapped Starbucks store customers could now trade down to VIA rather than abandoning the brand altogether.
- Relationships. Starbucks already has relationships with many grocery stores and other potential outlets for VIA, due to selling bagged Starbucks coffee, ice cream and other related treats in stores. The company added more contacts as it sought new outlets for its Seattle's Best Coffee brand. So when VIA came along, Starbucks already had a deep rolodex to use in finding retail partners. That advantage allowed for rapid expansion and quick dominance of the category.
- Trendspotting. Better-tasting single-serving coffee (and the fancy home equipment that brews it) has been big overseas for a long time. Just as Starbucks president, CEO and chairman Howard Schultz did in molding the original Starbucks concept from European coffeehouses he'd seen, the company saw upscale single-serve's overseas popularity and realized Starbucks could jump into the category and take a leading position before competitors got wise.
- Positioning. Starbucks did a careful job in packaging and marketing VIA to make sure customers understood this product didn't mean Starbucks was coming down a notch in quality. Instead, it meant Starbucks was bringing its quality standards to another, more affordable coffee niche. By stressing words such as "Colombia" and "Italian" in its VIA coffee names, the company kept telegraphing its high-end position to customers.
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