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Wed, Sep 30, 2009 - Page 10 News List

Starbucks rolls out Via instant coffee in the US

AP , CHICAGO

The company that added “venti” and “frappuccino” to American vocabularies is making a push throughout North America to convince connoisseurs to sample what many see as a down-market drink — instant coffee.

Nearly eight months after Starbucks Corp began selling its Via instant coffee in Seattle and Chicago, the company was yesterday to begin offering the dissolvable drink to the rest of the country and in its Canadian stores.

Backed by the company’s first-ever television ads, along with large-scale distribution to about 1,500 sites outside its stores, the Via launch shows just how determined Starbucks is to own a stake in the US$21 billion worldwide instant coffee market.

PERFORMING IN THE CUP

“Based on the success we’ve had, we feel strongly that we’re sitting on a very big opportunity,” Starbucks CEO Howard Schultz said during a conference call with journalists. “What’s going to sell Via at the end of the day is that [it] delivers in the cup. Most people will not be able to tell the difference.”

While instant coffee is pervasive throughout Europe — accounting for as much as 80 percent of coffee sales in the UK — the insta-brews haven’t won over US taste buds, in large part because of their image as an inferior knock-off of drip-brewed beverages.

But it’s that perception that Starbucks executives are trying to change. They hope the skinny cylindrical three-packs (US$2.95) and 12-packs (US$9.95) of coffee that dissolve in water will eventually be as prevalent on store shelves as its packaged coffee is now. The coffee is available in Colombia and Italian Roast flavors, and more varieties are expected to be introduced in the future.

While experts see opportunity for Starbucks, they also see challenges.

Bob Goldin, an analyst at the Chicago-based food consultant Technomic Inc, said Starbucks faces twin hurdles of perception and price.

The Starbucks instant comes in just shy of US$1 a cup, compared with the pennies it costs for a cup of home-brewed joe.

Executives wouldn’t release data on how Via has performed during its eight months on the market, but said early sales in the two US cities — as well as in London — have exceeded expectations.

Among the surprises so far are the various uses of the drink discovered by consumers, executives said. Some people are buying the ground coffee to cook and bake with, while others are mixing it with cold water or milk. Schultz said it was also being bought by teachers to keep in lunchrooms and desks and by physicians who want a quick cup of coffee in a hospital.

FINANCIAL SWAGGER

The introduction of Via comes at a particularly trying time for Starbucks, which has seen its revenue slide for the last three consecutive quarters. Meanwhile, profits have fallen in five out of the past six quarters.

Hit by increasing competition and a recession that has caused caffeine addicts to switch to cheaper drinks, the gourmet chain has also had to close hundreds of stores and lay off workers as it tries to regain its financial swagger.

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