Proprietary Technology Enables Company to Reinvent Instant Coffee Experience; Represents Significant Opportunity in $17 Billion Global Soluble Coffee Market
SEATTLE & NEW YORK.- Starbucks (NASDAQ: SBUX) today announced its latest innovation, a transformational instant coffee that replicates the body and flavor of Starbucks® coffee in an instant form.
While some instant coffees use lower-quality coffee beans and add chemicals and by-products, Starbucks VIA™ Ready Brew is 100% natural roasted coffee, made without preservatives. As with all Starbucks® coffee, Starbucks VIA™ Ready Brew is made with the highest quality coffee beans sourced from the top 3 percent of the world’s coffee supply. In developing Starbucks VIA™ Ready Brew, Starbucks developed a proprietary, patent-pending technology to preserve the coffee’s taste, quality and freshness.
“We have worked for nearly 20 years to develop an instant coffee that offers customers the quality and taste they expect from fresh-brewed Starbucks coffee, and a unique and convenient way for them to enjoy it,” said Starbucks chairman, president and ceo Howard Schultz. “This is a big move for us -- the opportunity to reinvent a category, create new rituals and grow our customer base is substantial.”
Added Professor John Quelch of Harvard Business School, and co-author of the best-selling March 2006 HBS case study on Starbucks, “Instant, soluble coffee has long been the unspeakable wasteland of the coffee business. Conventional wisdom would be that no premium brand should go near it. But Howard Schultz’s vision from day one has been to bring quality coffee to the mass market. Starbucks VIA™ Ready Brew continues that effort.” Quelch continued, “Look at the packaging. Taste the product. Starbucks VIA™ is going to redefine and reenergize the instant coffee subcategory. It will offer time-strapped Starbucks loyalists a chance to stretch their dollars and sustain their Starbucks brand consumption frequency. It will also offer non-Starbucks users an affordable entry point into the Starbucks world; after trying Starbucks VIA™, they may want to visit a store for the full Starbucks experience.”
Globally, instant coffee represents 40 percent of coffee sales, which translates into a $17 billion and growing market. Instant coffee sales represent the majority of coffee sales overall in many international markets where Starbucks already has a strong brand presence. For example, in the U.K., 81 percent of coffee sold is instant; in Japan, that figure is 63 percent. Together, these two markets account for over $4 billion in instant coffee retail sales. Even in the U.S., instant coffee is a $700 million market.
In the U.S., 66 billion cups of coffee are consumed each year, with 75 percent brewed at home, and the remainder consumed on the go (e.g. at the office or traveling) or away from home (e.g. coffeehouses). Starbucks share of U.S. at-home coffee consumption is less than 4 percent.
“The coffee consumption landscape is ripe for disruption,” added Schultz. “We’re pleased to have the right product at the right time to take advantage of this opportunity, and will look to learn from customers, experiment with other form factors and consider new sources of revenue for other lines of business.”
Starbucks VIA™ Ready Brew is made by adding hot (or cold) water to a cup, which brews the coffee in an instant. The product is pre-portioned into single-serve packets and will be packaged in books of three or boxes of 12. The suggested retail price for the U.S. will be $2.95 for three and $9.95 for 12, making a great cup of Starbucks® coffee less than $1 each.
The national rollout of Starbucks VIA™ Ready Brew is planned to begin in late Fall 2009, with first availability on March 3 in the Seattle area and in Illinois Starbucks stores. On March 25, select Starbucks stores in London will offer the product. For those in the U.S. who would like to pre-order their product, Starbucks VIA™ Ready Brew will be available exclusively online at http://starbucksVIA.com.
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