February 17, 2009 in Food, Region

Starbucks launching instant coffee in Seattle, Chicago

Associated Press
 
Associated Press photo

Howard Schultz, chairman, president and CEO of Starbucks, speaks during a news conference announcing Starbucks VIA Ready Brew instant coffee Feb. 17, 2009, in New York. Starbucks will begin selling its new instant coffee in Seattle and Chicago next month before rolling it out to all of its U.S. stores in the fall.
(Full-size photo)

NEW YORK — Starbucks Corp. began selling its new instant coffee online Tuesday, ahead of a nationwide launch to coincide with the company’s first major ad campaign.

Customers will be able to buy packets of the new coffee in Starbucks’ Seattle and Chicago stores March 3 and the rest of the company’s U.S. stores in the fall when the advertising begins. Online orders will start shipping in March.

Chief Executive Howard Schultz said the gourmet coffee chain wants to change perceptions of its affordability and the quality of instant coffee.

“This is not your mother’s instant coffee,” Schultz said at an “unveiling” event for analysts and reporters in New York.

Called Via, the water-soluble product sells in packets of three for $2.95 or 12 for $9.95 — $1 or less per cup. Just Colombia and Italian Roast varieties will be available at first, but the company will add others later.

In addition to customers in Starbucks stores, Target Corp. and Costco Wholesale Corp. shoppers in Seattle and Chicago will be able to buy the packets in March.

Schultz said that the new product will help boost traffic in the afternoon and evening hours when customers are more mobile and possibly looking for just one cup of coffee rather than a full pot.

“I don’t know if we’re going to replace the morning ritual,” he said.

First, the company will have to replace the perception that instant coffee is more Maxwell House than coffee house.

“We realize the connotation of instant in America and around the world is an uphill battle,” he said.

To fight that battle, Starbucks is launching its first-ever major advertising campaign, which will include a video on YouTube explaining the difference between Starbucks instant coffee and the old standbys.

The instant coffee, whose existence and launch was confirmed Thursday, has already created a stir among the company’s many followers and critics.

Critics say the move smells of desperation as the chain closes locations in the U.S. and overseas and cuts up to nearly 1,700 jobs.

Andrew Hetzel, the founder of coffee consulting group Cafemakers, said the new product could denigrate the premium positioning that helped create the gourmet coffee industry and made Starbucks the industry leader.

“I see it as being a very short-term approach to a long-term brand problem,” Hetzel said. “To me it looks like a big gamble. They’re throwing things out there to see what hits.”

Even competitors seemed surprised.

Michael McFall, 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 out of everything that they do,” McFall said. “This one I’m having a hard time making sense of.”

Schultz said the company is introducing the instant coffee because the time is right and the product is up to par.

“If we weren’t ready to go, I can assure you we wouldn’t be here today,” Schultz said.

Starbucks has been working on the formula for Via since 1993, but the project had mostly fallen off the radar until Schultz took back his CEO chair last year.

Starbucks shares dropped 48 cents, or 4.7 percent, to close at $9.65, mirroring a fall in the overall market as investors grew more concerned that the recession is worsening.

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