Summary
Annual worldwide Instant Coffee sales total about a $21 Billion, or about 40% of overall annual world coffee consumption. In the US, annual instant coffee sales total about $700 million. Starbucks presently has a 4% share of the $8 Billion US "At -Home" market. Research Indicates most consumers associate instant coffee with poor quality and taste. This article examines the implications upon Starbucks overall Brand positioning, of it's recently announced entry into the instant coffee market.
Analysis
Coffee is indeed a very substantial consumer product category with a worldwide annual sales value of about $52 Billion. About 40% or $21 Billion of this falls in the Instant category. In many countries other than the US, Instant is the primary form of consumption. The Instant share in the UK is 81%; in Japan 63%. In the US, Instant consumption represents only 9% of the total market.
The US total annual consumption is about 66 Billion cups, of which 75% are brewed at home, and 25% on the go. Long term coffee consumption trends are down. Fifty Years ago about 80% of the US population over 18 years of age consumed coffee on a daily basis, versus about 55% over the last several years. However, among the heavy users, frequency has trended up slightly. Coffee in the US market is a mature category, dominated by a few very large package goods manufacturers, with competition for the most part focused on pricing.
'Practically Edible", the web’s biggest food encyclopedia describes instant coffee as a "White Trash" product that is a general indicator regarding those who drink it as possessing a complete lack of taste about anything. While this seems to be an overstatement, it is clear that in the US market Instant is generally considered to be inferior and of much lower quality than fresh ground coffee, whether to brew at or away from home.
On Feb 17 2009, Starbucks announced their intention to roll out a "transformational" new instant coffee product, VIA that they claim has a taste profile and that is indistinguishable from the drip brews sold fresh in their stores. After introducing VIA in several European markets, and six months of limited distribution in a few US test markets, in late September Via was rolled out with much fanfare into all of the coffee giants US company operated stores, as well as 1500 other retail store locations, including REI and Office Depot. Future announced plans include Supermarket distribution slated to begin sometime in 2010.
Starbucks has invested enormously to achieve and maintain the general perception among consumers as having high quality products, friendly and knowledgeable baristas and pleasant and attractive stores that together constitute the "Starbucks Experience". Reasonable concerns have been raised among analysts and industry pundits questioning Starbucks decision to enter the Instant market, perhaps risking damage to the Brand, and for a category that represents a relatively small segment of the overall coffee market.
