I was a Starbucks addict during my MBA year in Madrid -- there were a couple of Starbucks coffee shops next to IE Business School, so myself and my MBA colleagues often spent hours there, drinking coffee and analyzing business cases. The coffee we drank was, well, normal, freshly brewed coffee, Starbucks style. It was much more expensive than the usually excellent cafe con leche served at madrileño cofee shops. But at Starbucks, we could sit in a smoke-free environment, and nobody kicked us out for hanging out there for several hours in a row, so it was okay to pay a premium for the coffee.
After graduation, I moved from Madrid to Brussels, where there's no Starbucks (although I think they've just opened one shop at the Brussels airport). What reminded me about the brand was a recent explosion of articles in the news, mostly related to the launch of an instant coffee brand, called Starbucks Via. It was launched in the March 2009 in the UK and created a lot of buzz around it, and a great deal of (often negative) analysis by marketing experts.
Most of the criticism is about Starbucks downgrading its brand by introducing a product -- instant coffee -- whose quality is perceived as low, no matter the brand association.
Line extensions like launch of Starbucks Via are a way to break into new segments while capitalizing on the strength of the existing "mother" brand. Line extensions occur when a company "introduces additional items in a given product category under the same brand name, such as new flavours, forms, colours, ingredients or package sizes." (Principles of Marketing, P. Kotler, 2002, p. 478). Reasoning behind introducing a line extension can be often quite complex, and purposes can be various, too.
In case of Starbucks Via, the reasons may be these:
- Starbucks's wish to tap into the UK market where instant coffee doesn't have a negative stigma and is consumed by many;
- Adapting to the recession: offering people instant Starbucks experiences at home, for a price that is lower than a regular cup of latte served at a Starbucks shop.
The main advantages of introducing Starbucks Via:
- Introducing a new instant coffee brand in the nation (UK) that is used to drinking instant coffee seems like a good idea. I am not sure though that launching Starbucks Via also in the US follows the same logic (unless I've somehow missed the fact that Americans are fans of instant coffee), and I doubt it will be very successful there.
- Offering a lower-priced product in the same product category is a much better way of surviving the recession and staying profitable than lowering prices of your high-end products and trashing your overall brand. (I wrote about this in my article Recession and Luxury Brands: the end of fun? warning luxury brands about long-terms effects of short-term price drops). Unfortunately, this is something I understand Starbucks has started doing in response to criticisms that their coffees are too expensive -- dropping prices of some of their core "lattes". Obviously, dropping a price of a cup of coffee by a couple of cents is not the same as dropping the price of a luxury bag by several hundreds of dollars, but continuous price cuts could turn Starbucks coffee into Dunkin Donuts coffee, and this is not the direction that the brand should be taking.
The biggest challenge that Starbucks is facing with its Via launch is probably this: how to make Via popular, but not too popular, so that it doesn't cannibalize the coffee brewed and served at Starbucks shops. To me, Starbucks is all about slow, meditative coffee-sipping experiences. If the company manages to incorporate an element of "experience", "relaxation" and the aspect of "hanging out" into its instant coffee, while concentrating on markets that are used to instant coffee consumption, it will probably have some success with its instant Starbucks Via brand.
Got another example of line extensions? Post a comment!