Wednesday, October 07, 2009

Starbucks: it's not about the coffee!

The debate rages about Starbucks' new instant coffee. I think the debate about the taste actually misses the point. The firm insists that it tastes great. Even if we grant them that point (which some would not), there is still the strategic question. Is this good good for the brand? Eric Felten makes a great point in the Wall Street Journal.

He points out that the instant product is a bit if a contradiction, a mismatch, for the firm, "not because it offends the palate but because it has no romance, it requires none of the effort that demonstrates enthusiasm and passion." In short, Starbucks was always about far more than the taste of the coffee. It was about an atmosphere, an emotion, an experience.

Of course, it's been a long time since Starbucks abandoned the firm's original positioning as a specialty premium differentiated coffee company. It became a mass market coffee company with less and less differentiation from other coffee companies over time. It lost the exclusivity of a luxury brand many moons ago. So perhaps the horse is long out of the barn. At this point there just isn't much that Starbucks won't do in pursuit of growth. Michael Porter argues great strategies require tradeoffs. They become unique by choosing what not to do. Tradeoffs make firms unique and hard to imitate. Yet tradeoffs limit growth to some extent. Many firms violate their original tradeoffs in pursuit of growth. Has Starbucks done that, and in so doing, become far less unique and differentiated?


Brian said...
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Brian said...

Starbucks abadoned their strategy a long time ago. Howard Shultz originally envisioned a "third stop" in addition to home and work where patrons would be personally greeted and build community. Ironic that while those communities are being built virtually on the Internet, the face-to-face community envisioned by Shultz has been undermined by the company's wide and rapid expansion. Starbucks has become to coffee what McDonalds is to hamburgers. Not that there's anything wrong with that! Essentially, the original strategy opened an opportunity for a bigger, and more lucrative, strategy. Expanding the brand into instant coffee makes perfect sense under the new reality.

Marissa said...

Since I never acquired a taste for Starbucks, I found it hard to believe that everyone that drank Starbucks really enjoyed it. I reasoned that Starbucks tapped into the high-end consumer profile, people who wanted the prestige associated with the more expensive drink. During a tightening economy, the number of such consumers dwindled away. Instead, they are consuming less expensive coffee on the run, or brewing their own (good heaven's!)

Will Starbucks ever get them back?

(Great blog, Mike!)

Michael Roberto said...

I would be very interested to see how many people drank normal brewed coffee at Starbucks prior to the recession, Marissa. It would be interesting to see their % of sales by product category... I may check out the 10K to see what I can find out.

Anonymous said...

It wasn't so long ago that Taster's Choice, Folgers or Nescafe instant coffee was the coffee drink of choice.

Starbucks presented itself as superior to anything that could be prepared easily at home or work.

Now they're telling customers that instant is just as good.

So why wouldn't people go back to Taster's Choice? It's a whole lot cheaper in the age of austerity.

Come to think of it, it did taste pretty good...

Time to head over to the A&P.

moylan7 said...
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moylan7 said...

Previous comment in practice.

About a month ago I walked into my local Starbuck's and saw a prominent display for Starbuck's instant coffee. I smiled as I thought back to our class discussions of Starbuck's diluted strategy and thought, is this rock bottom? Well I’m not sure if it is but I bought some and it was pretty good… next week I thought to myself it was kind of expensive to buy instant coffee individually wrapped and from Starbucks. I now have a 200 serving size container of Folgers instant coffee and haven’t been back to Starbuck's since.

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