Tuesday, September 29, 2009

Starbucks Instant Coffee

The Starbucks Company calls their instant coffee product "Via," and is test-selling the coffee in select US cities.   Via is a "road" to destruction, in my view.

I don't get it. In the last five years the Starbucks brand has been diluted with bad coffee, bad sandwiches, and lower quality pastries. They did have a good thing going with their music until iTunes came along. But that's not Starbucks' fault. What is their fault is the decline in their coffee quality, Pike's Place, and now further dilution of the brand with Via.

Starbucks has a shareholder problem.The value of the shares steadily increased since the issuing the of IPO in 1992. Until recently. The shares peaked at around $40, declined to $10 a few years ago, and are now inching back up to about $20 per share. Understandably, large shareholders hate to see their investments diminish. And they know that the only way back up is to expand, to sell more of the current product, or to create more products to sell. They have done about about all the US expansion they can do, they have a bigger menu in the stores than they need, so what's left?

Instant coffee? Yuuuchh. Fire the brain-child that dreamed this up.

It may work, sure, because it is still "cashing in" on the mystique of the name, but what happens 10 years from now when the Starbucks name is synonymous with Folgers or Maxwell House. Imagine saying to someone, "let's meet at the Folgers store." Instant coffee is short-sighted growth and killing the image goose that lays the golden eggs.

I have a suggestion. How about making a really good cup of coffee? Every cup, every customer, every time someone walks in the store.


RJG said...

As I've stated a few times on my blog, publicly traded companies and food quality do not mix. A company on the open market has only one goal - to increase the stock value for its shareholders. That is absolutely the bottom line. To provide great returns. One can argue that a better product will indeed lead to these goals. While that concept has a chance to hold true for technology companies (as an example), food is too easy to copy and whatever initial invention is achieved, there is immediate competition that plagiarizes the concept. There's a point of diminishing returns for all public companies in the food space. Either quality is sacrificed or profits are sacrificed. If it's the latter, it will soon be de-listed, and the CEO will be fired. Once organic growth can no longer be achieved or sustained, cost cutting has to take hold. While this can also happen to a Mom and Pop, they at least have the option to take less profits in the name of quality. Publicly traded companies do not have the option.

It's a shame to see Starbucks going lower and lower. For me, they were (not anymore though) the gold standard, despite my misgivings for traded companies in the space. This is something I wouldn't come close to saying about restaurants like McDonalds, Taco Bell and Olive Garden.

Francis Shivone said...

Thanks RJG. "Food" for thought.

I guess I'm torn between between my respect for a company like McDonald's, which pretty much created franchising, thereby increasing the wealth of many Americans, provides respectable quality at a fair price -- and the fact that a publicly traded company has to look at this quarter's returns.

For years I said that Starbucks proves that quality at a fair price can be a very profitable model for the food business. I still think that is true, at least potentially. Their move towards the inexpensive, low quality product cashes in on the image they have spent 20 years building. It's short sighted.

If you are ever in Philly -- go to La Colombe. Their coffee brand, their store, and the customers line up all day long.

Of course, it's not publicly traded either.

Victor Shivone said...

Funny. I laugh at the comment about goint to meet at the folgers coffee house. I think I would just stop drinking coffee. Maybe I would suffer the eye stabbing taste of instant coffee in order to injest some caffiene, for a buzz. I would have to be desperate though, like on a 30 mile 3 day backpacking trip, when I would consider drinking many things that I wouldn't normally drink. Maybe it is based on price? How cheap would clam juice have to be in order to sell it. That's it, maybe if they pay me two bucks if I'm driving by a Starbucks I'd stop by collect my two bucks, take a couple of sips, then throw it in the trash can once outside.

Lynn said...

I got a respectable chicken tarragon sandwich recently at Starbucks. Not brilliant, but tasty, filling, and not obscenely expensive. And last night I had a ginormous oatmeal cookie studded with golden raisins, regular raisins, and cranberry bits. Maybe it was a fluke, but it was *almost* as good as I would have made at home. And I am a mighty fine baker. [Very glad to see that they have done away with the iced sugar cookies whose frosting tastes like wax...]

Francis Shivone said...

Lynn -- yes I think you are correct in saying that some of their food items are good. Some of the baked goods, anyway. I can't say I have ever had a decent sandwich there. I still like their Sumatra coffee but don't find it often enough. Thanks for the comment.

Jake Good said...

From what I'm hearing, I would imagine that nobody on this blog has refined enough palate to tell the difference.

I haven't tried it myself *yet* but hell, I french press 90% of my coffee anyway...

Sara said...

I agree. I've been disappointed with Starbucks ever since Pike Place Roast became their daily coffee. It tastes old and burned.

Francis Shivone said...

Jake, my friend, I am going to test your theory tomorrow. If I can't guess the instant coffee I'll buy you and Becca a Yogolait. I think I'll be able to know without tasting, but we shall see.