Starbucks unveils Via instant coffee

NEW YORK Tue Feb 17, 2009 3:01pm GMT

The Starbucks sign is seen outside one of its stores in New York July 3, 2008. REUTERS/Chip East

The Starbucks sign is seen outside one of its stores in New York July 3, 2008.

Credit: Reuters/Chip East

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NEW YORK (Reuters) - Starbucks, whose chief executive is trying to fight "misperceptions about affordability" for the coffee chain's brands, unveiled on Tuesday its new Via Ready Brew instant coffee that sells for less than $1 (70 pence) per cup.

The latest move from the Seattle company, which grew rapidly by selling pricy lattes and other "affordable luxuries," is another example of how management has changed course since its business succumbed to overexpansion and the world tumbled into recession.

Starbucks now hopes that Via will expand its reach in the $17 billion global coffee market by appealing to travellers, campers, home coffee brewers and other coffee lovers who have their coffee outside one of the company's 12,000 global cafes.

The company, which recently announced another round of store closures and job cuts, will begin selling Via next month in select markets in the United States and in London. A trio of single-serve Via packets will sell for $2.95 in the U.S. and 12 packets will be priced at $9.95.

"The coffee consumption landscape is ripe for disruption," Starbucks Chief Executive Howard Schultz said in a statement. "This is a big move for us - an opportunity to reinvent a category, create new rituals and grow our customer base."

Its latest move would pit Via against best-selling instant coffee brands like Nestle's Nescafe and Kraft Foods' Sanka. Kraft distributes products for Starbucks.

At the same time, the company faces mounting competition from rivals who are doing a good job of weathering the economic storm.

Fast-food leader McDonald's Corp is rolling out its McCafe espresso drinks. Panera Bread Co, which has offered new coffee and breakfast items, plans to test steel-cut oatmeal after Starbucks' instant oatmeal found success.

STRONG MARKETS IN UK, JAPAN

Instant coffee is not exceptionally popular in Starbucks' key U.S. market, but Starbucks said it accounts for about 40 percent of coffee sales outside the United States.

To that end, Starbucks said instant coffee accounts for 81 percent of coffee sold in the United Kingdom and 63 percent of coffee sales in Japan. Starbucks has stores in both of those markets.

Since its U.S. business started slowing in late 2007, Starbucks has made plans to shutter about 1,000 stores worldwide, revamped its breakfast menu, announced discounted breakfast combinations, introduced new smoothies and other drinks, and rolled out loyalty and discount programs.

Starbucks already sells bags of ground coffee, prepared drinks and some branded food items through grocery stores in the United States and certain overseas markets.

In January, Schultz told analysts that Starbucks is increasingly viewing its consumer packaged business as central to its business strategy.

(Editing by Dave Zimmerman)

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