This May Be Starbucks Dumbest Move Ever (SBUX)

starbucks

Let me see if I get this VIA challenge right.

Come Friday, Starbucks (Nasdaq: SBUX)
is inviting Canadian coffee fans into its stores for a taste test.
Through Monday, java junkies will be able to sip freshly brewed Pike
Place Roast alongside its new VIA instant-coffee grounds that are stirred into hot water.

“We’re so confident that you won’t be able to tell the difference

between Starbucks VIA and our brewed coffee, we’re inviting customers
into our stores to see if they can tell the difference,” Starbucks CEO
Howard Schultz notes in the event’s press release.

Maybe I slept through business school when taste tests were being
discussed, but I always thought side-by-side comparisons were more
sadistic than masochistic. Why is Starbucks ripping itself? Why is it
belittling its barista-brewed drinks in favor of a much cheaper
solution that doesn’t involve stepping into a Starbucks store?

The more I let it percolate in my noggin, the stupider this “Taste Challenge” becomes.

The fiend is caffeine

Marketing
challenges pit Brand X against Brand Y, but usually they involve a
gutsy upstart attacking an established rival. This year’s collection of
Coca-Cola (NYSE: KO) spots, where the soft-drink titan tries to establish that Coke Zero is comparable to Coke itself, is a rare exception.

However, no one took Coca-Cola to task for the campaign, even when
it made a Super Bowl splash with a Coke Zero commercial that lampooned
its classic Mean Joe Green spot.

Coca-Cola knows what it’s doing, though. Coke Zero isn’t cheaper
than regular Coke. It broadens the market without diminishing the brand.

The same can’t be said for VIA. Why didn’t Starbucks go after the competition?

• It could have targeted premium-coffee rivals Dunkin’ Donuts or Peet’s (Nasdaq: PEET).
• It could have stacked up VIA against the fast-growing barista killer: Green Mountain’s (Nasdaq:GMCR) Keurig single-cup brewers with the K-Cup portion packs.
• Nestle
  (OTC BB: NSRGY.PK) is the global leader in instant coffee. It’s also
  making a splash with its pod-based single-cup Nespresso machines.
  Starbucks could have aimed its comparative punches all over Nestle.

The first point would be a logistical mess for a nationwide taste
test, though it would have delivered an effective fleet of television
commercials. Aiming at the single-cup speedsters would be dangerous,
since Starbucks is hoping to sell VIA packets for about a buck apiece.
K-Cups can be purchased for less than half that amount, and Nestle is
already running attack ads, claiming that Starbucks is four times as
expensive as its Nescafe instant coffee. J.M. Smucker’s (NYSE: SJM)
Folgers also has instant coffee crystals and Arabica singles. Why would
Starbucks give up its home-team luxuries for the crowded road?