Starbucks Bets On Instant Karma

If you want to know how serious Starbucks (SBUX) is about marketing Via, the new instant-coffee it is rolling out this week in the United States and Canada, consider that the company is actually running television commercials for the product.

Starbucks has rarely shelled out for TV time, relying instead on print ads and online media. The company is doing that, too, in a marketing offensive so large that it could be interpreted as an act of desperation. Not that you could blame Starbucks for being desperate, given its performance over the past few years.

For all the home-country hoopla, Starbucks will—eventually—be aiming Via mostly at the rest of the world, where people drink a lot more instant coffee than they do in North America. Worldwide (including the United States, where most people drink brewed coffee), instant coffee makes up 40 percent of the total coffee market, and generates $17 billion in annual sales. In some markets, particularly in parts of Europe and Asia, most of the coffee consumed is instant.

Starbucks has not yet managed to get distribution in traditional grocery stores. Besides Starbucks outlets, the product will be available in unusual locations such as the sporting-goods retailer REI, Office Depot (ODP), Barnes & Noble (BN), as well as on United Airline flights and in some hotels. It will also be available at Target and Costco stores.

In what seems to be a major problem, Advertising Age reports that Starbucks is still negotiating with major grocers to have Via displayed not alongside its competitors such as Nestle's Nescafe and Taster's Choice but alongside Starbucks' own fresh beans.

That problem makes for a fine illustration of the marketing challenge Starbucks faces with Via. It is charging a hefty premium over competing brands (something that Nestle has made sure to point out in its defensive advertising campaign), but it is also trying to position it as a cheaper alternative to brewed coffee. Marketing a product as both premium and affordable is a delicate dance.