The war over an instant

Originally published June 5, 2009

By Ian Sherr

There‘s a point in every Star Wars film when the good guy inevitably turns to his buddies and says, “I‘ve got a bad feeling about this,” right before all the big explosions begin.

One can only imagine that is what Nescafe was thinking when they saw Starbucks‘ VIA instant coffee mix arrive in Chicago, Seattle and London. After all, Nescafe is nearly synonymous with instant coffee.

So, what is Starbucks thinking?

While the United States is mostly a brewing country, 80 percent of people in the United Kingdom who drink coffee use instant. The numbers are even more dramatic the further east you go. So, it stands to reason that with Starbucks seeing fewer customers thanks to a deepening recession, some innovation is in order. VIA was in development for the past 16 years and Starbucks felt now was the time to unleash the beast.

“We wanted it to be perfect and to mirror the perfectly brewed coffee experience at a Starbucks,“ said company spokeswoman Lara Wyss.

But Nescafe isn‘t going to let this one go without a fight, deploying anti-VIA advertising on bus stops and even in handouts at local street fairs here in Chi-town. Their weapon of choice? Economics.

“Did you know you can get all five of these rich and delicious flavors for the cost of one Starbucks VIA?” Nescafe‘s five-flavor-sampler pack asks. “And that‘s without this coupon.”

Despite such money-focused advertising, William Blair analyst Sharon Zackfia said a price comparison is hardly necessary.

“Almost everything in instant coffee is less expensive than VIA,” she said. The real issue instead is much simpler: “I‘m sure Nescafe is eager to defend their turf.”

The instant coffee market is not only tremendously large outside the United States, but also tremendously lucrative — estimated at $17 billion in worldwide sales, according to industry analysts. That‘s a lot of potential packets of VIA.

So, Nescafe is piggybacking on VIA‘s headlines to show off its brand pride.

“We know instant coffee‘s been in the news a lot lately, so we just wanted our communications to remind people that with Nescafe they can have a great tasting high quality cup of coffee with a wide variety of blends and flavors at a great taste,” said company spokeswoman Pamela Krebs.

It seems Nescafe has fired the first shot in what promises to be a rather interesting rivalry. It is too early to tell whether Starbucks will respond with its huge brand power and marketing budget. But for now, VIA is only in test markets.

(Photos by Ian Sherr)

(By Ian Sherr. Published June 5, 2009 on the Reuters Shop-Talk blog, found here)