Starbucks pinning hopes on Via

Starbucks will aggressively expand its instant-coffee product into grocery stores this year.

By Kim Peterson Apr 23, 2010 2:39PM

Coffee shops © CorbisStarbucks (SBUX) is back on track, recently reporting a better-than-expected quarter that showed customers are returning to stores and spending more money.

Starbucks also gave us a glimpse of another weapon in its arsenal, one that could prove to be a major business driver moving forward: Via instant coffee.

We tend to crinkle our noses at the idea of instant coffee in the U.S., but the product is better received elsewhere in the world. So Starbucks is taking Via global, and recently launched it in Japan -- the world's biggest instant-coffee market.

Japan is a prize for Starbucks. The at-home coffee market there is $5 billion, and half of that is instant. There hasn't been much innovation in instant coffee there in more than 50 years, chief executive Howard Schultz said this week in the company's quarterly earnings call.

"Via has been a huge hit in Japan, and we have significantly overperformed against our sales projections," he said. "We are convinced we have a big winner with Via in Japan."


Post continues after video:

Starbucks wants Via to become a billion-dollar business. That would equal about 10% of its total 2009 sales. So, focus all you want on the competition between Starbucks and McDonald's (MCD). Via, meanwhile, is blowing up.

Key to Via's success will be its placement in grocery stores, both in the U.S. and abroad. Via is only six months old, after all, and is just in the early stages of distribution. Starbucks is hoping to get Via into 30,000 locations by September.

Starbucks is pouring its energy into Via's expansion into U.S. grocery stores this year, and plans a nationwide print and broadcast advertising campaign.
Via played a key role in the increases in both sales and operating income Starbucks saw in its second quarter (which ended March 28). In the global consumer products group, total net revenue rose 4%, while operating income jumped by 8%.

Right now, Starbucks expects Via to slightly contribute to its full-year profit (the company isn't giving out specific Via numbers, however). The aggressive launch into grocery stores should only help.

Here's a little perspective on Via's potential: The global instant-coffee market is $23 billion. Only $1 billion of that comes from North America.

So look at Via's U.S. expansion this year as an experiment of sorts to see what works and what doesn't with grocery-store distribution. If Starbucks blows it in the U.S., eh, no biggie. Starbucks will take what it has learned and move into international stores, where the real money is to be made with instant coffee.

"Via is not a product or a promotion," Schultz said in the earnings call. "It is a significant new platform for the company."

Related reading:
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124 rated 1
266 rated 2
452 rated 3
702 rated 4
671 rated 5
604 rated 6
640 rated 7
495 rated 8
267 rated 9
158 rated 10

Top Picks




Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.