February 13, 2011

Starbucks Working on Single Serve Product: Confirmed

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The Chicago Tribune confirmed recently that Starbucks is working to bring a single serve coffee/espresso product to the marketplace. The question will be what is it and what form will it take?

Espresso Based?

Starbucks at its heart is an espresso drinks company. Will the single serve product be a capsule based system like a Nespresso? If it is, they will need to make the appealing part of the espresso drinks easy to make. Most Starbucks drinkers want a milk-based drink, and most won't want to steam milk. So the solution may be a Nescafe Dolce Gusto type machine where the whole process is self contained makes sense for them.

Drip Coffee Based?

If Starbucks wants to make volume inroads into the grocery channel they will want to deliver drip coffee; the type of coffee most Americans drink. This means a K-Cup type product (non-pressurized/low pressure), maybe even K-Cups themselves. Paying royalties for the next year or two until Keurig patents start running out might be the most attractive proposition given the large installed base of machines in the US.

Regardless, the launch will certainly be in Starbucks Cafes and in the Grocery Channel. Separating from Kraft is all about the grocery channel and the ability for Starbucks to control its distribution and its feature and display better. The other not so subtle reason is that they may need to separate in order to push the a new non-Kraft single serve coffee product.

The Starbucks Via launch appears to be doing well, mostly on the back of the cafe volume - from what I can tell the volume through the grocery stores I visit is minimal at best (the Via Packages have dust on them). Starbucks is going to have to work hard to push the new product in grocery to overcome the barriers they see with Via. Picking a standard like a K-Cup would make it easy for grocery and consumers to understand the product and buy it.

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Posted by Scott Martin at February 13, 2011 9:27 AM
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