Tuesday, May 04, 2010

Starbucks Mounts Major Grocery Push
WSJ APRIL 30, 2010


I think this is a very interesting example of brand extension and all the issues involved.

"Starbucks is rolling out Via instant coffee—so far sold only in its own shops and a couple of retail chains—to tens of thousands of supermarkets, mass merchandisers and other outlets in coming weeks. The product's migration from coffee counter to grocery aisle reflects one of the food industry's hottest trends: putting more restaurant brands like California Pizza Kitchen and P.F. Chang's China Bistro into grocery aisles.....

..."It's an intriguing question how far Starbucks the coffee shop can morph into Starbucks the brand," said Sharon Zackfia, an analyst who follows the company for William Blair & Co. in Chicago. The strategy "bears some risk. And Howard does strike out sometimes. But he also hits home runs," she said. Ms. Zackfia owns some Starbucks stock.
(a relatively highly risk venture that suggests the current Starbucks model has limited growth potential)

,,,But Via will have to prove itself in the grocery aisles. Its debut in Starbucks coffee shops last fall helped reverse a year-long string of same-store sales declines at the company. But that success also reflected an aggressive push from baristas inside Starbucks coffee shops, where the company handed out samples and staged taste tests....
Without that advantage inside supermarkets, Starbucks plans to distribute coupons, purchase in-store displays and hire people to hand out samples. It will also unleash a larger television and print advertising campaign than what it launched amid Via's coffee-shop debut last autumn
.(issues of marketing in the new market segment)....

(What you do yourself vs. forming alliances to handle very new challenges is critical) In selling Via out of supermarkets, Starbucks faces a new challenge. To sell its coffee beans and bottled frappuccinos out of grocery stores, it struck up joint ventures with well-established consumer-goods brands: Kraft Foods Inc. and PepsiCo. But for Via it is acting as its own distributor, a strategy that could backfire if it fails to adequately manage supply and demand.
But Mr. Schultz says Starbucks has built the infrastructure to handle that distribution. And analysts note that the strategy could leave Starbucks with a greater share of profits.
(unproven territory)"

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