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Starbucks Tries Instant Gratification


But can it make instant coffee highbrow?

Starbucks (SBUX), purveyor of lattes to the masses, plans to offer instant coffee next month.

Today's study question: Will this extend the brand or destroy it?

Starbucks plans to charge $2.95 for a pack of 3 Via instant coffees and $9.95 for a pack of 12.

Instant coffee has a reputation for poor quality and so-so taste. The move may be a nod to the recession, but it also embraces what Starbucks calls a "significant opportunity" in the $17 billion global market for instant coffee.

Starbucks plans to introduce the new product at "exclusive events" next week in New York and other cities. But no matter how much the company repeats the word "exclusive" and jabbers about price points, instant coffee appears to undercut its hand-crafted yuppie image. How many aspiring poets, musicians and philosophers will go to Starbucks to think profound thoughts and guzzle instant coffee? And do participants in the company's customer-rewards program receive full credit for a cup of instant coffee?

Instant coffee has a strong bias to overcome, recession or no. Starbucks says the prototype for its new instant coffee was first made in 1993 by Don Valencia, a now-deceased worker who headed the company's early product-development efforts. Valencia's initial efforts were popular among traveling executives who couldn't get a Starbucks' white chocolate mocha in their godforsaken destination. Executives quickly dubbed the new product "JAWS" - for Just Add Water and Stir, the Wall Street Journal reports.

That's a great yarn, but are we to believe that Starbucks has spent more than a decade researching the art of instant coffee? The move looks desperate, especially for a company that sometimes appears to have lost its way.

Nevertheless, it's also the latest chapter in the company's ongoing effort to remake itself. Sales started to slow in 2007; Starbucks responded by closing about 1,000 stores, cutting staff and re-jiggering its menu.

Quality hasn't consistently matched Starbucks' lofty prices or self-important image. Consumer Reports magazine hired trained testers to sample a medium cup of black coffee from McDonald's, Burger King, Dunkin' Donuts and Starbucks. McDonald's "beat the rest," the magazine said. Coffee from the Golden Arches was "decent and moderately strong." And the price is right, especially now that consumers are pinched by the recession.

The cross-market coffee wars continue to rage in Cambridge, Massachusetts where Dunkin' Donuts is making converts among students at MIT and Harvard. As part of its effort to grab an upscale market, Dunkin' Donuts now offers health food, such as low-calorie sandwiches made with egg whites.

Coffee aficionados can take heart: Peet's Coffee & Tea (PEET) remains keeper of the flame in the upscale coffee market, even if it does also sell through national grocery chains.

Hey, you've got to believe in something.
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