Starbucks' Instant Grocery Gratification

Starbucks (Nasdaq: SBUX  ) wants its new instant coffee sensation, Via, to fill even more cups. Though the java giant has long positioned its cafes as a cozy "third place" for frazzled consumers, it's now branching out into a "fourth place" most people couldn't avoid if they wanted to: the aisles of your local grocery store.

While Via's surge into supermarkets is no surprise, the sheer retail reach of the company's push might be. By the end of June, numerous mainstream grocers and retailers will offer Via in 37,000 locations, including Target, Costco (Nasdaq: COST  ) , Wal-Mart (NYSE: WMT  ) , Safeway, and even CVS stores.

Such retailers will also form the basis for Starbucks' revitalized push into retail. The company is focused on creating a robust consumer-packaged-goods company, and it plans to market a pipeline of new products through grocery outlets over the next 18 months. That strategy could drive substantial gains: Currently, Starbucks derives 10% of its sales -- but 25% of its operating profit -- from grocery products. Starbucks can expose itself to more consumers than ever this way, while competing with rivals such as Green Mountain Coffee Roasters (Nasdaq: GMCR  ) and Dunkin' Donuts, and instant coffee heavyweights Nestle and Smucker (NYSE: SJM  ) .

True, this huge and seemingly indiscriminate push into grocers on all ends of the spectrum might risk harming Starbucks' brand. But that risk might be small, given Via's success thus far as a homegrown growth initiative. My original concerns that Starbucks' launch of an instant coffee offering could ruin its brand now seem unfounded.

Nonetheless, Starbucks has its work cut out for it. Grocery-store coffee aisles already offer plenty of options, and the original Via launch got an extra evangelical boost from baristas in Starbucks stores. Starbucks plans plenty of marketing around this new push, including coupons, in-store displays and samples, and even one of the company's relatively rare forays into print and TV advertising.

Competitive concerns aside, Starbucks shareholders should rejoice at the company's drive to recruit more Starbucks fans and loyal customers. Adding Via to grocery stores could drum up additional (and sustainable) growth for the coffee giant as it pushes further beyond its cafe-centric consumer reach.

Will Via's presence in grocery stores provide instant gratification for Starbucks? Let us know in the comment box below.

Starbucks and Costco are Motley Fool Stock Advisor selections. Costco and Wal-Mart are Inside Value recommendations. Green Mountain Coffee Roasters is a Rule Breakers pick. The Fool owns shares of Costco. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax owns shares of Starbucks. The Fool has a disclosure policy.


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