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Two More Threats to the Coffee Crowd

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Starbucks' (Nasdaq: SBUX  ) secret weapon is about to get more ammunition. The coffee giant plans to expand its highly successful Via instant coffee offering with four new flavors, displaying an aggressive competitive spirit that should please its shareholders.

Sometime this fall, java junkies will be able to pick up Via in mocha, vanilla, caramel, and cinnamon flavors. In early 2011, Starbucks will begin the grocery-store rollout for the new flavorful instant coffees, pushing the new iterations with advertising and free-sample promotions.

The flavored coffee market represents $377 million in annual sales, and it's yet another niche that Starbucks can delve into with Via. In addition, the company's own research shows that 60% of its customers drink flavored coffees, making its offerings more likely to entice those java fiends away from rival brews.

Indeed, caffeinated competitors should take notice. Green Mountain Coffee Roasters (Nasdaq: GMCR  ) offers flavored K-Cup coffees for its Keurig one-cup brewers. This also can't bode too well for companies that offer coffee through grocery stores, such as J.M. Smucker's (NYSE: SJM  ) Folgers or Kraft's (NYSE: KFT  ) Maxwell House and General Foods International flavored coffee offerings.

Starbucks' aggressive competitive move also threatens other coffee contenders such as McDonald's (NYSE: MCD  ) , Caribou (Nasdaq: CBOU  ) , and Peet's (Nasdaq: PEET  ) . At some point, all of these companies are duking it out to provide consumers' caffeinated beverages of choice.

Another new threat to java purveyors could give Starbucks an additional edge. Coffee futures prices have been going through the roof, currently nearing a 13-year high. Starbucks has already said it will absorb the added costs instead of passing a price hike to customers, but both Smucker and Kraft have revealed that they will raise prices on their own coffee products by 9% to 10%. Spiking prices for a not-so-premium product may shake some shoppers' old-school brand loyalty, driving them straight into Starbucks' waiting arms.

However tough times may be, only the most unwise companies would dare to mess with people's caffeine. Starbucks is aggressively expanding a product offering that's been wildly successful thus far. The coffee giant really seems to have its caffeinated mojo back as it expands its customer base and reach. Starbucks shareholders should say, "Cheers!"

Starbucks is a Motley Fool Stock Advisor selection. Green Mountain Coffee Roasters is a Motley Fool Rule Breakers choice. Try any of our Foolish newsletter services free for 30 days.

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

Read/Post Comments (1) | Recommend This Article (5)

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  • Report this Comment On August 30, 2010, at 7:25 PM, rfaramir wrote:

    There is plenty of room for innovation, without killing the original. Video may have killed the radio star, but not radio.

    We still use radio, TV, VHS tapes (not for much longer), and CDs, even though we prefer to use DVDs and the internet. Same with coffee.

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