Starbucks says it will start selling a decaf version of its Via instant coffee in the United States on Nov 17.

The coffee chain, which in the middle of a corporate turnaround, hopes that Via will help it grab a big piece the $21 billion instant coffee market from established players like Nestle’s Nescafe and Kraft Foods Inc’s Sanka.

Borrowing from the old Pepsi vs. Coke taste challenges, Starbucks baristas for four days invited customers to do side-by-side comparisons of Via and its regular brew.

Starbucks says early indicators show that Via is exceeding expectations with regard to sales and customer and employee response.

How did Via fare versus your own expectations?

(Photo/Starbucks)

In its battle to end the myth of the $4 Starbucks coffee — the world’s biggest cafe chain is offering tips on how to save money in its cafes, which are lowering prices on some beverages as they battle market newcomer McDonald’s.

Here are some tips from Susan Nodilo, manager of a popular Starbucks in West Hollywood.

1. Bring your own cup and save 10 cents — and the environment.

2. Order a smaller, unadvertised “Short” (8-ounce) espresso drink, which costs less than a “Tall” 12-ounce drinks, but contains the same amount of espresso.

3. Short on cash, but in love with lattes? Substituting brewed coffee for espresso saves an average of 85 cents per drink.

4. Try a French press. Coffee served in a press costs around $3. Each press yields four 8-oz cups and costs less than two 16-ounce “Grande” drip coffees.

5. Finally, she said, Starbucks’ food and beverage prices include California taxes — so those drinks from competitors may be pricier than you think.

(Photo\Reuters)

Starbucks Chief Financial Officer Troy Alstead earlier this week had some good news for its fans in places like Baton Rouge, Louisiana, Mobile, Alabama, and El Segundo, California.

Alstead said Starbucks removed 30 stores from its hit list of store closures, saying that each of the saved stores had improved profitability to a point where it made sense to keep them open.

Here’s the full list.

Alstead’s full comments are here.

(Reuters photo of Southern California store targeted for closure)

By Laura Isensee

On her way to work in downtown Los Angeles, banker Teresa Roman recently picked up a large iced vanilla coffee. Her cup had no green mermaid, the iconic Starbucks symbol. Instead, it displayed McDonald’s famed golden arches.

Roman switched from Starbucks iced coffee to McDonald’s when the fast-food giant started selling lattes, mochas and cappuccinos as part of its McCafe beverage expansion that launched officially earlier this year.

One would think the move from McDonald’s would be disasterious for Starbucks, which already had been slashing costs and closing stores after overbuilding during the real estate boom. But for all the angst over McDonald’s noisy entry into Starbucks territory, it doesn’t seem like Roman’s behavior is the norm.

Information from coffee drinkers, analysts and data suggest that McDonald’s and Starbucks are appealing to very different customers.

As part of our reporting, we talked with caffeine-starved workers in downtown Los Angeles. They said they chose their joe based on a variety of factors ranging from convenience and price to taste. 

“It’s not about saving money. It’s about an alternative taste,” said Stova Wong, who picked up a medium regular coffee - three creams, one sugar - at McDonald’s before heading to work in the IT department at a law firm. He now splits his coffee habit evenly between Starbucks, McDonald’s and mom and pop shops.

“McDonald’s coffee is not as dark, but it still provides a good level of coffee taste,” Wong said.

Lawyer Mindy Kay has noticed McDonald’s big advertsing blitz. “It hasn’t made me drink more or less. I did try some of their drinks but I mostly stick to regular coffee … I see McDonald’s first and foremost as a fast food restaurant where I can get good coffee.”

Eric Stevens, a 24-year-old summer associate at a law firm, has been drinking Starbucks coffee nearly every weekday this summer.

“I drink Starbucks mostly out of convenience if the location is close,” Stevens said. The cafe is located in the basement of the building where he works. 

Starbucks is his drink of choice for now. He’s never tried brews from McDonald’s, which is only two doors down, but his favorite coffee is from Peet’s Coffee & Tea. Catch what he has to say in this video:

Starbucks Chief Executive Howard Schultz says the coffee chain now pays almost as much for employee health care as it does for coffee beans, so the company long-known for its generous health benefits will begin passing more of those costs to employees.

The news from Starbucks comes amid skyrocketing U.S. health-care costs that are forcing American companies large and small to hike employee health-care contributions,  cut back on coverage, or eliminate it altogether.

U.S. health care spending consumes 16 percent of GDP, about $2.2 trillion a year,  and is projected to rise to 25 percent of GDP by 2025. But while the U.S. spends more than any other country on health care, its residents aren’t among the world’s healthiest. Some 46 million Americans are uninsured.

President Barack Obama says a broad health care overhaul is critical to a U.S. economic recovery. Congress is not expected to pass any reforms until after Labor Day. 

Remember all this next time you consider putting coin in the tip jar at Starbucks.

Starbucks will start selling a high-grade variety of fair trade-certified Rwandan coffee in Britain and Ireland next year as part of its effort to source more fair trade beans across East Africa. 

The world’s biggest coffee chain has pledged to have all coffee sold in its 700 British and Irish outlets fair trade-certified, which would make it the largest purchaser of such coffee in the world. 

Coffee represents Rwanda’s biggest foreign-exchange export earner in an economy which has been rebuilt following the 1994 genocide of 800,000 people.

(Photo\Starbucks)

There’s a point in every Star Wars film when the good guy inevitably turns to his buddies and says, “I’ve got a bad feeling about this,” right before all the big explosions begin.

One can only imagine that is what Nescafe was thinking when they saw Starbucks’ VIA instant coffee mix arrive in Chicago, Seattle and London.  After all, Nescafe is nearly synonymous with instant coffee.

So, what is Starbucks thinking?

While the United States is mostly a brewing country, 80 percent of people in the United Kingdom who drink coffee use instant.  The numbers are even more dramatic the further east you go.  So, it stands to reason that with Starbucks seeing fewer customers thanks to a deepening recession, some innovation is in order.  VIA was in development for the past 16 years and Starbucks felt now was the time to unleash the beast.

“We wanted it to be perfect and to mirror the perfectly brewed coffee experience at a Starbucks,” said company spokeswoman Lara Wyss.

But Nescafe isn’t going to let this one go without a fight, deploying anti-VIA advertising on bus stops and even in handouts at local street fairs here in Chi-town.  Their weapon of choice?  Economics.

“Did you know you can get all five of these rich and delicious flavors for the cost of one Starbucks VIA?” Nescafe’s five-flavor-sampler pack asks.  “And that’s without this coupon.”

Despite such money-focused advertising, William Blair analyst Sharon Zackfia said a price comparison is hardly necessary.

“Almost everything in instant coffee is less expensive than VIA,” she said.  The real issue instead is much simpler: “I’m sure Nescafe is eager to defend their turf.”

The instant coffee market is not only tremendously large outside the United States, but also tremendously lucrative — estimated at  $17 billion in worldwide sales, according to industry analysts.  That’s a lot of potential packets of VIA.

So, Nescafe is piggybacking on VIA’s headlines to show off its brand pride.

“We know instant coffee’s been in the news a lot lately, so we just wanted our communications to remind people that with Nescafe they can have a great tasting high quality cup of coffee with a wide variety of blends and flavors at a great taste,” said company spokeswoman Pamela Krebs.

It seems Nescafe has fired the first shot in what promises to be a rather interesting rivalry.  It is too early to tell whether Starbucks will respond with its huge brand power and marketing budget.  But for now, VIA is only in test markets.

(Photos by Ian Sherr)

Starbucks wants you to know that it is not the home of $4 coffee, and it’s launching a multimillion-dollar ad campaign to make sure you get the message that its brew is not an expensive luxury.

“Starbucks coffee does not cost $4,” Chief Executive Howard Schultz said this week when he announced the new ad blitz. The ad at left will run on Sunday in the New York Times.

In an email promoting its new campaign, Starbucks said: “Everybody is looking for value, but value doesn’t just mean what’s cheapest; it’s about what’s best for consumers, their families, their communities and the world around them.”

When the company was growing like gangbusters, it relied mostly on word of mouth advertising. ”But during that time … they became, kind of jokingly, the home of $4 beverages,” said William Blair & Co analyst Sharon Zackfia.

The reality is that most Starbucks rivals — with the exception of McDonald’s — have the same pricing, Zackfia said.

Starbucks drip coffee starts at around $1 and stays well below $4, while its specialty coffee drinks like mochas, lattes and Frappuccino blended drinks can top $4.

Chains like McDonald’s — which is wrapping up its U.S. buildout of in-restaurant McCafe counters –Quiznos and others have used Starbucks $4 coffee reputation to their advantage. 

Last year, McDonald’s operators in Seattle covered the city that gave rise to Stabucks with billboards reading “four bucks is dumb” and “large is the new grande.”

(Art courtesy of Starbucks, Quiznos)

We thought you might be interested in some comments from today’s chat with Starbucks CEO Howard Schultz. 
 
Schultz told Reuters he hopes to bring out decaffeinated Via instant coffee this year.  What was his drink of choice as he visited with us in Chicago?  Colombian Via, which made its debut on Tuesday.

He admitted that “people might trade down on a size or come less often as a result of the economy.”  But he says Starbucks is a place where people also seek refuge and a break. 

The company’s new $3.95 value breakfast pairings have gotten a lot of press attention of late, but the black horse may be its $25 loyalty card.  Schultz said almost 700,000 Starbucks Gold Cards have been purchased since Thanksgiving.  The card gives members 10 percent off most items at Starbucks and other perks — like free coupons to try new products such as its Tazo tea drinks.
 
For now, Starbucks is focused on selling its breakfast pairings and Via instant coffee.  While Starbucks has seen “a lot of demand” from grocery stores who want to sell Via, it is only in Seattle and Illinois for now, and not in grocery stores (though it will be sold at Costco, Target and Barnes & Noble). 

The CEO also let us in on a little factoid about Via, which Starbucks has been tinkering with for more than 15 years.  The inventor of Via created a liquid extract in the 1990s that was the centerpiece of the blended Frappuccino, he said. Getting to instant proved to be much harder.

Schultz also hinted that Frappuccino or iced coffee drinkers could find a new flavor in stores in time for summer, but declined to elaborate.

(Photo/Reuters)

Once upon a time, Starbucks had nowhere to go but up.

My, how times have changed.

Chief Executive Howard Schultz in July said the upscale coffee chain would not combine menu items and sell them at a discount, a move made popular by fast-food chains like McDonald’s.

“We’re not going to go down the fast-food lane,” Schultz told investors back then — when the company’s business was hitting the skids in a housing-led slowdown.

On the heels of news that McDonald’s will finish adding McCafes to U.S. stores by the middle of the year, Shultz is now touting a plan to offer several “breakfast pairings” at “attractive price points” beginning in March.

“The question of value often gets tied to the competition. How are we competing with (quick-service restaurants)? How can a premium brand be competitive when customers are trading down on everything from houses and travel to clothing and lunches out?” said Schultz. “We will combine our breakfast strengths with a value proposition that challenges misperceptions about our every day affordability.”

As it pays the price for its expansion exuberance, Starbucks is slashing another 300 namesake cafes around the world, bringing its closures to 1,000, cutting thousands of jobs and putting its brand new Gulfstream jet on the blocks. 

In the midst of it all,  Starbucks hopes to attract Seattle’s Best Coffee franchisees.

“We recently began exploring ways we could leverage Seattle’s Best Coffee brand to work for us, starting with a food service test in more than 2,800 Subway restaurants in the US beginning this month,” Starbucks Chief Executive Howard Schultz said. “I’m pleased to share with you today (that) we are expanding our franchising program with Seattle’s Best Coffee.”

Starbucks executives even suggested that Seattle’s Best franchisees could be good tenants for stores that will been vacated in the latest round of Starbucks closures, which bring the company’s total store closures to nearly 1,000.

Starbucks bought Seattle’s Best in 2003.

There are currently 12 Seattle’s Best franchisees who operate 36 cafes — some of which are located in Las Vegas casinos. Borders bookseller and grocery chain Albertsons are among the stores that house the more than 500 Seattle’s Best licensed cafes.