Starbucks (NASDAQ: SBUX) today announced the expected overseas expansion of its already popular VIA Ready Brew line of products, through international grocery channels in Japan, Canada and the U.K.
The addition of these 13,000 distribution points now brings Via more than 55,000 locations worldwide, which SBUX officials hope increases its share of the $23 billion global instant coffee market. The company already raked in with its U.S. line of Via Ready Brew java, which tallied $100 million in sales after only 10 months on the market.
It’s a no-brainer kind of move for a company that has to worry about diluting its brand. According to some estimates the instant coffee business now surpasses the $265 million premium flavored coffee market – something that has long been Starbucks’ core business.
The moves comes as coffee prices are on the rise – Starbucks has said it will be able to absorb the price spikes internally, which could amount to closing some international locations. To combat this, the company needs to be smart and quick on its feet – and offering new products that consumers want will only boost the company’s brand and image. On average, analysts have forecasted SBUX earnings of $1.23 per share for the 2010 fiscal year ending Sept. 30.
These new product launches have given the company something of which to be proud. Starbucks’ Via Ready Brew series achieved sales of about 30%of the market share in that specific segment of the coffee market – a big gain for the company. And because a premium instant at-home coffee that doesn’t require special equipment, the company’s new product is meeting untapped demand. In June, its Ready Brew Iced Coffee was launched, offering SBUX opportunities to further broaden the customer base in the U.S. and internationally.
The potential to build on Via’s success should only grow, especially in the economic downturn. While some consumers are perhaps ready to give up their everyday coffeehouse stops for $5 brews, not too many people are ready to give up coffee altogether. At-home premium brews will stem the losses while adding to its customer base.
Of course, the Via isn’t exactly going to catapult the stock into the stratosphere. SBUX is up +7.80% year-to-date against the Dow’s -0.49% and NASDAQ’s -2.27%. Though it’s had a up and down ride along with most stocks for the last six months, gaining +20% in June and then falling again.
In the meantime, its diversification, if you will, continues to be a smart move. Early this spring, Starbucks retail products saw a big push from the Seattle company, including bottled Frappucinos and a new line of ice cream flavors to appear at a grocery store near you. In June, there was news of Starbucks beer and wine bars popping up in test markets.
Not all will be a lasting success, but its building success the smart way – by seeing what sticks.
As of this writing, Burke Speaker did not own a position in any of the stocks named here.
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