Instant coffee war: Nestle takes aim at Starbucks
By Matt Andrejczak, MarketWatch
Last Update: 10:42 AM ET Nov 18, 2009
SAN FRANCISCO (MarketWatch) -- The instant coffee war is heating up.
A month after Starbucks' Via invaded Nestle's coveted turf, the giant Swiss food maker has mounted a spirited counter offensive, passing out free samples of its Nescafe Taster's Choice instant coffee across several key U.S. cities.
A Nestle spokeswoman says the company has been handing out free samples through much of the year to support a new "stick pack" product of six instant flavors.
But a look at Nestle's Twitter page shows they're really revved up the campaign.
Nestle marketers were recently spotted for the first time roaming the streets of downtown San Francisco, handing out free samples to caffeine-savvy citizens. This month, Nestle tweets have been urging people to find seek out their street marketers at specific corners or landmarks in Los Angeles, Philadelphia, and Washington, D.C.
The red packs contain six different flavors and a 1 coupon. On the back of the envelope, it says: "A Lot of Hype or A Lot of Flavor ... Taste for Yourself."
It's a thinly veiled jab at Starbucks SBUX, which has also been knocked by McDonald's for catering to the yuppie crowd.
Nestle's tactics extend to the Web, where it put up a site in May that tells consumers its Taster's Choice is cheaper and tastes better than Starbucks Via. In a web commercial, Nestle touts that one cup of its Taster's Choice costs 17 cents, while Via costs four times more. It even shows a Starbucks cup at the end.
Earlier this year, Nestle NSRG.Y pushed free samples in Chicago and Seattle, two cities where Starbucks did pilot tests for Via before its nationwide roll-out in September. Nestle also has been doing directing mailings.
It's hard to fathom the marketing muscle Nestle and Starbucks are throwing behind their rival instant brews. But the stakes are enormous, even more so when trying to break into a sluggish economy laced with new-found frugality.
Instant coffee generates 21 billion in worldwide sales -- just over 40% of the total coffee market. The U.S. accounts for 5% of the market.
"Starbucks has drawn more attention to the category (instant coffee)," said Nestle spokeswoman Pam Krebs, who thinks the very public rivalry is good for the product.
Starbucks rolled out Via after 20 years of secretive internal development. It was the biggest product launch in company history, supported by a coordinated attack of national television ads, highly visible in-store marketing posters, and other gorilla marketing tactics.
Starbucks isn't pitching Via as the instant coffee Americans grew up drinking, but as one of its gourmet coffees brewed in an "instant."
The Via-tagline reads "Never be without a great coffee."
And Starbucks isn't pulling any punches either, calling other instant coffees "flat and lifeless." CEO Howard Schultz claims instant coffee hasn't seen innovation for 50 years.
Starbucks, in its latest quarterly conference call, said Via sales have gone well but it didn't release hard numbers. Three single-serve packets of Via sell for 2.95, or just a buck per cup.
