Starbucks Instant Coffee Move a Curious One

Source Article: Starbucks has high hopes for its instant coffee | www.marketwatch.com (article)

Implications:
1) Is Move to Instant a "Value" Play
2) Detracts from Barista-prepared "Core" premium offering
3) May Cut In-Store Visits if Successful - Reduce retail profitability
4) Is this the beginning of migrating the Starbucks(NAS:SBUX) business model to become a CPG firm?

Analysis:

Starbucks(NAS:SBUX) introduction of it's "Via" instant coffee product is a curious one for a company struggling to improve performance at it's retail stores.

Is bringing "Via" to Costco(NAS:COST) and Target(NYSE:TGT), and eventually Wal-Mart(NYSE:WMT), a shrewd way to increase overall corporate revenues, or a way to begin to migrate the company model from a retail coffeehouse-based chain to a CPG company?

Starbucks(NAS:SBUX) retail locations have been the driving force behind the firm from it's inception. To make a move to deemphasize any focus on retail is a bit of a head scratcher.

If Via is Starbucks(NAS:SBUX) move to a "Value" product in response to the current tough consumer spending environment, then introducing an expensive alternative for a category (Instant Coffee) considered to be an inferior substitute in their primary North American markets is a tough sell to make.

Is this a more strategic and long-term plan to deemphasize retail and become a premium coffee purveyor through traditional retailing channels? That makes more sense, and putting a premium instant in as the transition begins would be a way to expand those channels and get customers looking at Starbucks(NAS:SBUX) products that would have never considered the brand before.

There's no way to know yet if this is the eventual direction of the business, but the new Starbucks(NAS:SBUX) initiatives to bolster the retail side have been underwhelming, up to this point in time.

The Starbucks(NAS:SBUX) experience was and is about good quality brewed coffee or coffee/espresso-based drinks, excellent customer service and ambiance at the sites. With the margin that coffee delivers, it's hard to imagine that they cannot retool margins and still deliver a retail experience that addresses the current consumer sentiment.

Is Via a misstep, or the beginning of Starbucks(NAS:SBUX) migrating to a new business model? Only time will tell.