Starbucks' new brew: Instant coffee

With all the talk about Starbucks going back to its roots and redesigning its stores to look more individual, who would have thought that their next step would be instant coffee?

Rustan Coffee, the sole licensee of Starbucks Coffee International in the Philippines, launched Via Ready Brew nationwide on Sept. 15, and it’s not any old three-in-one — this is instant coffee the Starbucks way, meaning it’s thoughtful, innovative, premium in quality… and has been brewing for over 20 years.

“Via was rejuvenated when Howard Schultz took over again in 2007,” said Noey Lopez, chief operating officer of Rustan Coffee. “He told Don Valencia (the late head of Starbucks’ R&D), ‘We have to crack instant.’”

Valencia responded, developing Micro Ground Technology, a proprietary, patent-pending process that turns 100-percent Arabica beans into a finely milled powder supposed to preserve all the taste, quality, freshness and aroma of the original coffee. Just add hot water and you’ll have the closest thing to a freshly brewed cup in your bag or pocket.

Starbucks wants a taste of the $23 billion instant and single-serve coffee market in the Philippines, “a huge market to tap into,” according to Lopez.

Via was launched in North America in October 2009, but the Philippines holds the distinction of being the third international market after the UK and Japan that Starbucks chose to roll out the coffee stick.

“In the last 12 months we’ve hit the $100-million mark, and sold 10 million sticks,” said Cos LaPorta, president of Starbucks International. “The Philippines is ready to go.”

Currently available in Colombian, Italian Roast and Decaf Italian Roast, a cup of Via Ready Brew ranges from P37.50 to P43.33, depending on whether you buy the three- or 12-pack. That’s less than half of what you would pay for a tall, freshly brewed coffee in-store (P90). At present Starbucks is offering customers free taste comparisons in its cafés, daring you to spot the difference between Via and its brewed coffees.

Unveiling Via: Noey Lopez, Starbucks International vice president for marketing Samie Barr, Starbucks International president Cos LaPorta, and Rustan Coffee president Eduardo Lopez. Photo by JOVEN CAGANDE

We sat down with Lopez for an exclusive one-on-one, and here’s what he had to say:

PHILIPPINE STAR: How many cups of coffee do you usually drink a day?

NOEY LOPEZ: A cup and a half a day. One in the morning, half in the afternoon.

How do you take it?

Black. My drink for the last 14 years has been — I learned this in the States — iced tall Americano. I’ve had it since I started training. I like more full-bodied coffees like Sumatra, and the Anniversary Blend with aged Sumatra. We have a new one now, Pike Place Roast, which is a little bit lighter.

“Instant” has a different connotation here. So how does Starbucks reinvent instant coffee?

For one thing we’d like to think of it as “ready-brew.” That’s the term we use. But we feel it’s a good opportunity to innovate. There hasn’t been a lot of innovation in the “instant” category, and we feel we have the technology to deliver the proper quality. It’s for occasions that maybe you’re in a hurry and don’t have time to brew. I bring it on planes when I travel, and my biking friends, because they start at 4 or 5 a.m., there’s no Starbucks. They stop in the corner coffee shop and buy instant. So this is something they can bring along as well.

Is Via meant to address the B and C markets here, or is it more for the office crowd?

That’s a good question. Even when Starbucks came in people were saying, “Are you going to address those markets?” We’ve never purposely targeted anybody. Our positioning has always been, it’s an affordable luxury. You’ve seen over the last 13 years that people who come into the stores are totally varied. The first time in 6750 it was a bit upscale but it’s changed. We have stores that are not upscale at all. It’s just the community where we put the store, and we’re very surprised at how deep we’re getting in terms of penetrating different segments of the Philippine market, like Cebu, where we have nine stores. We’re opening the first one in Mactan on Saturday near the airport.

Just add hot water: Via coffee sticks are sold in packs of three or 12.

People like buying tingi-tingi here. You didn’t want to offer it as single sachets?

Right now it’s packaged that way but if that’s what the customer wants, we may change it.

When you brew this you get premium black coffee. Don’t you think the 3-in-1 market here will miss the milk and sugar usually included in instant coffee sachets?

You might be surprised. There’s more innovation coming very soon, like the iced version. You can use lukewarm or cold water and it will still have the same flavor. Then you just add ice. And there’s lots more coming.

Why did they pick Colombian and Italian Roast as the first two coffees on offer?

Colombia is very pleasant. It’s a nutty, very light coffee, so it’s been one of the favorites of many customers and partners. It’s also a good entry for introducing Ready Brew. But there’s also Italian Roast, which is bolder.

Are they only available at Starbucks stores, or will you eventually be able to get them at your local sari-sari?

For now only at stores. Supermarkets may be possible.

What is coffee culture like in the Philippines now?

I think it’s still the same, the experience we’ve been trying to give: a safe, comfortable, welcoming gathering place, a community place. It is a coffee shop, and we do really focus hard on maintaining the standards in terms of the coffee quality, the product. But in many ways — our culture and the Starbucks culture — we’re trying to be the best at giving customer service also. We’re trying to compare ourselves to the best service companies in the Philippines and the world, like Amanpulo, and not just the coffee industry. We think we can fill a need for that in the market, a place where you get treated properly. Hopefully we’re exceeding your expectations, not just meeting them. We put that all together and it’s resonating because we’re touching a lot of people already, more than what we thought.

We also try to walk the talk. Starbucks considers the Philippines one of the best international markets, that’s why Via was chosen, because they consider Rustan’s one of the best operators anywhere, humility aside. They ask, “Why is that?” The reality is, their mission statement, their values — they have it all. We just try to live what Starbucks is all about. Good people in the company. Great people.

Is the trend now towards “easy coffee,” like George Clooney plugging those Nespresso machines?

Yeah, it’s providing options, really. If you look at the sustainability of the business, it’s still clear that people need a place to gather outside the home, whether it’s a coffee shop, a bar or a friend’s home. Although that segment’s growing, this is always going to be a huge opportunity.

I read that Starbucks has slowed down everywhere else in the world except Asia. Why do you think the brand is so strong here?

Maybe we’re still early in the growth of the brand, so in some ways we’re learning from what’s happened in other countries. Just take the global financial crisis. The Philippines wasn’t so high to begin with, so we didn’t have much to fall from. It’s the same with Rustan Coffee. We didn’t get ahead of ourselves. We didn’t build too many stores. When we did experience a little bit of a downturn we didn’t have to shutter any store at all. We got a little affected, but we managed expenses from another perspective rather than closing stores.

Some people feel that in this economy it’s a sin to buy coffee that costs as much as a meal. How do you respond to that?

People use Starbucks for different reasons. Hopefully they see the value in what they’re paying for, whether it’s the investment in this place or investment in our partners, who in many ways become a big part of their customers’ lives. Whether it’s the best Arabica coffee, or really well-made espresso drink or Frappuccino.

We’re the biggest Frappuccino market in terms of percent of sales, not in peso amount but as a percent of our business, the Frappuccino is the most popular in the Philippines.

I hope they also see that we’re a company that has a conscience, whether it’s partnership with (local charities) or building environmentally friendly stores. We employ 2,300 partners. We’re also helping the economy that way, with jobs. Our milk is from Batangas, we do business with a lot of local vendors. Our food is all local.

Last year Starbucks renovated its company-owned stores to look more local. Were we part of that global renovation? If so, what looks distinctly Filipino about Philippine stores?

We’re starting already. Like here (in Starbucks Jupiter St.) it’s totally different from what it used to be. Those are called the Shared Planet Boards. That’s a farm in Bukidnon. We’re trying to start buying coffee from there because we have Kape Vinta, so we’re cultivating relationships with local farmers to really improve the quality. The bar here is made of reclaimed wood from the Philippines. One of the great things about being environmentally friendly is we don’t ship things because the footprint is so huge, so we use more local stuff. The store we’re opening in Mactan, Cebu, we sourced pendant lights from Bacolod. It’s not just about making it more Filipino, it is a global initiative.

How does Starbucks view its competitors?

Competition keeps us on our toes. If you’re not competing with anybody, not only are your shareholders, the business is not going to be that good, your customers are going to suffer.

What are your biggest challenges?

Our biggest challenge is finding the right people to work and keeping them in the company once you’ve found them. It’s always been about that and growing and maintaining them. And it’s a service business, so it’s all people. The people are the products.

I look forward to the planner you put out every Christmas, and know many others who do. Was that a locally conceived promotion?

Yes, it was. What spawned that many years ago was there were Starbucks planners being made, not sold, from different countries. So our marketing manager said, “Hey, why don’t we run a Christmas promo where you have to collect certain things?” And in the beginning it was 60 drinks, but you win three. You realize that’s too much — nobody’s going to drink 60 drinks — but it was still successful. So we tweaked it a little bit over time and now have sense of what people like.

What other achievements of Starbucks Philippines are you proudest of?

What I’m really proud of is that it’s a Philippine company and yet Starbucks recognizes us as one of the best-run operations across the globe. And we’re all Filipinos running, managing, and executing it. Just the Via alone, we’re the third market after the UK and Japan. Why did they choose us? The president said it’s not only because the instant coffee market is very significant, it’s also because they have confidence in the Filipino employees in terms of executing. That’s a testament to hopefully the 13 years we’ve been here. Here we have among the highest brand equity scores in the Philippines compared to other Starbucks markets around the world.

You’ve opened 160 stores in almost 13 years. Are you still expanding as rapidly as you were before?

“As rapidly” I don’t know, but we came from that (recent economic) crisis so we’re conservative. But in hindsight I look at Philippines now with such a positive feeling. Notwithstanding that thing that happened (referring to the recent hostage crisis), business is doing very well. From Anton (Huang) I’m seeing that Stores Specialists, Inc. is bringing in all these brands, you see real estate prices. This is very encouraging, our demographics is young, there’s lot of population. Whether that’s good or bad, there’s renewal. There are a lot of positive signs as a businessman that get you excited.

What areas of the Philippines does Starbucks still want to expand to?

We opened in Naga three weeks ago in time for Iron Man, which is doing very well. We’re opening in Cagayan de Oro next month and my dad’s hometown of Iloilo next year. Davao is a big market we’re seriously looking at.

What’s your vision for Starbucks Philippines?

My vision is several things: One, I want our company to be the best service company in the Philippines and from a bigger, audacious goal, the best in the world.

Two, it’s a company with a conscience so we treat our people with dignity and respect, we walk the talk in terms of living the mission statement. Hopefully we’re very successful financially because it’s a business, but also successful in a socially responsible way.