A month after Starbucks' Via Ready Brew invaded Nestlé's jealously guarded turf, the giant Swiss food maker has mounted a spirited counteroffensive, passing out free samples of its Nescafé Taster's Choice instant coffee across several key U.S. cities.
A Nestlé spokeswoman says the company has been handing out samples, packaged in thin pouches similar to those Starbucks is using (Nescafé's are called "sticks"), through much of the year.
Nescafe
Longtime instant-coffee incumbent Nescafe reacts to Starbucks' encroachment with advertising splash and handouts.
But a look at Nestlé's Twitter page shows they've really revved up the campaign of late.
Nestlé marketers were recently spotted for the first time roaming the streets of downtown San Francisco, handing out samples to caffeine-savvy citizens. This month, Nestlé 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 flavors and a $1 coupon. On the back of the envelope is this tagline: "A lot of hype or a lot of flavor. Taste for yourself."
It's a thinly veiled jab at Starbucks (SBUX 23.12, -0.02, -0.09%) , which has
also been knocked by McDonald's (MCD 62.66, +0.49, +0.79%) for catering
to the image-conscious crowd.
Nestlé'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, Nestlé touts the fact that one cup of its Taster's Choice costs 17 cents, while Via costs four times that. It shows a Starbucks cup at the end.
Earlier this year, Nestlé (NSRG.Y 48.18, +0.18, +0.38%) pushed free
samples in Chicago and Seattle, two cities in which Starbucks did pilot tests for Via before its nationwide rollout in September. Nestlé (CH:NESN 50.35, +0.36, +0.72%) also has been doing directing mailings.
It's hard to fathom the marketing muscle Nestlé 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 newfound frugality.
Starbucks
Starbucks' instant Via comes in just two classic varieties, while Nescafe takes a bigger-tent approach.
Instant coffee generates $21 billion in worldwide sales -- that's more than 40% of the total coffee market. The U.S. accounts for 5% of the instant market.
"Starbucks has drawn more attention to the [instant] category," said Nestlé spokeswoman Pam Krebs, who thinks the very public rivalry is good for the product.
Starbucks rolled out Via after 20 years of secretive internal R&D. It was the biggest product launch in company history, supported by a coordinated attack of national television ads, highly visible in-store marketing collateral, and guerrilla marketing tactics.
Starbucks isn't pitching Via as the instant coffee Americans grew up drinking but as its gourmet coffee brewed in an instant. Its varieties are limited to Italian Roast and Colombia, while a Taster's Choice sample pack extends to hazelnut and vanilla flavors.
The Via tagline: "Never be without great coffee."
And, like its new rivals, Starbucks isn't pulling any punches, 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. A 12-pack of pouches runs $9.95. A Taster's Choice bulk buy of seven 12-packs is offered for $12.16 at Amazon.com.
Perhaps suggesting that consumers are pitting the new single-serve instant-coffee products against each other at home or office, Amazon lists the Starbucks and Nescafé offerings as "frequently bought together."
Matt Andrejczak is a reporter for MarketWatch in San Francisco.
