Friday, September 28, 2012

Starbucks' Verismo - landscape changer, or me-too item?

What should you do if you have a successful business, and you've developed a new product that will undercut your existing one?

In my view, you should introduce the new product. If you don't cannibalize your own sales, your competitors will.

Which brings us to Starbucks. Over the past few years, Starbucks brick and mortar establishments have had to deal with competition from high-end "make your own coffee/espresso at home" machines. Bunn, Flavia, Nespresso, Keurig - there are a number of machines that you can install in your home or office that could keep you out of a Starbucks store.

Starbucks' first volley was to introduce its line of instant coffees. Now they're coming out with their own machines - the Verismo line.

The name is not new. The in-store Starbucks machines have been called Verismo for years. However, until now you haven't been able to buy a Starbucks-branded single-serving coffeemaker for use at home (although you could buy Starbucks coffee and put it in your Keurig machine).

Initial reaction to the Verismo is similar to the reaction of an Apple fanboi to the latest insanely great phone. There are reports that the first batch of Verismo machines is selling out.

This may not be the death knell for Green Mountain (the Keurig people) or Nestle (the Nespresso people) or the other players. These high-end coffee/espresso machines are - well, they're high end. If you're plonking down $200 rather than $20 for a coffeemaker, you're going to be a little picky about what you acquire your device. So while Starbucks will undoubtedly be a player, I don't think Nestle or Green Mountain are going to close their doors any time soon.

Or at least not because of Starbucks. Nestle is always going to have its opponents, and the Nespresso technology has been relaunched for something that Nestle opponents love to hate - BabyNes single serving baby formula delivery system. At first I thought this was an Onion story, but this is actually a press release on Nestle's website.

Starbucks would never do that. They're, like, preserving the rainforest and stuff.
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