Transcript: Starbucks CEO on Instant Coffee Wars

Sept. 29, 2009 — -- Recently Starbucks CEO Howard Schultz sat down with ABC News' Bianna Golodryga to talk about the future of competing in the world of coffee.

Read the transcript of the interview below and click here for the full report.

BIANNA GOLODRYGA:

You've got a big launch coming out next week — instant coffee, that's not something people normally associate with Starbucks.

HOWARD SCHULTZ:

That's true. Believe it or not, for almost 20 years, we have been trying to kind of crack the code on replicating a — a cup of Starbucks coffee in instant form. And now, we have a patent-pending process in which, believe it or not, we have completely replicated the taste of Starbucks coffee and I think most people will not be able to taste the difference.

I've been polling thousands of people throughout the year — friends, my wife, business associates and no one can taste the difference. We've been testing it in Seattle, Chicago and London for the past few months. It has exceeded expectations.

We're so excited because our customers can now take a cup of Starbucks coffee on the go anywhere they want — in the office, on an airplane, travel, wherever.

GOLODRYGA:

For those lucky taste testers, what has their reaction been, when you told them?

HOWARD SCHULTZ:

When we finally tell them, they cannot believe that Starbucks Via is an instant coffee. The other thing is, this is a large category, almost the largest segment of the overall coffee business but there's been no innovation for over 50 years in instant coffee, and certainly this is not your grandmother's instant coffee.

And the quality of Starbucks, the brand reputation — we would never create an instant product that didn't meet the expectations we have of ourselves, let alone our customers. This is gonna shock people and we're so excited about this.

GOLODRYGA:

Well, instant coffee's a big hit in Europe, we know that. You have your pulse on the American consumer probably more than anyone else though. What tells you that they are wanting instant coffee right now?

HOWARD SCHULTZ:

Sure.

GOLODRYGA:

I mean are we going back to the days of Folger's right now?

HOWARD SCHULTZ:

Well, this is not anything like Folger's. I think what — what we I think really have understood is that we live in a mobile society. Everyone is on the go. And so if we can create a product that, you know, we are not — despite how many Starbucks there is, so many people complain they can't find Starbucks when they want it.

Now you can have instant Starbucks coffee wherever you are and I think just the ability of us to provide our customers with this product and they can have it in an instant is gonna be a big hit.

GOLODRYGA:

And some might say that may be a contradiction because Starbucks, of course, was all about the, the experience of walking into a store like we are right now. You've got great music playing, great ambience — do you think people are going to be able to do the same at home or have the same feeling once they drink a Starbucks?

HOWARD SCHULTZ:

Well, I think despite the success that we've enjoyed, we still have a very small percentage of the overall coffee category. And so we think this is an opportunity to introduce new customers to Starbucks and obviously create new experiences for our existing customers who are not in a Starbucks, can't get to a store. It's gonna be a accretive to the brand and accretive to the company.

GOLODRYGA:

And high end is not something people normally associate with instant coffee. What's the price range going to be?

HOWARD SCHULTZ:

Well, this package which is a tri-pack will be sold for $2.95 and a package of 12 will be sold for $9.95. So it's less than a dollar a cup of coffee. It's a great value. And you don't need any machine, it's a single-serve product, no waste, has a long shelf life.

It almost answers every possible question. But most importantly, the proof of Starbucks Via is in the cup. So all the marketing, all the PR in the world, can't change the fact that if this doesn't taste good, people aren't gonna buy it.

This is gonna shock people about how good this tastes.

GOLODRYGA:

And speaking of price, obviously this is a very difficult time in our economy right now. What is your sense of where things stand with regards to the recession and how the consumer's been affected?

HOWARD SCHULTZ:

Well, in the third quarter of our fiscal year, we began to see a sequential improvement in our own business. I think consumer confidence is rising. It certainly isn't at the level it once was or where it needs to be. But you know, I'm personally cautious— cautiously optimistic about the economy and I think things will improve.

GOLODRYGA:

And your stock price is, I think up 30 percent in the past 12 months and —

HOWARD SCHULTZ:

More than that.

GOLODRYGA:

More than that. Well, I think what is it, 120 percent this year so far.

HOWARD SCHULTZ:

Yeah.

GOLODRYGA:

What does that — I mean how often do you pay attention to the stock price? Is that something you look for —

[BOTH SPEAK AT ONCE]

HOWARD SCHULTZ:

Well, I think — for, for us as a company, we have to be very mindful of the fact that we're in a business where we're interacting every single day with our customers. We have to exceed their expectations. If we exceed our expectations of our customers and our people, we're gonna really build long-term value for the shareholders.

So you know, we're not looking at the stock price in terms of how we're making our decisions. We want to make long-term decisions like Via that will add long-term value to our shareholders. But obviously we're gratified that we've had a very good year in terms of turning the company around, getting back to the core business and I think our shareholders have recognized that and the value's been greater.