Hot off the Compass Points ticker...More on Starbucks, Maurice Levy!

If you’ve reading this blog these updates will make sense to you.

1] Nescafe Fights Back. The instant coffee field may be a $17 billion market, but there are already some established players and they aren’t going to let Starbucks in without a fight.

Nescafe has been spotted in New York setting up tastes tests where Starbucks’ Via is presented in a Starbucks-like cup and Nescafe’s Taster’s Choice in a mug. A poster behind the table reads, “A lot of hype OR a lot of flavor?”

It still seems wacko to me that Starbucks, while giving Via another name and separate packaging, is having its baristas try to hondle Starbucks customers into trying it. Why not just put it on grocery shelves and promote it on its own?

Well anyway now we’re in the middle of an Instant Coffee war. You can be sure this war will soon be extended into advertising and street promotions. That reminds me. Our troops in Iraq and Afghanistan have to drink instant coffee as part of the MRE (meals ready to eat) packages. Who makes it?

Writes blogger rubberbrandman (Chris DiAlfredi):

“The Starbucks board of directors, and the brand decision-makers that answer to them, will happily continue to dismantle everything that was good about the brand. "Via" dumb moves like foraying into instant coffee.

“The sheer magnitude of the Starbucks investors' greed, versus the sanctity of the brand defies logic. These short-term goals and thoughtless brand extensions, like Via, represent a new lesson for what not to do with a successful brand. 



“Howard Schultz is practically a marketing genius, but his biggest mistake was letting Starbucks go public. His second biggest mistake was coming back to his baby after his eight year break. This is really just sad to watch.”

2] Maurice Levy feeling the heat from client procurement officers.

Levy, of course, is not alone. I’ve seen data that up to 75% of the very big (over $200 million) advertisers are using procurement officers, and obviously their job is to keep pressure on agencies to cut their fees. Why? Because to them it’s a commodity business.

Levy is quoted in Media Daily News as saying: “There is huge pressure on procurement. I’ve seen a few heads of procurement in 2009. And they’ve said it is not a job anymore. It’s a mission. I am on a mission. I need to cut by X, Y, Z percent…we are facing serious difficulties.”

But he was happy to report that his “sophisticated” clients are moving their business to Digitas and Razorfish, his two leading digital agencies. “What will happen in the future – which could be very good news for people like us—is that we may come to a solution where we will be paid not on service, but on value and on deliverables. And deiiverables are measureable…which will be highly, highly positive for us.”

Levy said at Razorfish, his newest purchase, it’s seeing a rather pathetic 6% to 8% margin this year. He didn’t give the margin on Digitas, his biggest play. So his optimism here seems to be for the near future. He also said while the two shops might share tools and practices, he planned to keep the brands.