More Instant News from Starbucks

(MoneyWatch)  Chicago and Seattle will be the first test markets for Starbucks' new Via instant coffee.

The company said today that it plans to start test-marketing its instant coffee in those cities on March 3, with the goal of rolling them out nationwide in the fall.

CEO Howard Schultz went on CNBC this afternoon to pump the instant coffee strategy. "It's within our core business, which is coffee," he argued. "We're not going off half-cocked and creating new businesses. We're attacking the coffee industry and there's low-hanging fruit here in the instant category. It's the largest prize in the entire category, $17 billion and we're going to get our share of it for the first time."

CNBC anchor Maria Bartiromo questioned Schultz sharply on whether sales of the cheaper instant coffee will cannibalize sales of Starbuck's high-margin $4 coffee drinks, but Schultz said American consumers are entering a new period of frugality, and companies like his need to respond to that with more-affordable versions of their products.

And, he argued that Via is a viable alternative to Starbucks brewed coffees. In blind taste tests, most Starbucks customers couldn't tell Via was an instant version, he said. Bartiromo conceded that point, saying that she'd tried Via and found it to be "delicious."

Something that Starbucks is finding less tasty, however, is an on-going dispute with groups trying to unionize baristas. There's a new report out today on findings from last year's trial over unfair labor practices charges filed against the company, which "reads at times like a reality-TV script, revealing Starbucks baristas and managers yelling at each other, mishandling blenders and cursing," according to the Seattle Post-Intelligencer.