Starbucks 'Bold' Single-Serve Move Could Rival Green Mountain

Date : 02/17/2011 @ 4:54PM
Source : Dow Jones News
Stock : (MM) (GMCR)
Quote : 91.67  0.0 (0.00%) @ 2:05AM

Starbucks 'Bold' Single-Serve Move Could Rival Green Mountain

Keurig Green Mountain, Inc. (NASDAQ:GMCR)
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Green Mountain Coffee Roasters Inc. (GMCR) may be in for a rough road ahead, now that Starbucks Corp. (SBUX) has indicated its intention to enter the single-serve coffee space as the competition.

Starbucks' Chief Executive Howard Schultz said in a memo Thursday that the company has "very bold" plans for its single-serve coffee. "At this nascent stage [in the single-serve coffee industry], there are numerous contenders but no demonstrated, long-term winners related to any format, geography or machine," he says.

The memo, originally reported by CNBC, goes on to say that while Green Mountain has "emerged as an early leader ... patents alone do not determine market winners."

Green Mountain shares closed down 7.7% Thursday at $40.71, and continued to fall in late trading. A Green Mountain spokeswoman wasn't immediately available for comment.

Starbucks' long-standing distribution deal with Kraft Foods Inc. (KFT) expires March 1. As a result, speculation has been circling in recent weeks as to whether Starbucks will move on to partner with Green Mountain for its popular Keurig single-serve coffee machines and the K-Cup coffee packets that go with them.

Investors seem to be interpreting Schultz's comments as essentially dispelling these rumors. Schultz notes in his memo that certain Green Mountain patents for the K-Cups expire in about 18 months, and that only 6% of households in the U.S. own a single-serve brewer, leaving plenty of room for a new competitor in the industry. Schultz also indicated that Starbucks foresees the industry leader in the U.S. as one with an open system, unlike the Keurig which is only compatible with K-Cups.

Starbucks announced Tuesday it will provide single-serve coffee packets for up to 500,000 hotel rooms through a partnership with Courtesy Products.

-By Annie Gasparro, Dow Jones Newswires; 212-416-2244; annie.gasparro@dowjones.com

 
 

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