Green Mountain Looks To Differentiate From Starbucks Verismo

Date : 03/09/2012 @ 8:14AM
Source : Dow Jones News
Stock : (MM) (GMCR)
Quote : 91.67  0.0 (0.00%) @ 2:06AM

Green Mountain Looks To Differentiate From Starbucks Verismo

Keurig Green Mountain, Inc. (NASDAQ:GMCR)
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Green Mountain Coffee Roasters Inc. (GMCR) responded to Starbucks Corp.'s (SBUX) recently unveiled plans to push into the single-serve coffee market by looking to differentiate its Keurig brewing machine from Starbucks's Verismo, which should debut this fall.

Starbucks, the Seattle-based coffee giant, said Thursday it developed the Verismo single-serve system with Germany-based Krueger GmbH & Co. to make espresso-based beverages and brewed coffee using a high-pressure system.

Green Mountain, the predominant maker of single-serve coffee machines in the U.S., saw its shares tumble following Starbucks's news and is down 14% premarket at $53.50. Green Mountain said, however, its Keurig brewer uses low pressure to brew non-espresso coffee and tea, meaning Starbucks may not become a direct competitor to its core business.

Green Mountain Chief Executive Lawrence J. Blanford said the two companies continue to collaborate in the low-pressure Keurig brewing system, in which Starbucks will continue to sell packs, called K-cups, of Starbucks- and Tazo-branded coffee and tea for use in the Keurig. He added that "there also is opportunity for complementary high-pressure espresso-based systems," as Green Mountain is in a joint development with Luigi Lavazza SpA on a high-pressure capsule-based espresso system targeting North American consumers.

Starbucks Chief Executive Howard Schultz on Thursday also cited his company's continued relationship with Green Mountain and the difference between the Keurig and Verismo machines.

"We believe the category is still in its nascent stage. We have an opportunity to launch the Verismo system but also to support Green Mountain," he had said. "It's in both our interests for Starbucks and Green Mountain to cooperate in a way where we continue to sell those K-cups in the same spirit as when we began."

The move is part of Starbucks's strategy of becoming a broader consumer products company rather than relying so heavily on its retail stores.

Starbucks's shares are up 2.3% at $51.52 in premarket trading.

-By Ben Fox Rubin, Dow Jones Newswires; 212-416-3108; ben.rubin@dowjones.com

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